<PAGE> 1
EXHIBIT 2.1
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AMONG
QUENTRA NETWORKS, INC.
HOMEACCESS MICROWEB, INC.
DQE ENTERPRISES, INC.
BARBARA CONRAD
AND
JERRY CONRAD
DATED AS OF OCTOBER 5, 2000
<PAGE> 2
TABLE OF CONTENTS
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SECTION PAGE
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ARTICLE 1 CERTAIN DEFINITIONS................................................2
ARTICLE 2 THE TRANSACTIONS...................................................9
2.1 The Merger.........................................................9
2.2 Effective Time.....................................................9
2.3 Closing............................................................9
2.4 Articles of Incorporation and Bylaws of the Surviving
Corporation......................................................10
2.5 Directors of the Surviving Corporation............................10
2.6 Officers of the Surviving Corporation.............................10
2.7 Conversion of Securities..........................................10
2.8 Deliveries at the Closing.........................................10
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF EMPLOYEE AND THE COMPANY........12
3.1 Authority.........................................................12
3.2 Capitalization....................................................12
3.3 Organization and Qualification; Subsidiaries......................13
3.4 Articles of Incorporation and Bylaws; Records.....................13
3.5 Financial Statements..............................................14
3.6 Absence of Changes................................................14
3.7 Title to Assets; Equipment; Real Property, Leases; Inventory......16
3.8 Receivables.......................................................17
3.9 Intellectual Property.............................................17
3.10 Contracts.........................................................21
3.11 Compliance With Legal Requirements................................23
3.12 Governmental Authorizations.......................................24
3.13 Tax Matters.......................................................24
3.14 Employee and Labor Matters........................................26
3.15 Benefit Plans; ERISA..............................................27
3.16 Environmental Matters.............................................29
3.17 Sale of Products; Performance of Services.........................29
3.18 Insurance.........................................................29
3.19 Related Party Transactions........................................30
3.20 Proceedings; Orders...............................................30
3.21 Non-Contravention; Consents.......................................31
3.22 Brokers...........................................................32
3.23 Year 2000 Compliance..............................................32
3.24 Tax Treatment.....................................................32
3.25 Full Disclosure...................................................32
3.26 Powers of Attorney................................................33
3.27 Voting Arrangements...............................................33
3.28 Change in Control Payments........................................33
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<TABLE>
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3.28 Change in Control Payments........................................33
3.29 Board and Shareholder Approval....................................33
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS................33
4.1 Authority.........................................................34
4.2 Title to Shares...................................................34
4.3 Brokers...........................................................34
4.4 Accredited Investor...............................................34
4.5 Creation of HA....................................................34
4.6 Capitalization of HA..............................................35
4.7 Other Agreements..................................................35
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF QUENTRA.........................35
5.1 Organization and Qualification; Subsidiaries......................35
5.2 Capitalization....................................................36
5.3 Authority.........................................................37
5.4 SEC Filings; Financial Statements.................................37
5.5 Title to Shares...................................................38
5.6 Brokers...........................................................38
5.7 Board Approval....................................................38
5.8 Recent Capital Raising Transactions...............................38
5.9. Voting Agreements.................................................38
ARTICLE 6 COVENANTS.........................................................38
6.1 Directors of Quentra..............................................38
6.2 Post-Closing Covenants of the Parties.............................39
6.3 Expenses..........................................................42
6.4 Lock-Up Agreement.................................................42
6.5 Best Efforts......................................................43
ARTICLE 7 CONDITIONS TO CLOSING.............................................43
7.1 Conditions Precedent to Obligations of the Company and the
Shareholders.....................................................43
7.2 Conditions Precedent to Obligations of Quentra....................44
ARTICLE 8 TERMINATION.......................................................44
8.1 Termination.......................................................44
8.2 Effect of Termination.............................................45
ARTICLE 9 SURVIVAL; INDEMNIFICATION.........................................45
9.1 Survival..........................................................45
9.2 Indemnification by the Shareholders...............................45
9.3 Indemnification by Quentra........................................46
9.4 Notice of Claims..................................................46
9.5 Third Party Claims................................................46
9.6 Limitation on Damages.............................................47
9.8 No Circular Recovery..............................................47
ARTICLE 10 MISCELLANEOUS.....................................................48
10.1 Representations...................................................48
10.2 Dispute Resolution................................................48
</TABLE>
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<TABLE>
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10.3 Waiver............................................................48
10.4 Assignment........................................................48
10.5 Notices...........................................................48
10.6 Further Assurances................................................50
10.7 Severability......................................................50
10.8 Counterparts......................................................50
10.9 Construction......................................................50
10.10 Entire Agreement; Amendment.......................................50
10.11 No Third Party Beneficiaries......................................51
10.12 Public Announcements..............................................51
10.13 Waiver and Release................................................51
</TABLE>
<TABLE>
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EXHIBITS
Annex I Form of Agreement of Merger I-1
Annex II Form of Certificate of Merger II-1
Annex III Form of Restated Articles of Incorporation III-1
Annex IV Form of Bylaws IV-1
Schedule of Exceptions
Exhibit A - Form of Personal Services Agreement A-1
Exhibit B - Form of Voting Agreement B-1
Exhibit C - Form of Certificate of Designations, Preferences and
Rights of Series C Preferred Stock C-1
Exhibit D - Form of Opinion of Kirkpatrick and Lockhart LLP E-1
Exhibit E - Form of Opinion of Cassady & Klein F-1
Exhibit F - Form of Opinion of Morrison & Foerster LLP G-1
Exhibit G - Form of HA Option Agreement H-1
</TABLE>
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<PAGE> 5
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (this
"Agreement") is entered into as of this 5th day of October, 2000 among Quentra
Networks, Inc., a Delaware corporation formerly known as Coyote Network Systems,
Inc. ("Quentra"), HomeAccess Microweb, Inc., a California corporation formerly
known as Primary Knowledge, Inc. (the "Company"), DQE Enterprises, Inc., a
Pennsylvania corporation ("Enterprises"), Barbara Conrad ("Conrad") and Jerry
Conrad ("Employee"). Enterprises and Conrad are referred to collectively herein
as the "Shareholders" and individually as a "Shareholder", and the Shareholders,
the Company, Employee and Quentra are referred to collectively herein as the
"Parties" and individually as a "Party."
WITNESSETH:
WHEREAS, the Parties are party to the Agreement and Plan of Merger
dated May 10, 2000, as subsequently amended on May 26, 2000 and July 28, 2000
(collectively, the "Existing Agreement");
WHEREAS, the Parties hereto have agreed to amend and restate the
Existing Agreement as set forth in this Agreement, all on the terms and
conditions hereinafter set forth so that, as amended and restated, the Existing
Agreement reads in its entirety as provided in this Agreement;
WHEREAS, Conrad has formed HA Technology, Inc., a Delaware corporation
("HA"), which has entered into a license agreement with the Company under which
the Company has granted to HA an exclusive license to use the Company technology
and business model (excluding the states of Washington, Nevada, Oregon and
Pennsylvania) (the "HA License Agreement");
WHEREAS, the boards of directors of Quentra and the Company deem it
advisable and in the best interests of their respective corporations and
shareholders that the business of the Company be combined with that of Quentra
in order to achieve the long-term business interests of Quentra and the Company;
WHEREAS, the combination of the business of the Company with that of
Quentra will be effected pursuant to the terms of this Agreement through a
transaction in which HomeAccess Acquisition Corp., a wholly owned subsidiary of
Quentra ("Acquisition"), will merge with and into the Company (the "Merger"),
whereupon the Company will become a wholly owned subsidiary of Quentra and the
Shareholders will become stockholders of Quentra;
WHEREAS, the Shareholders own all of the issued and outstanding capital
stock of the Company; and
WHEREAS, for federal income tax purposes, it is intended that the
Merger qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
<PAGE> 6
NOW, THEREFORE, in consideration of the promises and of the mutual
representations, warranties and covenants herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
(a) For purposes of this Agreement, the following terms shall
have the following meanings:
"Affiliate" shall mean with respect to any Person, any other
Person which, directly or indirectly, controls, is controlled by, or is under a
common control with, such Person. The term "control" (including the terms
"controlled by" and "under common control with") as used in the preceding
sentence means the possession, directly or indirectly, of the power to direct or
cause the direction of management and policies of a Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Agreement" shall mean this Amended and Restated Agreement and
Plan of Merger among Quentra Networks, Inc., HomeAccess Microweb, Inc., DQE
Enterprises, Inc., Barbara Conrad and Jerry Conrad, (including the Disclosure
Schedules and all Exhibits) as it may be amended from time to time.
"Associate" shall mean, with respect to any Person, any other
Person (i) five percent or more of the equity of which is owned, directly or
indirectly, by such Person or an Affiliate of such Person, (ii) any Person which
owns, directly or indirectly, five percent or more of such Person or (iii) any
Person five percent or more of the equity of which is owned, directly or
indirectly, by a Person identified in clause (i) or (ii) of this definition.
"Business Day" shall mean any day other than a Saturday,
Sunday or United States federal holiday.
"Company Common Stock" shall mean the common stock, no par
value per share, of the Company.
"Company Contract" shall mean any Contract:
(a) to which the Company is a party;
(b) by which the Company or any of its assets is or may become
bound or under which the Company has, or may become subject to, any obligation;
or
(c) under which the Company has or may acquire any right or
interest.
"Consent" shall mean any approval, consent, ratification,
permission, waiver or authorization (including any Governmental Authorization).
2
<PAGE> 7
"Contract" shall mean, with respect to any Person, any legally
binding written, oral, implied or other agreement, contract, understanding,
arrangement, instrument, note, guaranty, indemnity, representation, warranty,
deed, assignment, power of attorney, certificate, purchase order, work order,
insurance policy, benefit plan, commitment, covenant, assurance, obligation,
promise or undertaking of any nature to which such Person is a party or by which
its properties or assets may be bound or affected or under which it or its
business, properties or assets receive benefits.
"Conversion Ratio" means the Quentra Maximum Amount divided by
the total number of shares of the Company's capital stock outstanding
immediately prior to the Closing.
"Current Benefit Plan" shall mean any Employee Benefit Plan
that is currently in effect and:
(a) that was established or adopted by the Company or any
ERISA Affiliate or is maintained or sponsored by the Company;
(b) in which the Company participates;
(c) with respect to which the Company or any ERISA Affiliate
is or may be required or permitted to make any contribution; or
(d) with respect to which the Company or any ERISA Affiliate
is or may become subject to any Liability.
"Defined Benefit Plan" shall mean either a plan described in
Section 3(35) of ERISA or a plan subject to the minimum funding standards set
forth in Section 302 of ERISA and Section 412 of the Code.
"Employee Benefit Plan" shall have the meaning specified in
Section 3(3) of ERISA.
"Encumbrance" shall mean any lien, pledge, hypothecation,
charge, mortgage, security interest, encumbrance, equity, trust, equitable
interest, claim, preference, right of possession, lease, tenancy, license,
encroachment, covenant, infringement, interference, Order, proxy, option, right
of first refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).
"Entity" shall mean any corporation (including any non profit
corporation), general partnership, limited partnership, limited liability
partnership, joint venture, estate, trust, cooperative, foundation, society,
political party, union, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity.
3
<PAGE> 8
"Environmental Laws" means any federal, state, local or
foreign Legal Requirement relating to pollution or protection of human health or
the environment.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974.
"ERISA Affiliate" shall mean any Person that is, was or would
be treated as a single employer with the Company under Section 414 of the Code.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Governmental Authorization" shall mean any:
(a) permit, license, certificate, franchise, concession,
approval, consent, ratification, permission, clearance, confirmation,
endorsement, waiver, certification, designation, rating, registration,
qualification or authorization that is issued, granted, given or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement; or
(b) right under any Contract with any Governmental Body.
"Governmental Body" shall mean any:
(a) nation, principality, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other
government;
(c) governmental or quasi governmental authority of any nature
(including any governmental division, subdivision, department, agency, bureau,
branch, office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or Entity and any court or other
tribunal);
(d) multinational organization or body; or
(e) individual, Entity or body exercising, or entitled to
exercise, any executive, legislative, judicial, administrative, regulatory,
police, military or taxing authority or power of any nature.
"HA Option Agreement" shall mean the option agreement between
HA and Quentra substantially in the form attached hereto as Exhibit G.
"Hazardous Material" shall mean any substance, chemical, waste
or other material which is listed, defined or otherwise identified as hazardous,
toxic or dangerous under any applicable law; as well as any petroleum, petroleum
product or by-product, crude oil, natural gas, natural gas liquids, liquefied
natural gas, or synthetic gas useable for fuel, and "source," "special nuclear,"
and "by-product" material as defined in the Atomic Energy Act of 1954, 42 U.S.C.
Section 2011 et seq.
4
<PAGE> 9
"Investment Sharing Agreement" means that certain Investment
Sharing Agreement dated February 25, 1999, by and between Prehn, LP, an Idaho
limited partnership, Wachtell, LP, an Idaho limited partnership, Conrad and the
Company.
"Knowledge" shall mean an individual deemed to have
"Knowledge" of a particular fact or other matter if:
(a) such individual is actually aware of such fact or other
matter; or
(b) a prudent individual could be expected to discover or
otherwise become aware of such fact or other matter in the course of conducting
a reasonably comprehensive investigation concerning the existence of such fact
or other matter.
A corporation shall be deemed to have "Knowledge" of a
particular fact or matter only if a director, officer or key employee of such
corporation has actual Knowledge, or could have had such Knowledge following
investigation as set forth in clause (b) above, of such fact or matter.
"Law" shall mean any foreign or domestic law, statute,
ordinance, rule, regulation, order, judgment or decree.
"Legal Requirement" shall mean any federal, state, local,
municipal, foreign or other law, statute, legislation, constitution, principle
of common law, resolution, ordinance, code, edict, decree, proclamation, treaty,
convention, rule, regulation, ruling, directive, pronouncement, requirement,
specification, determination, decision, opinion or interpretation that is or has
been issued, enacted, adopted, passed, approved, promulgated, made, implemented
or otherwise put into effect by or under the authority of any Governmental Body.
"Liability" shall mean any debt, obligation, duty or liability
of any nature including any unknown, undisclosed, unmatured, unaccrued,
unasserted, contingent, indirect, conditional, implied, vicarious, derivative,
joint, several or secondary liability, regardless of whether such debt,
obligation, duty or liability would be required to be disclosed on a balance
sheet and regardless of whether such debt, obligation, duty or liability is
immediately due and payable.
"Multiemployer Plan" means a plan described in Section 3(37)
of ERISA.
"Order" shall mean any:
(a) order, judgment, injunction, edict, decree, ruling,
pronouncement, determination, decision, opinion, verdict, sentence, subpoena,
writ or award that is issued, made, entered, rendered or otherwise put into
effect by or under the authority of any court, administrative agency or other
Governmental Body or any arbitrator or arbitration panel; or
(b) Contract with any Governmental Body that is entered into
in connection with any Proceeding.
5
<PAGE> 10
"Ordinary Course of Business" shall mean an action taken by or
on behalf of the Company shall not be deemed to have been taken in the "Ordinary
Course of Business" unless:
(a) such action is recurring in nature, consistent with the
Company's past practices and taken in the ordinary course of the Company's
normal day to day operations;
(b) such action is not required to be authorized by the
Company's shareholders, the Company's board of directors or any committee of the
Company's board of directors and does not require any other separate or special
authorization of any nature; and
(c) such action is similar in nature and magnitude to actions
customarily taken, without any special or separate authorization, in the
ordinary course of the normal day to day operations of other Entities that are
employed in businesses similar to Company's business.
"Person" shall mean any individual, Entity or Governmental
Body.
"Proceeding" shall mean any action, suit, litigation,
arbitration, proceeding (including any civil, criminal, administrative,
investigative or appellate proceeding and any informal proceeding), prosecution,
contest, hearing, inquiry, inquest, audit, examination or investigation,
commenced, brought, conducted or heard by or before, or otherwise has involved,
any Governmental Body or any arbitrator or arbitration panel.
"Quentra Common Stock" shall mean the common stock, par value
$1.00 per share, of Quentra.
"Quentra Maximum Amount" shall mean a number equal to 19.90%
of the total number of shares of Quentra Common Stock outstanding at the Closing
(which number shall include the shares of Quentra Common Stock issuable upon the
Closing of the Offering).
"Related Party" shall mean each of the following:
(a) each individual who is, or who has at any time been, an
officer of the Company or a predecessor thereto;
(b) each member of the family of each of the individuals
referred to in clause "(a)" above;
(c) any Entity (other than the Company) in which any one of
the Persons referred to in clauses "(a)" or "(b)" above holds (or in which more
than one of such individuals collectively hold), beneficially or otherwise, a
material voting, proprietary or equity interest.
"Representatives" of a specified party shall mean officers,
directors, employees, attorneys, accountants, advisors and representatives of
such party. The Related Parties shall be deemed to be "Representatives" of the
Company.
"SEC" shall mean the United States Securities and Exchange
Commission.
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<PAGE> 11
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Series C Preferred Stock" shall mean the Series C Convertible
Preferred Stock, par value $.01 per share, of Quentra.
"Subsidiary" of a specified Person shall mean any corporation,
partnership, limited liability company, joint venture or other legal entity of
which the specified Person (either alone and/or through and/or together with any
other Subsidiary) owns, directly or indirectly, 50% or more of the stock or
other equity or partnership interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such legal entity or of which the specified Person controls the
management.
"Tax" shall mean any tax (including any income tax, franchise
tax, capital gains tax, estimated tax, gross receipts tax, value added tax,
surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use tax,
property tax, business tax, occupation tax, inventory tax, occupancy tax,
withholding tax or payroll tax), levy, assessment, tariff, impost, imposition,
toll, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, penalty or interest), (a) imposed,
assessed or collected by or under the authority of any Governmental Body, or (b)
payable pursuant to any tax sharing agreement or similar Contract.
"Tax Return" shall mean any return (including any information
return), report, statement, declaration, estimate, schedule, notice,
notification, form, election, certificate or other document or information that
is, has been or may in the future be filed with or submitted to, or required to
be filed with or submitted to, any Governmental Body in connection with the
determination, assessment, collection or payment of any Tax or in connection
with the administration, implementation or enforcement of or compliance with any
Legal Requirement relating to any Tax.
"Transaction Documents" shall mean, collectively, the Personal
Services Agreement, the Agreement of Merger, the Certificate of Merger and the
Promissory Note.
"Transactions" shall mean (a) the execution and delivery of
the respective Transaction Documents, and (b) all of the transactions
contemplated by the respective Transaction Documents, including, without
limitation, the Merger, and the performance by the Parties to the Transaction
Documents of their respective obligations under the Transaction Documents.
(b) Each of the following terms is defined in the Section or
reference set forth opposite such term below:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Acquisition...........................................................Recitals
Agreement.............................................................Preamble
Agreement of Merger................................................Section 2.2
Beneficially Owns...............................................Section 6.2(a)
</TABLE>
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<TABLE>
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Cassady & Klein Opinion.........................................Section 2.8(b)
Certificate of Merger..............................................Section 2.2
CGCL...............................................................Section 2.1
Closing............................................................Section 2.3
Closing Date.......................................................Section 2.3
Code..................................................................Recitals
Company...............................................................Preamble
Company Preferred Stock............................................Section 3.2
Company Returns................................................Section 3.13(b)
Company Technology..............................................Section 3.9(b)
Conrad................................................................Preamble
Damages............................................................Section 9.4
DGCL...............................................................Section 2.1
Disclosure Schedules.................................................Article 3
Domain Names....................................................Section 3.9(j)
Effective Time.....................................................Section 2.2
Employee..............................................................Preamble
Enterprises...........................................................Preamble
Expenses...........................................................Section 6.3
Financial Statements............................................Section 3.5(a)
HA Warrant.........................................................Section 4.6
Incorporated Third Party Technology.............................Section 3.9(k)
Indemnified Party..................................................Section 9.4
Indemnifying Party.................................................Section 9.4
IP Registration.................................................Section 3.9(e)
IP Rights.......................................................Section 3.9(e)
Leased Premises.................................................Section 3.7(c)
Liquidation Payment.............................................Section 3.7(c)
Marks...........................................................Section 3.9(d)
Material Adverse Effect.........................................Section 3.6(a)
Merger................................................................Recitals
Millennial Dates................................................Section 3.9(k)
Offering...........................................................Section 5.8
Party.................................................................Preamble
Personal Services Agreement.....................................Section 2.8(b)
Plans..........................................................Section 3.15(a)
Pledge Agreement................................................Section 2.8(e)
Products........................................................Section 3.9(b)
Promissory Note.................................................Section 2.8(b)
Quentra...............................................................Preamble
Quentra Damages.................................................Section 9.2(a)
Quentra Indemnitees.............................................Section 9.2(a)
Quentra Preferred Stock............................................Section 5.2
Quentra SEC Reports................................................Section 5.4
Quentra Subsidiaries...............................................Section 5.1
Registrable Securities.............................................Section 5.2
</TABLE>
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<TABLE>
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Shareholder Damages................................................Section 9.3
Shareholder Designees...........................................Section 6.2(a)
Shareholder Indemnitees............................................Section 9.3
Shareholders..........................................................Preamble
Surviving Corporation..............................................Section 2.1
Technology......................................................Section 3.9(b)
Technology Related Assets.......................................Section 3.9(a)
Third Party Licenses............................................Section 3.9(c)
Third Party Technologies........................................Section 3.9(c)
Transfer...........................................................Section 6.4
Voting Agreement...................................................Section 5.9
Year 2000 Compliant.............................................Section 3.9(k)
</TABLE>
ARTICLE 2
THE TRANSACTIONS
2.1 The Merger. Subject to the terms and conditions set forth
in this Agreement, at the Effective Time, Acquisition shall be merged with and
into the Company and the separate corporate existence of Acquisition shall
thereupon cease. The Company, as the surviving corporation of the Merger
(sometimes hereinafter referred to as the "Surviving Corporation"), will be
governed by the laws of the State of California. The Merger shall have the
effects specified in the California General Corporation Law (the "CGCL") and the
General Corporation Law of the State of Delaware (the "DGCL"). Without limiting
the generality of the foregoing, and subject thereto, at the Effective Time, all
of the properties, rights, privileges, powers, franchises, debts, liabilities,
obligations and duties of the Company will continue in the Surviving Corporation
unaffected by the Merger.
2.2 Effective Time. As soon as practicable following the
satisfaction of the conditions set forth in Article 7, the Parties will file an
agreement of merger (the "Agreement of Merger") in substantially the form of
Annex I with the Secretary of State of the State of California and the
certificate of merger (the "Certificate of Merger") in the form of Annex II with
the Secretary of State of the State of Delaware, in such form as is required by
and executed in accordance with the relevant provisions of the CGCL and DGCL,
and will make all other filings or recordings required under the CGCL and DGCL
to consummate the Merger. The Merger will become effective upon the date and the
time of the filing of the Agreement of Merger with the Secretary of State of the
State of California and the Certificate of Merger with the Secretary of State of
the State of Delaware, whichever is later, or at such other time as the Parties
hereto may agree and as may be specified in the Agreement of Merger and
Certificate of Merger in accordance with applicable law. The date and time when
the Merger becomes effective is herein referred to as the "Effective Time."
2.3 Closing. The closing of the Merger (the "Closing") shall
take place at the offices of Kirkpatrick & Lockhart LLP, Pittsburgh, PA, as soon
as practicable (but in no event more than 5 Business Days) after satisfaction or
waiver of the conditions set forth in Article 7, unless another time, date or
place is agreed to in writing by the Parties. The date on which the Closing
occurs shall be referred to herein as the "Closing Date."
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<PAGE> 14
2.4 Articles of Incorporation and Bylaws of the Surviving
Corporation. At the Effective Time, in accordance with the CGCL, (i) the
Restated Articles of Incorporation, as amended, of the Company will be amended
to read in their entirety as set forth in Annex III, and (ii) the Bylaws of the
Company will be amended to read in their entirety as set forth in Annex IV.
2.5 Directors of the Surviving Corporation. At the Effective
Time, the directors of Acquisition then in office will become the directors of
the Surviving Corporation until the earlier of their resignation or removal or
until their respective successors are duly elected and qualified, as the case
may be.
2.6 Officers of the Surviving Corporation. At the Effective
Time, the officers of Acquisition will become the officers of the Surviving
Corporation until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
2.7 Conversion of Securities. As of the Effective Time, by
virtue of the Merger and without any action on the part of the Shareholders or
any holders of any shares of capital stock of Acquisition:
(a) Each issued and outstanding share of common stock, par
value .001 per share, of Acquisition shall be converted into and become one
fully paid and non-assessable share of common stock, no par value, of the
Surviving Corporation.
(b) Each share of Company Common Stock outstanding
immediately prior to the Merger shall be converted into the right to receive
that number of fully paid and non-assessable shares of Quentra Common Stock
equal to the Conversion Ratio. All such shares of Company Common Stock, when so
converted, shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect thereto
except the right to receive the foregoing shares of Quentra Common Stock.
(c) Each share of Company Preferred Stock outstanding
immediately prior to the Merger shall be converted into the right to receive
that number of fully paid and non-assessable shares of Series C Preferred Stock
equal to the Conversion Ratio. All such shares of Company Preferred Stock, when
so converted, shall no longer be outstanding and shall automatically be canceled
and retired and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights with respect thereto
except the right to receive the foregoing shares of Series C Preferred Stock.
2.8 Deliveries at the Closing.
(a) At the Closing, Enterprises shall deliver to Quentra:
(i) stock certificates representing all of the Company
Preferred Stock owned by Enterprises;
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(ii) an opinion of Kirkpatrick and Lockhart LLP
substantially in the form attached hereto as Exhibit D.
(b) At the Closing, Conrad shall deliver to Quentra or
cause to be delivered to Quentra:
(i) stock certificates representing all of the Company
Common Stock owned by Conrad;
(ii) an opinion of Cassady & Klein substantially in
the form attached hereto as Exhibit E (the "Cassady & Klein Opinion");
(iii) the HA Option Agreement duly executed by an
authorized officer of HA; and
(iv) a certified copy of the articles of incorporation
of HA and evidence that the HA License Agreement and HA Warrant have been
entered into.
(c) At the Closing or as otherwise set forth below,
Quentra shall deliver or cause to be delivered:
(i) to Enterprises, one or more certificates
representing that number of shares of Series C Preferred Stock determined in
accordance with Section 2.7(c), rounded to the next whole share, issued in the
name of Enterprises within one (1) Business Day after the Closing Date;
(ii) to Conrad, one or more certificates representing
that number of shares of Quentra Common Stock determined in accordance with
Section 2.7(b), rounded to the next whole share, issued in the name of Conrad,
less that number of shares of Quentra Common Stock required to be pledged to
Quentra by an Affiliate of Conrad in accordance with the terms of the Pledge
Agreement, within three (3) Business Days after the Closing Date;
(iii) to Employee, Two Million Dollars ($2,000,000) in
accordance with the terms of the Personal Services Agreement;
(iv) to Employee, the personal services agreement in
the form attached hereto as Exhibit A (the "Personal Services Agreement"), duly
executed by Quentra;
(v) to each Shareholder, a copy of the Certificate of
Designation creating the Series C Preferred Stock, in the form attached hereto
as Exhibit C, certified by the Secretary of State of the State of Delaware;
(vi) to each Shareholder, the Voting Agreements, duly
executed by the parties thereto; and
(vii) an opinion of Morrison & Foerster LLP
substantially in the form attached hereto as Exhibit F.
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(d) At the Closing, the Company shall deliver to Quentra:
(i) the Cassady & Klein Opinion.
(e) At the Closing, Employee shall deliver or cause to be
delivered to Quentra:
(i) the Personal Services Agreement, duly executed by
Employee;
(ii) a promissory note in the amount of $2,000,000 in
the form attached to the Personal Services Agreement (the "Promissory Note"),
duly executed by Employee; and
(iii) the pledge and security agreement in the form
attached to the Personal Services Agreement (the "Pledge Agreement"), duly
executed by an executive officer of pledgor.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF EMPLOYEE AND THE COMPANY
Except as specifically set forth in the disclosure schedule
delivered by Employee and the Company to Quentra at or prior to the execution of
this Agreement the parts of which are numbered to correspond to the Section
numbers of this Agreement (the "Disclosure Schedules"), Employee and the Company
hereby represent and warrant to Quentra that as of the execution of this
Agreement and as of the Effective Time:
3.1 Authority. The Company has all necessary power and
authority to execute and deliver this Agreement and the Transaction Documents to
which it is or is to become a party, to perform its obligations hereunder and
thereunder and to consummate the Merger and the other transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the
Transaction Documents to which the Company is or is to become a party and the
consummation by the Company of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary action on the part of the
Company and no other proceedings on the part of the Company are necessary to
authorize this Agreement or any Transaction Document or to consummate such
transactions. This Agreement has been validly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company,
enforceable against it in accordance with its terms. The Transaction Documents
to which the Company is or is to become a party, when executed and delivered by
the Company at the Closing, will constitute the legal, valid and binding
obligation of the Company, enforceable against it in accordance with its terms.
3.2 Capitalization. As of the date of this Agreement, the
authorized capital stock of the Company consists of 833,333 shares of Company
Common Stock, no par value per share, and 333,333 shares of Series A Convertible
Preferred Stock, $.01 par value per share ("Company Preferred Stock"). 500,000
shares of Company Common Stock are issued and outstanding, all of which are
owned by Conrad, and 333,333 shares of Company Preferred Stock
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are issued and outstanding, all of which are owned by Enterprises. Except as set
forth in this Section 3.2, there are no options, warrants, conversion rights,
stock appreciation rights, redemption rights, repurchase rights or other rights,
agreements, arrangements or commitments of any character to which the Company is
a party or by which the Company is bound relating to the issued or unissued
capital stock of the Company or obligating the Company to issue or sell any
shares of capital stock of, or other equity interests in, the Company. Except as
set forth in the Investment Sharing Agreement, all Company Common Stock and
Company Preferred Stock are free and clear of all Encumbrances and have been
duly authorized, validly issued, fully paid and nonassessable, will not be
subject to preemptive rights and have been issued in full compliance with all
applicable securities laws and other Legal Requirements. There are no
outstanding contractual obligations of the Company to repurchase, redeem or
acquire any shares of capital stock of the Company or security convertible into
or exchangeable for any of the foregoing.
3.3 Organization and Qualification; Subsidiaries.
(a) The Company has been duly organized and is validly
existing and in good standing under the laws of the State of California, and has
the requisite power and authority and all necessary governmental approvals to
own, lease and operate its properties and to carry on its business as it is now
being conducted. The Company is duly qualified or licensed to do business, and
is in good standing, in each jurisdiction where the character of the properties
owned, leased or operated by it or the nature of its business makes such
qualification or licensing necessary, except where the failure to so qualify
would not have a Material Adverse Effect on the Company. The Company has no
Subsidiaries and has never owned beneficially or otherwise any equity interest
in any other Person.
(b) The Company has never conducted any business under or
otherwise used, for any purpose or in any jurisdiction, any fictitious name,
assumed name, trade name or name other than the name set forth in its articles
of incorporation, as amended.
3.4 Articles of Incorporation and Bylaws; Records.
(a) The Company has delivered to Quentra accurate and
complete copies of: (i) the Company's articles of incorporation and bylaws,
including all amendments thereto; (ii) the stock records of the Company; and
(iii) the minutes and other records of the meetings and other proceedings
(including any actions taken by written consent or otherwise without a meeting)
of the shareholders of the Company, and any predecessor thereto, and the board
of directors of the Company, and any predecessor thereto. There have been no
meetings or other proceedings of the shareholders of the Company, or any
predecessor thereto, or the board of directors of the Company, or any
predecessor thereto, that are not reflected in such minutes or other records.
(b) There has not been any violation of any of the
provisions of the Company's articles of incorporation or bylaws or of any
resolution adopted by the Company's shareholders or the Company's board of
directors, and to the Knowledge of the Company no event has occurred, and no
condition or circumstance exists, that likely would (with or without notice or
lapse of time) constitute or result directly or indirectly in such a violation.
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(c) The books of account, stock records, minute books and
other records of the Company are accurate, up to date and complete, and have
been maintained in accordance with sound and prudent business practices. All of
the records of the Company and any predecessor thereto are in the actual
possession and direct control of the Company.
3.5 Financial Statements.
(a) The Company has delivered to Quentra the unaudited
balance sheet of the Company as of December 31, 1999 and the unaudited balance
sheet of the Company as of April 30, 2000 (the "Unaudited Interim Balance
Sheet"), and the related statements of operations, changes in shareholders'
equity and cash flows of the Company for the period from inception (January 19,
1999) through December 31, 1999 and for the four month period ending April 30,
2000, together with the notes thereto, if any (collectively, the "Financial
Statements").
(b) All of the Financial Statements are accurate and
complete in all material respects. The Financial Statements are in accordance
with the books and records of the Company, present fairly the financial position
of the Company as of the respective dates thereof and the results of operations
and changes in shareholders' equity and cash flows of the Company for the
respective periods covered thereby.
(c) At the date of the Unaudited Interim Balance Sheet,
(i) the Company had no Liabilities of any nature (matured or unmatured, fixed or
contingent) required to be provided for in such Unaudited Interim Balance Sheet
which were not provided for and (ii) the Company had no other material
Liabilities of any nature (matured or unmatured, fixed or contingent).
(d) As of the date of this Agreement, the Company has no
Liabilities in excess of $10,000 individually or in the aggregate, except for
(i) Liabilities identified as such in the "liabilities" column of the Unaudited
Interim Balance Sheet; and (ii) accounts payable and Liabilities incurred by the
Company in the Ordinary Course of Business since the date of the Unaudited
Interim Balance Sheet.
3.6 Absence of Changes. Since April 30, 2000:
(a) there has not been any material adverse change in the
Company's business, condition, assets, liabilities, operations, financial
performance, results of operations or prospects, and no event has occurred that
likely would have an adverse effect on the business, condition, assets,
liabilities, operations, financial performance, results of operations or
prospects (a "Material Adverse Effect") of the Company;
(b) there has not been any material loss, damage or
destruction to, or any interruption in the use of, any of the Company's assets
(whether or not covered by insurance);
(c) the Company has not (i) declared, accrued, set aside
or paid any dividend or made any other distribution in respect of any shares of
capital stock, or (ii) repurchased, redeemed or otherwise reacquired any shares
of capital stock or other securities;
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(d) the Company has not sold or otherwise issued any
shares of capital stock or any other securities, except as contemplated by this
Agreement;
(e) the Company has not amended its articles of
incorporation or bylaws and has not effected or been a party to any
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(f) the Company has not purchased or otherwise acquired
any asset from any other Person, except for assets acquired by the Company in
the Ordinary Course of Business;
(g) the Company has not leased or licensed any asset from
any other Person except for assets leased or licensed in the Ordinary Course of
Business;
(h) the Company has not made any individual capital
expenditure, measured by invoice amount, in excess of $10,000;
(i) the Company has not sold or otherwise transferred, and
has not leased or licensed, any asset to any other Person except for products
sold by the Company from its inventory in the Ordinary Course of Business;
(j) the Company has not written off as uncollectible, or
established any extraordinary reserve with respect to, any account receivable or
other indebtedness, except in the Ordinary Course of Business;
(k) the Company has not pledged or hypothecated any of its
assets or otherwise permitted any of its assets to become subject to any
Encumbrance, except in the Ordinary Course of Business;
(l) the Company has not made any loan or advance to any
other Person, including without limitation, any shareholder of the Company;
(m) the Company has not (i) established or adopted any
Employee Benefit Plan or (ii) paid any bonus or made any profit sharing or
similar payment to, or increased the amount of the wages, salary, commissions,
fringe benefits or other compensation or remuneration payable to, any of its
directors, officers or employees other than increases for non-officer employees
consistent with the Company's review and compensation policies in force prior to
the date of this Agreement;
(n) the Company has not entered into, and neither the
Company nor any of the assets owned or used by the Company has become bound by,
any Contract, except in the Ordinary Course of Business;
(o) no Contract by which the Company or any of the assets
owned or used by the Company is or was bound, or under which the Company has or
had any rights or interest, has been amended or terminated, except in the
Ordinary Course of Business;
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(p) there has been no borrowing or agreement to borrow by
the Company or change in the contingent obligations of the Company by way of
guaranty, endorsement, indemnity, warranty or other-wise or grant of a mortgage
or security interest in any property of the Company, and the Company has not
incurred, assumed or otherwise become subject to any Liabilities, other than
accounts payable incurred by the Company in the Ordinary Course of Business;
(q) the Company has not discharged any Encumbrance or
discharged or paid any indebtedness or other Liability, except any that (i) are
reflected as current liabilities in the Unaudited Interim Balance Sheet or have
been incurred by the Company since the date thereof in the Ordinary Course of
Business, and (ii) have been discharged or paid in the Ordinary Course of
Business;
(r) the Company has not forgiven any debt or otherwise
released or waived any right or claim;
(s) the Company has not changed any of its methods of
accounting or accounting practices in any respect;
(t) the Company has not entered into any transaction or
taken any other action outside the Ordinary Course of Business; and
(u) the Company has not agreed or committed (in writing or
otherwise) to take any of the actions referred to in clauses (c) through (t)
above.
3.7 Title to Assets; Equipment; Real Property, Leases;
Inventory.
(a) The Company owns, and has good, valid and marketable
title to, all material assets it purports to own, including (i) all assets
reflected on the Unaudited Interim Balance Sheet; (ii) all assets acquired by
the Company since the date of the Unaudited Interim Balance Sheet; and (iii) all
other material assets reflected in the Company's books and records as being
owned by the Company. All of said assets are owned by the Company free and clear
of any Encumbrances, except liens for current taxes and assessments not
delinquent.
(b) To the Knowledge of the Company, each material asset
of the Company (i) is free of defects and deficiencies and in good condition and
repair, consistent with its age and intended use (ordinary wear and tear
excepted); (ii) complies in all respects, and is being operated and otherwise
used in full compliance, with all applicable Legal Requirements; and (iii) is
adequate for the uses to which it is being put.
(c) The Company does not own any real property or any
interest in real property, except for the leaseholds created under the real
property leases identified in Section 3.7(c) of the Disclosure Schedule (the
"Leased Premises"). Section 3.7(c) of the Disclosure Schedule provides an
accurate and complete description of the premises covered by said leases and the
facilities located on such premises. The Company enjoys peaceful and undisturbed
possession of such premises. The Company has delivered to Quentra complete
copies of all such leases. Quentra will obtain a valid leasehold interest in
such leases, in each case free and clear of all title defects, Encumbrances and
restrictions of any kind, except: (i)
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mechanics', carriers', workers' and other similar liens arising in the Ordinary
Course of Business since the date of the Unaudited Interim Balance Sheet and
(ii) liens for current taxes not yet due and payable.
(d) All leases pursuant to which the Company leases real
or personal property are valid and effective in accordance with their respective
terms and, to the Company's Knowledge, there exists no default thereunder or
occurrence or condition which could result in a default thereunder or
termination thereof.
(e) The Company's Leased Premises are in a condition
adequate for the conduct of the business in the Ordinary Course of Business, and
the Company owns, or has a valid leasehold interest in or license to, all assets
necessary for the conduct of its business as presently conducted.
(f) The Company does not have any inventory.
3.8 Receivables.
(a) All existing accounts receivable of the Company
(including those accounts receivable reflected on the Unaudited Interim Balance
Sheet that have not yet been collected and those accounts receivable that have
arisen since such date and have not yet been collected) (i) represent valid
obligations of customers of the Company arising from bona fide transactions
entered into in the Ordinary Course of Business; and (ii) are current and, in
the aggregate, will be collected in full (without any counterclaim or setoff),
net of reserves, on or before the later of 90 days from the date of invoice or
60 days from the date hereof.
(b) The Company has no oral contracts or agreements to
deliver products or provide services
3.9 Intellectual Property.
(a) General. Except as set forth in the HA License
Agreement, the Company owns or is licensed and has all rights in and to the
following as required to conduct its business as now conducted and as proposed
to be conducted in any written materials furnished by the Company: (a) all
products, tools, computer programs, specifications, source code, object code,
graphics, devices, techniques, algorithms, methods, processes, procedures,
packaging, trade dress, formula, drawings, designs, improvements, discoveries,
concepts, user interfaces, software, "look and feel," development and other
tools, content, inventions (whether or not patentable or copyrightable and
whether or not reduced to practice), designs, logos, know-how, concepts and
other technology that are now, or during the two years prior to the date of this
Agreement have been, or currently are proposed to be, developed, produced, used,
marketed or sold by the Company (collectively, the "Technology-Related Assets");
and (b) all intellectual property and other proprietary rights in the
Technology-Related Assets, including, without limitation, all trade names,
trademarks, domain names, service marks, logos, brand names and other
identifiers, trade secrets, copyrights and domestic and foreign letters patent,
and the registrations, applications, renewals, extensions and continuations (in
whole or in part) thereof, all goodwill associated therewith and all rights and
causes of action for infringement, misappropriation, misuse, dilution or unfair
trade practices associated therewith.
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(b) Company Technology. Section 3.9(b) of the Disclosure
Schedule sets forth a list of all products and tools developed, produced, used,
marketed or sold by the Company during the two years prior to the date of this
Agreement and owned by the Company as of the date of the Unaudited Interim
Balance Sheet, together with all prior versions, predecessors or precursors to
such products or tools (collectively, the "Products"). Except as set forth in
Section 3.9(b) of the Disclosure Schedule and in the HA License Agreement, and
except for the Third Party Technologies (as defined in Section 3.9(c)), the
Company owns all right, title and interest in and to the following
(collectively, the "Technology"), free and clear of all Encumbrances: (i) the
Products, together with any and all codes, techniques, software tools, formats,
designs, user interfaces, content and "look and feel" related thereto; (ii) any
and all updates, enhancements, corrections, modifications, improvements and new
releases related to the items set forth in clause (i) above; (iii) any and all
technology and work in progress related to the items set forth in clauses (i)
and (ii) above; and (iv) all inventions, discoveries, processes, designs, trade
secrets, know-how and other confidential or proprietary information related to
the items set forth in clauses (i), (ii), and (iii) above. The Technology,
excluding the Third Party Technologies (as defined below), is sometimes referred
to herein as the "Company Technology."
(c) Third Party Technology. Section 3.9(c) of the
Disclosure Schedule sets forth a list of all Technology used in the Company's
business for which the Company does not own all right, title and interest
(collectively, the "Third Party Technologies"), and all license agreements or
other contracts pursuant to which the Company has the right to use (in the
manner used by the Company, or intended or necessary for use with the Company
Technology) the Third Party Technologies (the "Third Party Licenses"),
indicating, with respect to each of the Third Party Technologies listed therein,
the owner thereof and the Third Party License applicable thereto. The Company
has the lawful right to use (free of any material restriction not expressly set
forth in the Third Party Licenses) (a) all Third Party Technology that is
incorporated in or used in the development or production of the Company
Technology and (b) all other Third Party Technology necessary for the conduct of
the Company's business as now conducted and as proposed to be conducted in any
written materials furnished by the Company to Quentra. All Third Party Licenses
are valid, binding and in full force and effect, the Company and, to the
Company's Knowledge, each other party thereto have performed in all material
respects their obligations thereunder, and neither the Company nor, to the
Company's Knowledge, any other party thereto is in material default thereunder,
nor to the Company's Knowledge has there occurred any event or circumstance that
with notice or lapse of time or both would constitute a material default or
event of material default on the part of the Company or, to the Company's
Knowledge, any other party thereto or give to any other party thereto the right
to terminate or modify any Third Party License. The Company has not received
written notice or to the Company's knowledge any other notice that any party to
any Third Party License intends to cancel, terminate or refuse to renew (if
renewable) such Third Party License or to exercise or decline to exercise any
option or right thereunder.
(d) Trademarks. Section 3.9(d) of the Disclosure Schedule
sets forth a list of all trademarks, trade names, brand names, service marks,
logos or other identifiers for the Products or otherwise used by the Company in
its business (the "Marks"). Except as set forth in Section 3.9(d) of the
Disclosure Schedule and in the HA License Agreement, the Company has full legal
and beneficial ownership, free and clear of any Encumbrances, of all rights
conferred by use of the Marks in connection with the Products or otherwise in
the Company's business and,
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as to those Marks that have been registered in the United States Patent and
Trademark Office, by federal registration of the Marks.
(e) Intellectual Property Rights. Section 3.9(e) of the
Disclosure Schedule sets forth all patents, patent applications, copyright
registrations (and applications therefor) and trademark registrations (and
applications therefor) (collectively, the "IP Registrations") associated with
the Company Technology and the Marks. Except as set forth in Section 3.9(e) of
the Disclosure Schedule and in the HA License Agreement, the Company owns all
right, title and interest, free and clear of any Encumbrances, in and to the IP
Registrations, together with any other rights in or to any copyrights
(registered or unregistered), rights in the Marks (registered or unregistered),
trade secret rights and other intellectual property rights (including, without
limitation, rights of enforcement) contained or embodied in the Company
Technology and the Marks (collectively, the "IP Rights").
(f) Maintenance of Rights. The Company has not conducted
its business, and has not used or enforced (or, to its knowledge, failed to use
or enforce) the IP Rights, in a manner that would result in the abandonment,
cancellation or unenforceability of any item of the IP Rights or the IP
Registrations, and the Company has not taken (or, to its knowledge, failed to
take) any action that would result in the forfeiture or relinquishment of any IP
Rights or IP Registrations, in each case where such abandonment, cancellation,
unenforceability, forfeiture or relinquishment has had or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company. Except as set forth in Section 3.9(f) of the Disclosure Schedule
and in the HA License Agreement, the Company has not granted to any third party
any rights or permissions to use any of the Technology or the IP Rights. To the
best of the Company's Knowledge, except pursuant to reasonably prudent
safeguards and as set forth in the HA License Agreement, (a) no third party has
received any confidential information relating to the Technology or the IP
Rights and (b) the Company is not under any contractual or other obligation to
disclose to any third party any Company Technology.
(g) Third Party Claims. The Company has not received
written notice or to the Company's Knowledge any other notice or claim (whether
written, oral or otherwise) challenging the Company's ownership or rights in the
Company Technology or the IP Rights or claiming that any other person or entity
has any legal or beneficial ownership with respect thereto. All the IP Rights
are legally valid and enforceable without any material qualification, limitation
or restriction on their use, and the Company has not received any written
notice, or to the Company's Knowledge any other notice or claim (whether
written, oral or otherwise) challenging the validity or enforceability of any of
the IP Rights. To the Company's Knowledge, no other person or entity is
infringing or misappropriating any part of the IP Rights or otherwise making any
unauthorized use of the Company Technology.
(h) Infringement by the Company. Except for those rights
set forth in the HA License Agreement, the use of any of the Technology in the
Company's business does not infringe, violate or interfere with or constitute an
appropriation of any right, title or interest (including, without limitation,
any patent, copyright, trademark or trade secret right) held by any other person
or entity, and there have been no claims made with respect thereto. Except for
those rights set forth in the HA License Agreement, the use of any of the Marks
and other IP
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Rights in the Company's business does not infringe, violate or interfere with or
constitute an appropriation of any right, title or interest (including, without
limitation, any patent, copyright, trademark or trade secret right) held by any
other person or entity, and there have been no claims made with respect thereto.
The Company has not received any written notice, or to the Company's Knowledge
any other kind of notice or claim (whether written, oral or otherwise) regarding
any infringement, misappropriation, misuse, abuse or other interference with any
third party intellectual property or proprietary rights (including, without
limitation, infringement of any patent, copyright, trademark or trade secret
right of any third party) by the Company, the Technology or the Marks or other
IP Rights, or claiming that any other entity has any claim of infringement with
respect thereto.
(i) Confidentiality. The Company has not disclosed any
source code regarding the Technology to any person or entity other than those
persons or entities set forth on Section 3.9(i) of the Disclosure Schedule, all
of whom have entered into a written nondisclosure agreement with the Company.
The Company has at all times maintained and diligently enforced commercially
reasonable procedures to protect all confidential information relating to the
Technology. Neither the Company nor any escrow agent is under any contractual or
other obligation to disclose the source code or any other proprietary
information included in or relating to the Technology. The Company has not
deposited any source code relating to the Technology into any source code
escrows or similar arrangements. If, as disclosed in Section 3.9(i) of the
Disclosure Schedule, the Company has deposited any source code to the Technology
into source code escrows or similar arrangements, no event has occurred that has
or could reasonably form the basis for a release of such source code from such
escrows or arrangements.
(j) Domain Names. Section 3.9(j) of the Disclosure
Schedule sets forth a list of all Internet domain names used by the Company in
its business (collectively, the "Domain Names"). The Company has, and upon the
Closing the Surviving Corporation will have, a valid registration and all
material rights (free of any material restriction) in and to the Domain Names,
including, without limitation, all rights necessary to continue to conduct the
Company's business as it is currently conducted.
(k) Year 2000. The Company Technology, and to the
Company's Knowledge the Third Party Technology that is incorporated in or used
in the development or production of the Company Technology (the "Incorporated
Third Party Technology") is Year 2000 Compliant. The Company's business,
financial condition and results of operations will not be materially adversely
affected by Year 2000 Compliance related issues. The term "Year 2000 Compliant"
as used herein means that (i) each item of Company Technology, and, to the
Company's knowledge, the Incorporated Third Party Technology, on dates on and
after January 1, 2000 (the "Millennial Dates"), will calculate any information
dependent on or relating to dates on or after January 1, 2000 in the same
manner, and with the same functionality, data integrity and performance, as such
Company Technology, and to the Company's Knowledge, Incorporated Third Party
Technology records, stores, processes, calculates and presents calendar dates on
or before any Millennial Date, and (ii) the Millennial Dates will not adversely
affect the operation of such Company Technology, and to the Company's Knowledge,
such Incorporated Third Party Technology, with respect to date-dependent data or
computations, output, or other routines or functions.
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(l) Indemnification. Except pursuant to standard end user
licenses, (true and correct copies of which have been provided to Quentra or its
counsel), the Company has not entered into any agreement or offered to indemnify
any Person against any charge of infringement by the Technology or IP Rights, or
any other intellectual property or right. The Company has not entered into any
agreement granting any Person the right to bring any infringement action with
respect to, or otherwise to enforce, any of the Technology or IP Rights.
(m) Restrictions on Intellectual Property. To the
Knowledge of the Company, none of the Company's officers or employees has
entered into any agreement regarding know-how, trade secrets, assignment of
rights in inventions, or prohibition or restriction of competition or
solicitation of customers, or any other similar restrictive agreement or
covenant, whether written or oral, with any Person other than the Company.
3.10 Contracts.
(a) Section 3.10 of the Disclosure Schedule lists each of
the following Company Contracts:
(i) any Company Contract or series of related Company
Contracts requiring in the aggregate payments after the date hereof by or to the
Company of more than $10,000;
(ii) any Company Contract with or for the benefit of
any current or former officer, director, shareholder, employee or consultant of
the Company;
(iii) any Company Contract with any labor union or
association representing any employee of the Company;
(iv) any Company Contract for the purchase or sale of
materials, supplies, equipment, merchandise or services that contain an
escalation, renegotiation or redetermination clause or that obligate the Company
to purchase all or substantially all of its requirements of a particular product
from a supplier, or for periodic minimum purchases of a particular product from
a supplier;
(v) any Company Contract for sale of any of the assets
or properties of the Company other than in the Ordinary Course of Business or
for the grant to any Person of any options, rights of first refusal, or
preferential or similar rights to purchase any such assets or properties;
(vi) any agreement of surety, guarantee or
indemnification, other than agreements in the Ordinary Course of Business with
respect to obligations in an aggregate amount not in excess of $10,000;
(vii) any Company Contract containing covenants of the
Company not to compete in any line of business, in any geographic area or with
any Person or covenants of any other Person not to compete with the Company or
in any line of business of the Company;
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(viii) any Company Contract granting or restricting
the right of the Company to use any Company Technology, Marks or IP Rights;
(ix) any Company Contract with customers or suppliers
for the sharing of fees, the rebating of charges or other similar arrangements;
(x) any Company Contract with any holder of securities
of the Company as such (including, without limitation, any Company Contract
containing an obligation to register any of such securities under any federal or
state securities laws);
(xi) any Company Contract obligating the Company to
deliver services or product enhancements or containing a "most favored nation"
pricing clause;
(xii) any Company Contract relating to the acquisition
by the Company of any operating business or the capital stock of any other
person;
(xiii) any Company Contract requiring the payment to
any Person of a brokerage or sales commission or a finder's or referral fee
(other than arrangements to pay commission or fees to employees in the Ordinary
Course of Business);
(xiv) any Company Contract or note relating to or
evidencing outstanding indebtedness for borrowed money;
(xv) any lease, sublease or other Company Contract
under which the Company is lessor or lessee of any real property or equipment or
other tangible property with respect to obligations in excess of $10,000; and
(xvi) any other material Company Contract whether or
not made in the Ordinary Course of Business.
(b) Each Company Contract is valid and in full force and
effect, and is enforceable by the Company in accordance with its material terms,
except as enforceability may be limited by bankruptcy and other similar laws and
general principles of equity.
(c) Neither the Company nor any party to a Company
Contract is in default under any Company Contract. No event has occurred, and no
circumstance or condition exists, that likely would (with or without notice or
lapse of time) (i) result in a violation or breach of any of the provisions of
any Company Contract, (ii) give any Person the right to declare a default or
exercise any remedy or hinder any Company Contract, (iii) give any Person the
right to accelerate the maturity or performance of any Company Contract, or (iv)
give any Person the right to cancel, terminate or modify any Company Contract.
The Company has not waived any of its rights under any Company Contract, except
in the Ordinary Course of Business.
(d) To the Company's Knowledge, each Person against which
the Company has or may acquire any rights under any Company Contract is solvent
and is able to satisfy all of such Person's current and future monetary
obligations and other obligations and Liabilities to the Company.
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(e) (i) The Company has never guaranteed or otherwise
agreed to cause, insure or become liable for, and has never pledged any of its
assets to secure, the performance or payment of any obligation or other
Liability of any other Person except in the Ordinary Course of Business; and
(ii) the Company has never been a party to or bound by (A) any joint venture
agreement, partnership agreement, profit sharing agreement, cost sharing
agreement, loss sharing agreement or similar Contract, or (B) any Contract that
creates or grants to any Person, or provides for the creation or grant of, any
stock appreciation right, phantom stock right or similar right or interest.
(f) To the Knowledge of the Company, the performance of
the Company Contracts will not result in any violation of or failure to comply
with any Legal Requirement.
(g) No Person is materially renegotiating, nor has the
contractual right to materially renegotiate, any amount paid or payable to the
Company under any Company Contract or any other material term or provision of
any Company Contract.
(h) Schedule 3.10(h) of the Disclosure Schedule
identifies and provides an accurate and brief description of each proposed
Contract as to which any bid, offer, written proposal, term sheet or similar
document has been submitted or received by the Company that would commit the
Company to deliver goods or provide services with a value in excess of $20,000
and is outstanding.
(i) No party to any Company Contract has notified the
Company or made a claim to the effect that the Company has failed to perform an
obligation thereunder. In addition, to the Knowledge of the Company, there is no
plan, intention or indication of any contracting party to any Company Contract
to cause the termination, cancellation or modification of such Contract or to
reduce or otherwise change its activity thereunder so as to adversely affect the
benefits derived or expected to be derived therefrom by the Company.
(j) The Contracts identified in Section 3.10 of the
Disclosure Schedule collectively constitute all of the Contracts necessary to
enable the Company to conduct its business in the manner in which its business
is currently being conducted.
3.11 Compliance With Legal Requirements.
(a) The Company is in compliance with each Legal
Requirement that is applicable to it or to the conduct of its business or the
ownership or use of any of its assets.
(b) To the Knowledge of the Company, no event has
occurred, and no condition or circumstance exists, that likely would (with or
without notice or lapse of time) constitute or result directly or indirectly in
a violation by the Company of, or a failure on the part of the Company to comply
with, any Legal Requirement.
(c) The Company has not received at any time any notice
or other communication (in writing or otherwise) from any Governmental Body, or
any other Person, regarding (i) any actual, alleged, possible or potential
violation of, or failure to comply with, any Legal Requirement, or (ii) any
actual, alleged, possible or potential obligation on the part of the
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Company to undertake, or to bear all or any portion of the cost of, any cleanup
or any remedial, corrective or response action of any nature.
(d) To the Knowledge of the Company, no Governmental Body
has proposed or is considering any Legal Requirement (other than any Legal
Requirement that would be applicable generally to the industry in which the
Company competes) that, if adopted or otherwise put into effect, would
specifically affect the Company and (i) may have an adverse effect on the
Company's business, condition, assets, liabilities, operations, financial
performance, results of operations or prospects or on the ability of the Company
to comply with or perform any covenant or obligation under this Agreement or any
of the other Transaction Documents, or (ii) may have the effect of preventing,
delaying, making illegal or otherwise interfering with any of the Transactions.
3.12 Governmental Authorizations.
(a) Section 3.12 of the Disclosure Schedule identifies
(i) each Governmental Authorization that is held by the Company; and (ii) each
other Governmental Authorization that, to the Knowledge of the Company, is held
by any of the Company's employees and is used in connection with the Company's
business. The Company has delivered to Quentra accurate and complete copies of
all of the Governmental Authorizations identified in Section 3.12 of the
Disclosure Schedule, including all renewals thereof and all amendments thereto.
Each Governmental Authorization identified or required to be identified in
Section 3.12 of the Disclosure Schedule is valid and in full force and effect.
(b) The Governmental Authorizations identified in Section
3.12 of the Disclosure Schedule constitute all of the Governmental
Authorizations necessary (i) to enable the Company to conduct its business in
the manner in which its business is currently being conducted and (ii) to permit
the Company to own and use its assets in the manner in which they are currently
owned and used.
3.13 Tax Matters.
(a) Each Tax required to have been paid, or claimed by
any Governmental Body to be payable, by the Company (whether pursuant to any Tax
Return or otherwise) has been duly paid in full on a timely basis. Any Tax
required to have been withheld or collected by the Company has been duly
withheld and collected, and (to the extent required) each such Tax has been paid
to the appropriate Governmental Body.
(b) "Company Returns" means all Tax Returns required to
be filed by or on behalf of the Company with any Governmental Body with respect
to any taxable period ending on or before the date hereof. All Company Returns
(i) have been or will be filed when due, and (ii) have been, or will be when
filed, accurately and completely prepared in material compliance with all
applicable Legal Requirements. All amounts shown on the Company Returns to be
due on or before the date hereof, and all amounts otherwise payable in
connection with the Company Returns on or before the date hereof, have been
paid. The Company has delivered to Quentra accurate and complete copies of
Company Returns filed by the Company.
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(c) The Company's liability for unpaid Taxes for all
periods ending on or before the date of the Financial Statements does not, in
the aggregate, exceed the amount of the current liability accruals for Taxes
(excluding reserves for deferred taxes) reported in the Financial Statements.
The Company has established in the Ordinary Course of Business reserves for the
payment of all Taxes for the period from the date of the Financial Statements
through the date hereof and has disclosed the dollar amount of such reserves to
the Quentra.
(d) Section 3.13(d) of the Disclosure Schedule accurately
identifies each examination or audit of any Company Return that has been
conducted by any Governmental Body. The Company has delivered to Quentra
accurate and complete copies of all audit reports and similar documents relating
to Company Returns. No extension or waiver of the limitation period applicable
to any of the Company Returns has been granted (by the Company or any other
Person), and no such extension or waiver has been requested from the Company.
(e) No claim or other Proceeding is pending or to the
Company's Knowledge has been threatened against or with respect to Company in
respect of any Tax. There are no unsatisfied Liabilities for Taxes (including
liabilities for interest, additions to tax and penalties thereon and related
expenses) with respect to any notice of deficiency or similar document received
by the Company. The Company has not entered into or become bound by any
agreement or consent pursuant to Section 341(f) of the Code. The Company has not
been, and will not be, required to include any adjustment in taxable income for
any tax period (or portion thereof) pursuant to Section 481 or 263A of the Code
or any comparable provision under state or foreign Tax laws as a result of
transactions or events occurring, or accounting methods employed, prior to the
Closing. The Company is in compliance with the terms and conditions of any
applicable Tax exemptions, Tax agreements or Tax orders of any Governmental Body
to which it may be subject or which it may have claimed, and the transactions
contemplated by this Agreement will not have any adverse effect on such
compliance.
(f) There is no agreement, plan, arrangement or other
Contract covering any employee or independent contractor or former employee or
independent contractor of the Company that, individually or collectively, could
give rise directly or indirectly to the payment of any amount that would not be
deductible pursuant to Section 280G or Section 162 of the Code.
(g) Company has no net operating losses or other tax
attributes presently subject to limitation under Code Sections 382, 383, or 384.
(h) The Company is not liable for Taxes incurred by any
individual, trust, corporation, partnership or other entity other than Company,
either as a transferee or pursuant to Treasury Regulations Section 1.1502-6, or
pursuant to any other provision of federal, state or local law or regulation.
The Company is not, and has never been, a party to or bound by any tax indemnity
agreement, tax sharing agreement, tax allocation agreement or similar Contract.
(i) The Company is not a party to any joint venture,
partnership or other arrangement or contract which could be treated as a
partnership for United States federal income tax purposes.
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(j) The Company is not a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code and has
not been a United States real property holding corporation within the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code.
3.14 Employee and Labor Matters.
(a) Section 3.14(a) of the Disclosure Schedule accurately
sets forth, with respect to each significant employee of the Company (including
any significant employee of the Company who is on a leave of absence or on
layoff status) (i) the name of such employee and the date as of which such
employee was originally hired by the Company; (ii) such employee's title; (iii)
such employee's annualized compensation as of the date of this Agreement; (iv)
each Current Benefit Plan in which such employee participates or is eligible to
participate; and (v) any Governmental Authorization that is held by such
employee and that is used in connection with the Company's business.
(b) Schedule 3.14(b) of the Disclosure Schedule contains
a list of individuals who are currently performing services for the Company and
are classified as "consultants" or "independent contractors," and the respective
compensation of each such "consultant" or "independent contractor."
(c) There is no former employee of the Company who is
receiving or is scheduled to receive (or whose spouse or other dependent is
receiving or is scheduled to receive) any benefits (whether from the Company or
otherwise) relating to such former employee's employment with the Company.
(d) The Company is not a party to or bound by any
employment agreement or any union contract, collective bargaining agreement or
similar Contract.
(e) The employment of each of the Company's employees is
terminable by the Company at will. The Company has delivered to Quentra accurate
and complete copies of all employee manuals and handbooks, disclosure materials,
policy statements, employment agreements and other materials relating to the
employment of the current employees of the Company.
(f) To the Knowledge of the Company (i) no significant
employee of the Company intends to terminate his or her employment with the
Company and the Company does not have a present intention to terminate the
employment of any significant employee; (ii) no significant employee of the
Company is currently considering, an offer to join a business that likely would
be competitive with the Company's business; and (iii) no employee of the Company
is a party to or is bound by any confidentiality agreement, noncompetition
agreement or other Contract (with any Person) that likely would have an adverse
effect on (A) the performance by such employee of any of his or her duties or
responsibilities as an employee of the Company, or (B) the Company's business or
operations.
(g) The Company is not engaged, and has never been
engaged, in any unfair labor practice of any nature. There has never been any
slowdown, work stoppage, labor dispute or union organizing activity, or any
similar activity or dispute, affecting the Company or
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any of its employees. There is not now pending, and to the Knowledge of the
Company no Person has threatened to commence, any such slowdown, work stoppage,
labor dispute or union organizing activity or any similar activity or dispute,
nor has any event occurred, nor does any condition or circumstance exist, that
likely would directly or indirectly give rise to or provide a basis for the
commencement of any such slowdown, work stoppage, labor dispute or union
organizing activity or any similar activity or dispute.
3.15 Benefit Plans; ERISA.
(a) Section 3.15 of the Disclosure Schedule lists (i) all
Employee Benefit Plans, (ii) all employment agreements, including, but not
limited to, any individual benefit arrangement, policy or practice with respect
to any current or former employee or director of the Company or any ERISA
Affiliate, and (iii) all other employee benefit, bonus or other incentive
compensation, stock option, stock purchase, stock appreciation, severance pay,
lay-off or reduction in force, change in control, sick pay, vacation pay, salary
continuation, retainer, leave of absence, educational assistance, service award,
employee discount, fringe benefit plans, arrangements, policies or practices,
whether legally binding or not, which the Company or any ERISA Affiliate
maintains, contributes to or has any obligation to or liability for
(collectively, the "Plans").
(b) None of the Plans is a Defined Benefit Plan, and
neither the Company nor any ERISA Affiliate has ever sponsored, maintained or
contributed to, or ever been obligated to contribute to, a Defined Benefit Plan.
(c) None of the Plans is a Multiemployer Plan, and
neither the Company nor any ERISA Affiliate has ever contributed to, or ever
been obligated to contribute to, a Multiemployer Plan.
(d) The Company does not maintain or contribute to any
welfare benefit plan that provides health benefits to an employee after the
employee's termination of employment or retirement except as required under
Section 4980B of the Code and Sections 601 through 608 of ERISA.
(e) Each Plan that is an Employee Benefit Plan complies
by its terms and in operation with the requirements provided by any and all
statutes, orders or governmental rules or regulations currently in effect and
applicable to the Plan, including but not limited to ERISA and the Code.
(f) All reports, forms and other documents required to be
filed with any Governmental Body with respect to any Plan (including without
limitation, summary plan descriptions, Forms 5500 and summary annual reports)
have been timely filed and are accurate.
(g) Each Plan intended to qualify under Section 401(a) of
the Code is the subject of a favorable determination letter issued by the
Internal Revenue Service that provides that it so qualifies through the last day
of the "TRA 86 Remedial Amendment Period," as such term is defined in Section
3.02 of Revenue Procedure 96-55 issued by the Internal Revenue Service and that
its related trust is exempt from taxation under Section 501 of the Code. To the
Company's Knowledge, nothing has occurred since the date of the Internal Revenue
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Service's favorable determination letter that could adversely affect the
qualification of such Plan or the tax exempt status of its related trust.
(h) All contributions for all periods ending prior to the
Closing (including periods from the first day of the current plan year to the
Closing) have been made prior to the Closing by the Company in accordance with
past practice and the recommended contribution in any applicable actuarial
report.
(i) All insurance premiums have been paid in full,
subject only to normal retrospective adjustments in the ordinary course, with
regard to the Plans for plan years ending on or before the Closing.
(j) With respect to each Plan:
(i) no prohibited transactions (as defined in Section
406 or 407 of ERISA or Section 4975 of the Code) have occurred for which a
statutory exemption is not available;
(ii) no action or claims (other than routine claims
for benefits made in the ordinary course of Plan administration for which Plan
administrative review procedures have not been exhausted) are pending,
threatened or imminent against or with respect to the Plan, any employer who is
participating (or who has participated) in any Plan or any fiduciary (as defined
in Section 3(21) of ERISA) of the Plan;
(iii) neither the Company nor any fiduciary has any
Knowledge of any facts which could give rise to any such action or claim; and
(iv) it provides that it may be amended or terminated
at any time and, except for benefits protected under Section 411(d) of the Code,
all benefits payable to current, terminated employees or any beneficiary may be
amended or terminated by the Company at any time without liability.
(k) Neither the Company nor any ERISA Affiliate has any
liability or is threatened with any liability (whether joint or several) (i) for
any excise tax imposed by Sections 4971, 4975, 4976, 4977 or 4979 of the Code,
or (ii) to a fine under Section 502 of ERISA.
(l) All of the Plans listed in the Disclosure Schedule,
to the extent applicable, are in compliance with the continuation of group
health coverage provisions contained in Section 4980B of the Code and Sections
601 through 608 of ERISA.
(m) True, correct and complete copies of all documents
creating or evidencing any Plan listed in the Disclosure Schedule have been
delivered to Quentra, and true, correct and complete copies of all reports,
forms and other documents required to be filed with any governmental entity
(including, without limitation, summary plan descriptions, Forms 5500 and
summary annual reports for all plans subject to ERISA) have been delivered to
Quentra. There are no negotiations, demands or proposals which are pending or
have been made which
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concern matters now covered, or that would be covered, by the type of agreements
listed in the Disclosure Schedule.
(n) All expenses and liabilities relating to all of the
Plans described in the Disclosure Schedule have been, and will on the Closing be
fully and properly accrued on the Company's books and records and disclosed in
accordance with generally accepted accounting principles and in Plan financial
statements.
3.16 Environmental Matters. The Company is and has been at all
times in compliance in all respects with all Environmental Laws. The Company has
now and at all times has had all the necessary permits required under
Environmental Laws for the operation of its business, and is not and has not
been in violation of any of the terms and conditions of any of its permits. The
Company has not received any notice or other communication (in writing or
otherwise) that alleges that the Company is not in compliance with any
Environmental Law. The Company has not generated, manufactured, produced,
transported, imported, used, treated, refined, processed, handled, stored,
discharged, released, or disposed of any Hazardous Materials (whether lawfully
or unlawfully) at any of the Leased Premises occupied or controlled by the
Company on or at any time prior to the date hereof other than common household
and office products in de minimis quantities. There are not and have not been
any releases or threatened releases of any Hazardous Materials in any quantity
(other than common household and office products in de minimis quantities) at,
on, or from the Leased Premises, and to the Knowledge of the Company (a) there
are no circumstances that may prevent or interfere with the Company's compliance
with any Environmental Law and (b) no former owner or user of the Leased
Premises engaged in any type of manufacturing or commercial activity which might
be reasonably expected to generate, manufacture, produce, transport, import,
use, treat, refine, process, handle, store, discharge, release, or dispose of
any Hazardous Materials (whether lawfully or unlawfully) on the Leased Premises.
3.17 Sale of Products; Performance of Services. The Company
has not made any express warranties or guarantees relating to its products that
are in effect as of the date hereof. No customer or other Person has ever
asserted or threatened to assert any material claim against the Company (i)
under or based upon any warranty provided by or on behalf of the Company, or
(ii) under or based upon any other warranty relating to any product sold by the
Company or any services performed by the Company. To the Knowledge of the
Company, no event has occurred, and no condition or circumstance exists, that
likely would (with or without notice or lapse of time) directly or indirectly
give rise to or serve as a basis for the assertion of any such claim. The
Company has received no customer complaints pursuant to which the Company gave a
credit or accepted a product return for a refund in either case in excess of
$1,000.
3.18 Insurance. The Company does not currently have any
insurance policies in place. The Company has not been refused any insurance with
respect to its assets or operations, nor has any insurance carrier to which it
has applied for any such insurance or with which it has carried insurance
limited its coverage.
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3.19 Related Party Transactions.
(a) No Related Party has, and no Related Party has at any
time since January 1, 1999, had, any direct or indirect interest of any nature
in any asset used in or otherwise relating to the business of the Company;
(b) no Related Party is, or has been, indebted to the
Company;
(c) no Related Party has entered into, or has had any
direct or indirect financial interest in, any Contract, transaction or business
dealing of any nature involving the Company and no such Contract, transaction or
business dealing of any nature is necessary to operate the business of the
Company as it is currently conducted;
(d) to the Company's Knowledge, no Related Party is
competing, or has at any time competed, directly or indirectly, with the Company
in any market served by the Company;
(e) no Related Party has any claim or right against the
Company; and
(f) to the Knowledge of the Company, no event has
occurred, and no condition or circumstance exists, that likely would (with or
without notice or lapse of time) directly or indirectly give rise to or serve as
a basis for any claim or right in favor of any Related Party against the
Company.
3.20 Proceedings; Orders.
(a) There is no pending Proceeding, and to the Knowledge
of the Company, no Person has threatened to commence any Proceeding (i) that
involves the Company or that otherwise relates to or likely would affect the
Company's business or any of the assets owned or used by the Company (whether or
not the Company is named as a party thereto); or (ii) that challenges, or that
may have the effect of preventing, delaying, making illegal or otherwise
interfering with, any of the Transactions. To the Knowledge of the Company, no
event has occurred, and no claim, dispute or other condition or circumstance
exists, that likely would directly or indirectly give rise to or serve as a
basis for the commencement of any such Proceeding.
(b) No Proceeding has ever been commenced by or against
the Company, and no Proceeding otherwise involving or relating to the Company
has been pending or threatened at any time.
(c) The Company has delivered to Quentra accurate and
complete copies of all pleadings, correspondence and other written materials to
which the Company has access that relate to the Proceedings identified in
Section 3.20 of the Disclosure Schedule.
(d) There is no Order to which the Company, or any of the
assets owned or used by the Company, is subject.
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(e) To the Knowledge of the Company, no officer or
employee of the Company is subject to any Order that prohibits such officer or
employee from engaging in or continuing any conduct, activity or practice
relating to the Company's business.
(f) There is no Order that, or to the Knowledge of the
Company, proposed Order (other than any proposed Order that would be applicable
generally to the data integration industry) that, if issued or otherwise put
into effect, (i) likely would have a material adverse effect on the ability of
the Company to comply with or perform any covenant or obligation under this
Agreement or any of the other Transaction Documents, or (ii) may have the effect
of preventing, delaying, making legal or otherwise interfering with any of the
Transactions.
3.21 Non-Contravention; Consents. Neither the execution and
delivery of this Agreement or the other Transaction Documents, nor the
consummation or performance of any of the Transactions, will directly or
indirectly (with or without notice or lapse of time):
(a) contravene, conflict with or result in a violation of
(i) any of the provisions of the Company's articles of incorporation or bylaws,
or (ii) any resolution adopted by the Company's shareholders, the Company's
board of directors or any committee of the Company's board of directors, if any;
(b) to the Knowledge of the Company, contravene, conflict
with or result in 2 violation of, or give any Governmental Body or other Person
the right to challenge any of the Transactions or to exercise any remedy or
obtain any relief under, any Legal Requirement or any Order to which the
Company, or any of the assets owned or used by the Company, is subject;
(c) cause the Company to become subject to, or to become
liable for the payment of, any Tax;
(d) cause any of the assets owned or used by the Company
to be reassessed or revalued by any taxing authority or other Governmental Body;
(e) to the Knowledge of the Company, contravene, conflict
with or result in a violation of any of the terms or requirements of, or give
any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate
or modify, any Governmental Authorization that is held by the Company or any of
its employees or that otherwise relates to the Company's business or to any of
the assets owned or used by the Company;
(f) contravene, conflict with or result in a violation or
breach of, or result in a default under, any material provision of any of the
Company Contracts;
(g) give any Person the right to (i) declare a default or
exercise any remedy under any Company Contract, (ii) accelerate the maturity or
performance of any Company Contract, or (iii) cancel, terminate or modify any
Company Contract;
(h) give any Person the right to any payment by the
Company or give rise to any acceleration or change in the award, grant, vesting
or determination of options,
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warrants, rights, severance payments or other contingent obligations of any
nature whatsoever of the Company in favor of any Person, in any such case as a
result of the change in control of the Company or otherwise resulting from the
Transactions; or
(i) result in the imposition or creation of any
Encumbrance upon or with respect to any asset owned or used by the Company.
Except as set forth in Section 3.21 of the Disclosure Schedule, the Company will
not be required to make any filing with or give any notice to, or obtain any
Consent from, any Person in connection with the execution and delivery of this
Agreement and the other Transaction Documents or the consummation or performance
of any of the Transactions. As of the date hereof, all such filings, notices and
Consents have been duly made, given or obtained and are in full force and
effect, other than those which by their nature are required to be made, given or
obtained after the execution of this Agreement, all of which shall be made,
given or obtained within the time required therefor.
3.22 Brokers. The Company has not agreed or become obligated
to pay, or taken any action that likely would result in any Person claiming to
be entitled to receive, any brokerage commission, finder's fee or similar
commission or fee in connection with any of the Transactions.
3.23 Year 2000 Compliance. All of the Company's products
(including products currently under development) record, store, process and
calculate and present calendar dates falling on and after January 1, 2000,
calculate any information dependent on or relating to such dates in the same
manner and with the same functionality, data integrity and performance as the
products record, store, process, calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such dates. All of the Company's material products lose no functionality with
respect to the introduction of records containing dates falling on or after
January 1, 2000. All of the Company's internal computer systems, including
without limitation, its accounting systems, are Year 2000 Compliant.
3.24 Tax Treatment. Neither the Company nor any of its
Affiliates has taken any action or knows of any fact, agreement, plan or other
circumstance that could pose a material risk to the status of the Merger as a
reorganization under the provisions of Section 368(a) of the Code.
3.25 Full Disclosure.
(a) Neither this Agreement (including all Schedules,
Exhibits and Annexes hereto), nor any of the Transaction Documents, contains any
untrue statement of material fact or omits to state any fact necessary to make
any of the representations, warranties or statements contained therein on behalf
of the Company or any of the Shareholders not misleading. To the extent any
representation or warranty permits omission of items otherwise required to be
discussed because they are not material or do not or would not have a Material
Adverse Effect on the Company, such omissions in the aggregate will not and do
not have a Material Adverse Effect on the Company.
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(b) As of the date of this Agreement, the Company has
provided Quentra and Quentra's Representatives with full and complete access to
all of the Company's records and other documents and data requested by them.
(c) There is no fact within the Knowledge of Company
(other than publicly known facts relating exclusively to political or economic
matters of general applicability) that (i) may have a Material Adverse Effect on
the Company's business, condition, assets, liabilities, operation, financial
performance, net income or prospects (in or any aspect or portion thereof) or on
the ability of the Company to comply with or perform any covenant or obligation
under this Agreement or any of the other Transaction Documents, or (ii) may have
the effect of preventing, delaying, making illegal or otherwise interfering with
any of the Transactions.
(d) All of the information set forth in the Disclosure
Schedule, other information regarding the Company and its business, condition,
assets, liabilities, operation, financial performance, net income and prospects
that have been furnished to Quentra or any of its Representatives by or on
behalf of Company or any of the Company's Representatives, is accurate in all
material respects.
3.26 Powers of Attorney. The Company has not given a power of
attorney to any Person.
3.27 Voting Arrangements. There are no outstanding shareholder
agreements, voting trusts, proxies or other arrangements or understandings
relating to the voting of any shares of the capital stock of the Company.
3.28 Change in Control Payments. The Company does not have any
plans, programs or agreements to which it is a party, or to which it is subject,
pursuant to which payments (whether in cash or property or the vesting of
property) may be required upon, or may become payable directly or indirectly as
a result of, a change of control of the Company.
3.29 Board and Shareholder Approval. The board of directors of
the Company has, as of the date of this Agreement, unanimously (i) approved this
Agreement and the transactions contemplated hereby and thereby, (ii) determined
that the Merger is in the best interests of the shareholders of Company and is
on terms that are fair to such shareholders and (iii) recommended that the
shareholders of Company approve this Agreement and the Merger. The Shareholders
have unanimously approved the adoption of this Agreement and the transactions
contemplated hereby.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Except as specifically set forth in the Disclosure Schedule
delivered by the Shareholders to Quentra at or prior to the execution of this
Agreement, each Shareholder (except with respect to Sections 4.5, 4.6 and 4.7 to
which Enterprises makes no representations or
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warranties) hereby represents and warrants severally to Quentra that as of the
execution of this Agreement and as of the Effective Time:
4.1 Authority. The Shareholder has all necessary power and
authority to execute and deliver this Agreement and the Transaction Documents,
to perform its obligations under this Agreement and the Transaction Documents
and to consummate the Merger and the other transactions contemplated by this
Agreement and the Transaction Documents. The execution and delivery of this
Agreement and the Transaction Documents and the consummation by the Shareholder
of the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary action, and no other proceedings on the part of the
Shareholder are necessary to authorize this Agreement or the Transaction
Documents or to consummate the transactions contemplated hereby or thereby. This
Agreement has been validly executed and delivered by the Shareholder and
constitutes a legal, valid and binding obligation of the Shareholder,
enforceable against it in accordance with its terms. Each of the Transaction
Documents will, when duly executed and delivered by the Shareholder at the
Closing, constitute a legal, valid and binding obligation of the Shareholder,
enforceable against it in accordance with its terms.
4.2 Title to Shares. The Shareholder has legal, valid,
beneficial and exclusive title to the shares of the capital stock of the Company
owned by it, free and clear of all Encumbrances other than those imposed by the
Securities Act and except as set forth in the Investment Sharing Agreement.
4.3 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Shareholder.
4.4 Accredited Investor. The Shareholder is an "accredited
investor" within the meaning of Rule 501 of Regulation D under the Securities
Act. The Shareholder (i) is receiving the Series C Preferred Stock and the
Quentra Common Stock issuable pursuant to the terms of this Agreement for
investment for its own account and not with a view to, or for sale in connection
with, any distribution thereof, in violation of the Securities Act, (ii) has had
an opportunity to ask questions of the officers and directors of, and has had
access to information concerning, Quentra, (iii) has knowledge, sophistication
and experience in business and financial matters and risks of such investment,
(iv) is able to bear the economic risk of such investment, and (v) is able to
afford the complete loss of such investment.
4.5 Creation of HA.
(a) HA has been duly organized and is validly existing and
in good standing under the laws of the State of California, and has the
requisite power and authority and all necessary governmental approvals to own,
lease and operate its properties and to carry on its business as it is now being
conducted. HA is duly qualified or licensed to do business, and is in good
standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except where the failure to so qualify would not have a
Material Adverse Effect on HA. HA has
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no Subsidiaries and has never owned beneficially or otherwise any equity
interest in any other Person.
(b) HA has never conducted any business under or otherwise
used, for any purpose or in any jurisdiction, any fictitious name, assumed name,
trade name or name other than the name set forth in its articles of
incorporation, as amended.
4.6 Capitalization of HA. As of the date of this Agreement,
the authorized capital stock of HA consists of 833,333 shares of HA's common
stock, $.001 par value per share (the "HA Common Stock") and 333,333 shares of
Series A Convertible Preferred Stock, $.001 par value per share ("HA Preferred
Stock") none of which are issued and outstanding. As of the date of this
Agreement, 500,000 shares of HA Common Stock are issued and outstanding, all of
which are owned by Conrad, and Enterprises owns a warrant (the "HA Warrant") to
purchase 333,333 shares of HA Preferred Stock. Except as set forth in this
Section 4.6 and in the HA Option Agreement, there are no options, warrants,
conversion rights, stock appreciation rights, redemption rights, repurchase
rights or other rights, agreements, arrangements or commitments of any character
to which HA is a party or by which HA is bound relating to the issued or
unissued capital stock of HA or obligating HA to issue or sell any shares of
capital stock of, or other equity interests in, HA. All HA Common Stock, the HA
Warrant, and the shares of Preferred Stock issuable upon exercise of the HA
Warrant, will be free and clear of all Encumbrances and have been duly
authorized, validly issued, fully paid and nonassessable, will not be subject to
preemptive rights and have been issued in full compliance with all applicable
securities laws and other Legal Requirements. There are no outstanding
contractual obligations of HA to repurchase, redeem or acquire any shares of
capital stock of HA or securities convertible into or exchangeable for any of
the foregoing.
4.7 Other Agreements. HA has entered into the HA License
Agreement with the Company and granted the HA Warrant to Enterprises, both in
the form previously reviewed and approved by Quentra.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF QUENTRA
Except as specifically set forth in the Disclosure Schedule
delivered by Quentra to the Company and the Shareholders at or prior to the
execution of this Agreement, Quentra hereby represents and warrants to the
Company and to each Shareholder that as of the execution of this Agreement and
as of the Effective Time:
5.1 Organization and Qualification; Subsidiaries. Quentra and
each Subsidiary of Quentra (collectively, the "Quentra Subsidiaries") has been
duly organized and is validly existing and in good standing under the laws of
the jurisdiction of its incorporation or organization, as the case may be, and
has the requisite power and authority and all necessary governmental approvals
to own, lease and operate its properties and to carry on its business as it is
now being conducted. Each of Quentra and each Quentra Subsidiary is duly
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification
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or licensing necessary, except where the failure to so qualify would not have a
Material Adverse Effect on Quentra. Schedule 5.1 sets forth a complete and
correct list of all of the Quentra Subsidiaries. Neither Quentra nor any Quentra
Subsidiary holds any equity interest in any Person other than the Quentra
Subsidiaries so listed.
5.2 Capitalization. As of the date of this Agreement, the
authorized capital stock of Quentra consists of 70,000,000 shares of Quentra
Common Stock and 10,000,000 shares of preferred stock, par value $.01 per share
(the "Preferred Stock"). As of the date hereof: (i) approximately 22,409,090
shares of Quentra Common stock are issued and outstanding (which number includes
the contemplated issuance of approximately 2,090,090 shares of Quentra Common
Stock under the Offering, the issuance of which is contingent, in part, upon the
execution of this Agreement); (ii) 708,692 shares of Quentra 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; (v) 1,783,000
shares of Series C Convertible Preferred Stock are authorized for issuance of
which no shares are issued and outstanding; and (vi) 5,058,405 shares of
undesignated Preferred Stock are authorized but unissued. In addition, as of the
date of this Agreement: (A) Quentra has reserved for issuance under various
stock option plans of Quentra (the "Plans") 7,090,463 shares of Quentra 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 Quentra
Common Stock are subject to outstanding options, warrants or restricted stock
awards granted outside the Plans. Except as set forth in Schedule 5.2, filings
made by Quentra with the SEC under the Securities Act and the Exchange Act or in
this Section 5.2, and except for warrants and options and other rights granted
as set forth above, there are no options, warrants, conversion rights, stock
appreciation rights, redemption rights, repurchase rights or other rights,
agreements, arrangements or commitments of any character to which Quentra or any
Quentra Subsidiary is a party or by which Quentra or any Quentra Subsidiary is
bound relating to the issued or unissued capital stock of Quentra or any Quentra
Subsidiary or obligating Quentra or any Quentra Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, Quentra or any Quentra
Subsidiary. All shares of Quentra Common Stock and Series C Preferred Stock,
upon issuance to the Shareholders at Closing, and all shares of Quentra Common
Stock issuable upon conversion of the Series C Preferred Stock or otherwise
pursuant to this Agreement, when issued, will be free and clear of all
Encumbrances, other than those imposed by the Securities Act, and will be duly
authorized, validly issued, fully paid and nonassessable and will not be subject
to preemptive rights. Except as set forth on Schedule 5.2, there are no
outstanding contractual obligations of Quentra or any Quentra Subsidiary to
repurchase, redeem or acquire any shares of Quentra Common Stock, Quentra
Preferred Stock or any security convertible into or exchangeable for any of the
foregoing. Each outstanding share of capital stock of each Quentra Subsidiary is
duly authorized, validly issued, fully paid, nonassessable and not subject to
preemptive rights and each such share owned by Quentra or a Quentra Subsidiary
is free and clear of all Encumbrances, other than those imposed by the
Securities Act. Quentra has delivered to the Company and Shareholders a list,
which is true, correct and complete in all material respects, of each holder of
any option, warrant or other right to acquire any shares of Quentra Common Stock
(or any security convertible into or exchangeable for Quentra Common Stock), and
sets forth with respect to each such holder the number of shares of Quentra
Common Stock (or securities convertible into or exchangeable for
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Quentra Common Stock) underlying each option, warrant or other right held by
that holder, the exercise or conversion price of each such option, warrant or
other right and the date of grant or issuance of each such option, warrant or
other right; except as set forth on such list, or as otherwise contemplated by
this Agreement, no option, warrant or other right to acquire any shares of
Quentra Common Stock (or any security convertible into or exchangeable for
Quentra Common Stock) is issued and outstanding or has been authorized for
issuance as of the date of this Agreement.
Quentra has filed with the Nasdaq Stock Market, Inc. an
additional listing application to list all shares of Quentra Common Stock that
may be issued to either Shareholder (i) at the Closing, or (ii) upon conversion
of the Series C Preferred Stock (collectively, the "Registrable Securities") on
the Nasdaq National Market.
5.3 Authority. Quentra has all necessary corporate power and
authority to execute and deliver this Agreement and the Transaction Documents to
which it is or is to become a party, to perform its obligations hereunder and
thereunder and to consummate the Merger and the other transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the
Transaction Documents to which Quentra is or is to become a party and the
consummation by Quentra of the transactions contemplated hereby and thereby have
been duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of Quentra are necessary to authorize this
Agreement or any Transaction Document or to consummate such transactions. This
Agreement has been duly authorized and validly executed and delivered by Quentra
and constitutes a legal, valid and binding obligation of Quentra, enforceable
against it in accordance with its terms. The Transaction Documents to which
Quentra or Acquisition is or is to become a party, when executed and delivered
by Quentra or Acquisition at the Closing, will constitute legal, valid and
binding obligations of Quentra or Acquisition, enforceable against it in
accordance with their terms.
5.4 SEC Filings; Financial Statements. Except as set forth in
Section 5.4 of the Disclosure Schedule, Quentra has filed all forms, reports and
documents required to be filed by Quentra with the SEC since January 1, 1998
(collectively, together with any forms, reports and documents filed by Quentra
with the SEC after the date hereof until the Closing, the "Quentra SEC
Reports"). Each such report, when filed, complied in all material respects as to
form with the requirements of the Exchange Act and, as of their respective
dates, none of such reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Each of the consolidated financial statements (including,
in each case, any related notes) contained in the Quentra SEC Reports complied
as to form in all material respects with the applicable rules and regulations of
the SEC with respect thereto, was prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements)
and fairly presented the consolidated financial position of Quentra as at the
respective dates and the consolidated results of operations and cash flows for
the periods indicated, except that unaudited interim financial statements
contained in any quarterly report on Form 10-Q (i) were or are subject to normal
year-end adjustments which were not or are not expected to be material in
amount, and (ii) do not contain footnote disclosure.
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5.5 Title to Shares. At the Effective Time, each Shareholder
shall acquire legal and valid title to the shares of Quentra Common Stock or
Series C Preferred Stock issued to him or it, in each case free and clear of all
Encumbrances, other than those imposed by the Securities Act. Upon issuance,
each Shareholder shall acquire legal and valid title to the shares of Quentra
Common Stock underlying the Series C Preferred Stock and to all other shares of
Quentra Common Stock issued pursuant to this Agreement, in each case free and
clear of all Encumbrances, other than those imposed by the Securities Act.
5.6 Brokers. Except with respect to fees incurred by Quentra
in connection with the fairness opinion to be issued by First Security Van
Kasper (the payment of which will be the sole responsibility of Quentra), no
broker, finder or investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Quentra.
5.7 Board Approval. The board of directors of Quentra has, as
of the date of this Agreement, unanimously (i) approved this Agreement and the
transactions contemplated hereby and thereby, and (ii) determined that the
Merger is in the best interests of the stockholders of Quentra and is on terms
that are fair to such stockholders.
5.8 Recent Capital Raising Transactions. On or prior to the
Closing, Quentra will have closed a private offering (the "Offering") of its
units for not less than $8,000,000 at a price of $11.00 per unit. Each unit
consists of four (4) shares of Quentra Common Stock and a warrant to purchase
one (1) share of Quentra Common Stock at an exercise price of $2.75 per share.
In addition, on or prior to the Closing, warrants to purchase shares of Quentra
Common Stock will have been exercised for an amount in excess of $1,500,000.
Quentra has provided to the Shareholders true and correct copies of the
documents provided to potential investors in connection with the Offering.
5.9 Voting Agreements. Each person who is (i) a director of
Quentra (other than the directors designated pursuant to Section 6.1), (ii) an
officer (as defined in Rule 16a-1 under the Exchange Act) of Quentra and (iii) a
stockholder of Quentra in which any person specified above has a direct or
indirect interest, including, without limitation, KRJ, LLC, has executed and
delivered to the Shareholders at the Closing a voting agreement in the form
attached hereto as Exhibit B (each, a "Voting Agreement"), a true and correct
copy of which has been delivered to the Shareholders.
ARTICLE 6
COVENANTS
6.1 Directors of Quentra. Quentra shall take all action
necessary (including, without limitation, adoption of an appropriate amendment
to Quentra's by-laws, if necessary) to ensure that as of the Effective Time, the
Board of Directors of Quentra shall be composed of seven (7) directors (six (6)
of whom shall be appointed as of the Effective Time), two (2) of whom shall be
designated by Enterprises and one (1) of whom shall be designated by Conrad. The
two (2) directors designated by Enterprises pursuant to this Section 6.1 shall
be in separate classes of Quentra's classified Board of Directors such that the
initial terms of those directors
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shall expire at the annual meetings of the stockholders of Quentra to be held in
2001 and 2002, respectively. The initial term of the director designated by
Conrad pursuant to this Section 6.1 shall expire at the annual meeting of the
stockholders of Quentra to be held in 2003. Following the Closing, the members
of the Board of Directors of Quentra shall cooperate to fill the remaining
directorship.
6.2 Post-Closing Covenants of the Parties.
(a) Directors of Quentra. From and after the Closing
(i)(A) so long as Enterprises and/or its Affiliates collectively beneficially
owns (within the meaning of Rule 13d-3 under the Exchange Act) ("Beneficially
Owns") a number of shares of Quentra Common Stock equal to or greater than fifty
percent (50%) of the number of shares of Series C Preferred Stock issued to
Enterprises at the Closing (subject to adjustment in the event of stock splits,
stock dividends and other similar events), Enterprises shall be entitled to
designate for nomination by the Board of Directors of Quentra, and the Board of
Directors of Quentra shall so nominate for election by Quentra's stockholders,
two directors (in accordance with Section 6.2 of this Agreement), (B) so long as
Enterprises and/or its Affiliates collectively Beneficially Own a number of
shares of Quentra Common Stock equal to or greater than twenty five percent
(25%) but less than fifty percent (50%) of the number of shares of Series C
Preferred Stock issued to Enterprises at the Closing (subject to adjustment in
the event of stock splits, stock dividends and other similar events),
Enterprises shall be entitled to designate for nomination by the Board of
Directors of Quentra, and the Board of Directors of Quentra shall so nominate
for election by Quentra's stockholders, one director and (ii) so long as Conrad
Beneficially Owns a number of shares of Quentra Common Stock equal to or greater
than thirty three percent (33%) of the number of shares of Quentra Common Stock
issued to Conrad at the Closing (subject to adjustment in the event of stock
splits, stock dividends and other similar events), Conrad shall be entitled to
designate for nomination by the Board of Directors of Quentra, and the Board of
Directors of Quentra shall so nominate for election by Quentra's stockholders,
one director. The rights of each Shareholder under this Section 6.2(a) are
freely transferable to any Person to whom or to which all of the shares of
Series C Preferred Stock and Quentra Common Stock then Beneficially Owned by
such Shareholder and its Affiliates are transferred; provided, however, that in
the case of a transfer of all of the shares of Series C Preferred Stock and
Quentra Common Stock Beneficially Owned by a Shareholder and its Affiliates, the
rights of such Shareholder under this Section 6.2(a) shall not be transferable
to such transferee unless such transferee is first approved by Quentra, such
approval not to be unreasonably withheld, conditioned or delayed; and provided,
further, that a transfer by a Shareholder (or any of its Affiliates) of shares
of Series C Preferred Stock and Quentra Common Stock and the rights of that
Shareholder under this Section 6.2(a) to the other Shareholder (or any of its
Affiliates) shall not require the prior approval of Quentra. Any disputes
between a Shareholder and Quentra pursuant to the preceding sentence shall be
resolved in accordance with the provisions of Section 10.2. So long as a
Shareholder has rights to designate a director under this Section 6.2(a), that
Shareholder shall be entitled to designate a successor to the director or
directors designated by him or it in the case of any vacancy resulting from the
death, resignation or removal of such designee prior to the expiration of his or
her term. For so long as either Shareholder has the right to designate one or
more directors for nomination pursuant to this Section 6.2(a), Quentra shall
take all actions necessary to maintain the number of directors at seven (7) and
shall not expand the Board of Directors or otherwise take any action to increase
the number of directors to a
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number greater than seven (7), in each case without the prior written consent of
each Shareholder. Within thirty (30) days after the date that Enterprises or
Conrad loses the right to designate for nomination a director or directors to
the Board of Directors of Quentra as set forth in this Section 6.2(a),
Enterprises or Conrad, as the case may be, shall cause that number of directors
that it no longer has the right to designate to resign from the Board of
Directors of Quentra and the remaining directors shall appoint a new director or
directors to fill the vacancy created by such resignation(s). From and after the
Closing, Quentra shall indemnify each director designated pursuant to this
Section 6.2(a) (collectively, the "Shareholder Designees") to the fullest extent
permitted by applicable Law with respect to any and all liabilities arising from
or related to acts or omissions arising out of such individuals' services as
directors of Quentra. Without limiting the foregoing, if any Shareholder
Designee is or becomes involved in any capacity in any action, proceeding or
investigation in connection with any matter, including the transactions
contemplated by this Agreement, occurring on or after the Closing, Quentra shall
pay as incurred such Shareholder Designee's reasonable legal and other expenses
(including the cost of any investigation and preparation) incurred in connection
therewith in the same manner as the directors of Quentra that are not
Shareholder Designee's. From and after the Closing, Quentra shall maintain in
effect directors' and officers' liability insurance in favor of the Shareholder
Designees.
(b) Voting Agreements. From and after the Closing and for
so long as either Shareholder has the right to designate a director pursuant to
Section 6.2(a), Quentra shall use its best efforts to cause each person who
becomes a director of Quentra (other than any Shareholder Designee) to execute a
Voting Agreement.
(c) Strategic Relationships. After the Closing and until
the fourth anniversary of the Closing Date, Enterprises shall use its
commercially reasonable efforts to cause the utilities and non-regulated
businesses with which it is affiliated, and those with which it is not
affiliated but with which it has relationships, to participate in the rolling
out of the Surviving Corporation's services as such services exist on the
Closing Date.
(d) Additional Compensation. After the Effective Time, and
for a period of four (4)years from the Closing Date, Quentra shall issue to the
Shareholders, collectively (and for allocation between the Shareholders $7.00 to
Conrad and $3.00 to Enterprises), $10.00 for every customer obtained by the
Surviving Corporation (or any Affiliate thereof) following the Closing (the
"Customer Payment"); provided, however, that each such customer shall be subject
to the prior approval of Quentra (which approval shall not be unreasonably
withheld, conditioned or delayed) and provided, further, that each such customer
shall purchase merchandise and/or services through the Surviving Corporation's
electronic commerce systems with an aggregate retail price of $100 or more
during any continuous thirty (30) month period before the Customer Payment shall
be made under this Section 26.2(d) with respect to that customer. For purposes
of this Section 6.2, a "customer" includes, but is not limited to, a subscriber
to the Surviving Corporation's electronic commerce system (whether or not such
customer is then a customer or prospect of the Surviving Corporation,
Enterprises or the current or future Affiliates of Enterprises). Customer
Payments pursuant to this Section 6.2(d) shall be made to the Shareholders on a
quarterly basis, in arrears, and not later than the tenth Business Day after the
end of each calendar quarter. Notwithstanding the foregoing, no
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Customer Payment shall be made (i) for any customer obtained on or after the
four (4) year anniversary of the Closing Date, or (ii) for any customers in
excess of 5.6 million customers.
(e) Registration of Registrable Securities.
(i) Within 120 days after the Closing Date, Quentra
shall file with the SEC a shelf registration statement under Rule 415 of the
Securities Act on Form S-1 (or any successor form thereto) covering the sale or
other distribution of all of the Registrable Securities, and shall keep such
shelf registration statement effective until all Registrable Securities have
been sold. If such shelf registration statement is not filed within 120 days
after the Closing Date, or if such shelf registration statement is not declared
effective by the SEC before the first anniversary of the Closing Date, then
Quentra shall pay to each Shareholder on the fifth Business Day following such
first anniversary of the Closing Date cash in an amount equal to (x) such number
of additional shares of Quentra Common Stock as is equal to twelve percent (12%)
of the aggregate number of Registrable Securities held by such Shareholder on
such first anniversary of the Closing Date multiplied by (y) the average closing
sales price of the Quentra Common Stock for the five (5) Business Days
immediately preceding the date such registration statement should have been
filed or declared effective, as applicable, up to a maximum price of $6.00 per
share) (the "Liquidation Payment"). Quentra shall amend the shelf registration
statement from time to time at the request of either Shareholder to include in
such registration statement Registrable Securities issued to such Shareholder
subsequent to the filing of the registration statement (or any amendment
thereto) with the SEC. Quentra shall notify each Shareholder promptly (A) when
the shelf 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, (B) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of such registration
statement or the initiation of any proceedings for that purpose, (C) of the
receipt by Quentra 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 (D) 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. Quentra shall make every effort to
obtain the withdrawal of any order suspending the effectiveness of such
registration statement at the earliest possible time. Quentra shall timely file
all reports required to be filed by it under Section 13 or Section 15(d) of the
Exchange Act. The payment of the Liquidation Payment shall not constitute a
waiver of Shareholders' right to seek specific performance of this Section
6.2(e). The parties hereto acknowledge that the Liquidation Payment is not a
penalty, but constitutes liquidated damages.
(ii) The Shareholders agree that no Shareholder may
participate in or have its shares of Quentra Common Stock included in any such
shelf registration statement unless such Shareholder completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms
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of such underwriting arrangements or to ensure compliance with the requirements
of the Securities Act.
(iii) In addition to the information required to be
provided in a notice and questionnaire by each Shareholder to Quentra, Quentra
may require each Shareholder to furnish to Quentra such additional information
regarding each Shareholder and such Shareholder's intended method of
distribution of the Quentra Common Stock as Quentra 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 Securities Act. Each Shareholder agrees to
notify Quentra as promptly as practicable of any inaccuracy or change in
information previously furnished by such Shareholder to Quentra or of the
occurrence of any event in either case as a result of which any prospectus
relating to such registration contains or would contain an untrue statement of a
material fact regarding such Shareholder or such Shareholder's intended method
of disposition of the Quentra Common Stock or omits to state any material fact
regarding such Shareholder or such Shareholder's intended method of disposition
of the Quentra Common Stock required to be stated therein or necessary to make
statements therein not misleading in light of the circumstances then existing,
and promptly to furnish to Quentra 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 Shareholder or the
disposition of the applicable Quentra Common Stock 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) Future Agreements. Quentra shall not enter into any
contract, agreement or other instrument, whether or not written, or any
amendment thereto, which in any way materially adversely affects any right or
rights of the Shareholders or any of them hereunder, including without
limitation the rights of the Shareholders set forth under paragraph (a) of this
Section 6.2, without the express prior written consent of the Shareholders.
6.3 Expenses. Whether or not the Merger is consummated, all
Expenses incurred in connection with this Agreement and the Merger and the other
transactions contemplated hereby shall be paid by the Party incurring such
Expense; provided, however, that the expenses incurred by the Company shall be
paid by the Shareholders. For purposes of this Agreement, "Expenses" consist of
all out-of-pocket expenses (including, all reasonable fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a Party
hereto and its Affiliates) incurred by a Party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement, and all other matters related to the closing of
the transactions contemplated hereby.
6.4 Lock-Up Agreement. None of (i) James R. McCullough, (ii)
KRJ, LLC or (iii) First Venture Leasing shall directly or indirectly sell,
dispose of, encumber, pledge, hypothecate or otherwise transfer (a "Transfer")
any shares of the capital stock of Quentra (or any securities convertible into
or exchangeable for shares of the capital stock of Quentra); except in
connection with (A) the sale or merger of Quentra in a single transaction or a
series of related transactions (excluding the transaction contemplated at the
Closing), or (B) a tender offer pursuant to Regulation 13D-G, Regulation 14D or
Regulation 14E of the Exchange Act or until the later of (x) nine (9) months
after the Closing or (y) ninety (90) days after the effective date of
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the shelf registration statement referred to in Section 6.2(e) of this
Agreement, but in no event longer than the first anniversary of the Closing
Date.
6.5 Best Efforts. Subject to the terms and conditions provided
in this Agreement and to applicable legal requirements, each of the Parties
agrees to use its best efforts to take, or cause to be taken, all action, and to
do, or cause to be done, and to assist and cooperate with the other Parties in
doing, as promptly as practicable, all things necessary, proper or advisable
under applicable Laws to ensure that the conditions set forth in Article 7 are
satisfied and to consummate and make effective the transactions contemplated by
this Agreement including, but not limited to, Quentra, the Company and the
Shareholders taking all steps necessary or desirable to consummate the Merger.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions Precedent to Obligations of the Company and the
Shareholders. The obligation of the Company and each Shareholder to consummate
the Merger is subject to the fulfillment (or waiver in writing by the Company or
such Shareholder) at or prior to the Closing Date of the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Quentra contained in Article 5 of this
Agreement shall be true and correct in all material respects as of the Closing
Date (except for such representations and warranties as are made as of a
specified date, which shall be true and correct in all material respects as of
such specified date);
(b) Covenants. All the covenants in this Agreement to be
complied with and performed by Quentra on or before the Closing Date shall have
been duly complied with and performed in all material respects;
(c) Officer's Certificate. A certificate in form and
substance acceptable to the Shareholders to the effect that the conditions set
forth in Sections 7.1(a) and 7.1(b) have been fulfilled, dated the Closing Date
and signed by an authorized executive officer of Quentra, shall have been
delivered to the Shareholders and to the Company;
(d) No Injunctions. No order shall have been entered and
shall have remained in effect in any action or proceeding before any
Governmental Body that would prohibit or make illegal the consummation of the
Merger;
(e) Nasdaq Listing. Evidence acceptable to the
Shareholders that the Registrable Securities have been approved for listing on
the Nasdaq National Market, subject to official notice of issuance, shall have
been delivered to the Shareholders;
(f) Regulatory Approvals. All notices, reports and other
filings required to be made prior to the Effective Time by Quentra with, and all
consents, registrations, approvals, permits and authorizations required to be
obtained prior to the Effective Time by
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Quentra from, any Governmental Body in connection wit the execution and delivery
of this Agreement and the consummation of the Merger shall have been made or
obtained, as the case may be; and
(g) Deliveries. Quentra and Employee shall have delivered
the documents and other items required to be delivered by each of them at the
Closing pursuant to Section 2.8 of this Agreement.
7.2 Conditions Precedent to Obligations of Quentra. The
obligation of Quentra to consummate the Merger is subject to the fulfillment (or
waiver in writing by Quentra) at or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. Each of the
representations and warranties of the Company and the Shareholders contained in
Articles 3 and 4 of this Agreement shall be true and correct in all material
respects as of the Closing Date (except for such representations and warranties
as are made as of a specified date, which shall be true and correct in all
material respects as of such specified date);
(b) Covenants. All the covenants in this Agreement to be
complied with and performed by the Shareholders on or before the Closing Date
shall have been duly complied with and performed in all material respects;
(c) Officer's Certificate. Certificates, each in form and
substance acceptable to Quentra, to the effect that the conditions set forth in
Section 7.2(a) and Section 7.2(b) have been fulfilled, dated the Closing Date
and signed by the Company, Conrad and an authorized executive officer of
Enterprises, as applicable, shall have been delivered to the Shareholders and to
Quentra;
(d) Regulatory Approvals. All notices, reports and other
filings required to be made prior to the Effective Time by the Company or either
Shareholder with, and all consents, registrations, approvals, permits and
authorizations required to be obtained prior to the Effective Time by the
Company or either Shareholder from, any Governmental Body in connection with the
execution and delivery of this Agreement and the consummation of the Merger
shall have been made or obtained, as the case may be; and
(e) Deliveries. The Shareholders, the Company and the
Employees shall have delivered to Quentra the documents and other items required
to be delivered by each of them at the Closing pursuant to Section 2.8 of this
Agreement.
ARTICLE 8
TERMINATION
8.1 Termination. This Agreement may be terminated prior to the
Closing and the transactions contemplated hereby abandoned as follows:
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(a) by the mutual written consent of each Shareholder and
Quentra at any time prior to the Closing; and
(b) by any Party if a final, non-appealable order to
restrain or otherwise prevent the consummation of the transactions contemplated
hereby shall have been entered by any Governmental Body of competent
jurisdiction
8.2 Effect of Termination. Except as provided in Article 9, in
the event of termination of this Agreement pursuant to Section 8.1, this
Agreement shall forthwith become void, there shall be no liability under this
Agreement on the part of any Party, and all rights and obligations of each Party
hereto shall cease; provided, however, that nothing in this Agreement shall
relieve any Party from liability for the willful breach of any of its
representations and warranties or the breach of any of its covenants or
agreements set forth in this Agreement.
ARTICLE 9
SURVIVAL; INDEMNIFICATION
9.1 Survival. All representations and warranties set forth
herein shall survive the Closing, but no claim may be made with respect to any
breach of any representation or warranty hereunder after the twenty-fourth
(24th) month anniversary of the Closing Date; provided, however, that the
representations and warranties contained in Sections 3.1, 4.1, 4.2, 5.3 and 5.5
shall survive without limitation as to time. The agreements and covenants of the
Parties set forth in Sections 6.3 and 6.6 and Article 9 of this Agreement shall
survive the Closing.
9.2 Indemnification by the Shareholders.
(a) By Enterprises. Subject to Section 9.6 below,
Enterprises shall severally indemnify, defend, save and hold Quentra and its
officers, directors, employees, Affiliates and agents (including, after the
Closing, the Surviving Corporation) (collectively, "Quentra Indemnitees")
harmless from and against all demands, claims, actions or causes of action,
assessments, losses, damages, deficiencies, liabilities, costs and expenses,
including reasonable attorneys' fees (collectively, "Quentra Damages") asserted
against, imposed upon, resulting to or incurred by any of the Quentra
Indemnitees, directly or indirectly, in connection with, or arising out of, or
resulting from (i) a breach of any of the representations and warranties made by
Enterprises in this Agreement, but only if a claim with respect thereto is made
within the time limits, if any, prescribed by the first sentence of Section 9.1
or (ii) a breach of any of the covenants or agreements made by Enterprises in or
pursuant to this Agreement and in any Transaction Document to which Enterprises
is a party.
(b) By Conrad and Employee. Subject to Section 9.6 below,
Employee and Conrad shall jointly and severally indemnify, defend, save and hold
the Quentra Indemnitees harmless from and against all Quentra Damages asserted
against, imposed upon, resulting to or incurred by any of the Quentra
Indemnitees, directly or indirectly, in connection with, or arising out of, or
resulting from (i) a breach of any of the representations and warranties
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<PAGE> 50
made by the Company, Employee or Conrad in this Agreement, but only if a claim
with respect thereto is made within the time limits, if any, prescribed by the
first sentence of Section 9.1, (ii) a breach of any of the covenants or
agreements made by the Company, Employee or Conrad in or pursuant to this
Agreement and in any Transaction Document to which the Company, Employee or
Conrad is a party, (iii) the Memorandum of Understanding between SMI and PBNV
executed on July 30, 1999, or (iv) a breach of the covenants and agreements set
forth in the nondisclosure agreements transferred to the Company pursuant to the
terms of the Assignment and Assumption Agreement dated May 1, 2000 between the
Company and HomeAccess MicroWeb, LLC, which occur prior to the Closing Date, or
any other liabilities incurred by the Quentra Indemnitees under such agreements
after the Closing Date, which liabilities are not the result of or caused by the
actions or inaction of the Quentra Indemnitees; provided, however, that Conrad
and her Affiliates, other than Employee, shall not be required to indemnify the
Quentra Indemnitees under the Promissory Note and the Personal Services
Agreement except to the extent set forth in the Pledge Agreement.
9.3 Indemnification by Quentra. Subject to Section 9.6 below,
Quentra shall indemnify, defend, save and hold each Shareholder and their
respective officers, directors, employees, Affiliates and agents (collectively,
"Shareholder Indemnitees") harmless from and against any and all demands,
claims, actions or causes of action, assessments, losses, damages, deficiencies,
liabilities, costs and expenses, including reasonable attorneys' fees
(collectively, "Shareholder Damages") asserted against, imposed upon, resulting
to or incurred by any of the Shareholder Indemnitees, directly or indirectly, in
connection with, or arising out of, or resulting from, (i) a breach of any of
the representations and warranties made by Quentra in this Agreement, but only
if a claim with respect thereto is made within the time limits, if any,
prescribed by the first sentence of Section 9.1 or (ii) a breach of any of the
covenants or agreements made by Quentra in or pursuant to this Agreement and in
any Transaction Document to which Quentra is a party.
9.4 Notice of Claims. If any Quentra Indemnitee or Shareholder
Indemnitee (an "Indemnified Party") believes that it has suffered or incurred or
will suffer or incur any Quentra Damages or Shareholder Damages ("Damages") for
which it is entitled to indemnification under this Article 9, or if any legal,
governmental or administrative proceeding which may result in such damages is
threatened or asserted, such Indemnified Party shall so notify the party or
parties from whom indemnification is being claimed (the "Indemnifying Party")
with reasonable promptness and reasonable particularity in light of the
circumstances then existing. If any action at law or suit in equity is
instituted by or against a third party with respect to which any Indemnified
Party intends to claim any Damages, such Indemnified Party shall promptly notify
the Indemnifying Party of such action or suit. The failure of an Indemnified
Party to give any notice required by this Section 9.4 shall not affect any of
such party's rights under this Article 9 except to the extent such failure is
actually prejudicial to the rights or obligations of the Indemnifying Party.
9.5 Third Party Claims. In case any legal, governmental or
administrative proceeding which may result in such Damages is instituted,
threatened or asserted by or against a third party with respect to which an
Indemnified Party intends to claim any Damages and the Indemnified Party
notifies the Indemnifying Party of such proceeding as provided in Section 9.4,
the Indemnifying Party shall be entitled to participate therein and, to the
extent that it may wish,
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jointly with any other Indemnifying Party similarly notified, to assume the
defense thereof, with counsel satisfactory to such Indemnified Party (who may be
counsel to the Indemnifying Party), and after notice from the Indemnifying Party
to such Indemnified Party of its election so to assume the defense thereof, the
Indemnifying Party will not be liable to such Indemnified Party under this
Article 9 for any legal or other expenses subsequently incurred by such
Indemnified Party in connection with the defense thereof. No Indemnifying Party
shall, without the prior written consent of the Indemnified Party, effect any
settlement of any pending or threatened action in respect of which any
Indemnified Party is or could have been a party and indemnity could have been
sought hereunder by such Indemnified Party unless such settlement includes an
unconditional release of such Indemnified Party from all liability on any claims
that are the subject matter of such proceeding.
9.6 Limitation on Damages. Notwithstanding any provision under
this Article 9 to the contrary, no Party shall have any indemnity liability with
respect to a breach of any of the representations and warranties made by that
Party in this Agreement until the aggregate amount of Damages incurred by the
other Party with respect to such breaches by the first Party exceeds the sum of
$50,000, but if the aggregate amount of such Damages exceeds $50,000,
indemnification shall be made to the full extent of Damages; provided, however,
that, the foregoing limitations shall not apply to any matter relating to title
to the Company Common Stock, the Company Preferred Stock, the Series C Preferred
Stock or the Quentra Common Stock. In no event shall the liability of
Enterprises under this Article 9 exceed One Million Two Hundred Seventy Five
Thousand Dollars ($1,275,000) and in no event shall the liability of Conrad and
Employee under this Article 9 exceed Two Million Nine Hundred Seventy Five
Thousand Dollars ($2,975,000) in the aggregate; provided, however, that the
limitations on the liability of any Indemnifying Party set forth in this Article
9 shall not apply, and no other remedy at law or in equity that an Indemnified
Party may have against an Indemnifying Party but for the provisions of this
Article 9 shall be limited or restricted, in the event of such Indemnifying
Party's actual fraud; and provided, further, that any claims by Enterprises
arising out of or related to its purchase of securities from the Company shall
be made solely against Conrad and Employee and not the Company or Quentra. All
Damages payable hereunder shall be paid promptly in cash. The Parties
acknowledge and agree that the provisions of this Article 9 shall be the sole
and exclusive remedy of any Party for any and all breaches of the
representations and warranties of any other Party or the failure of any other
Party to perform any covenant or other agreement set forth in this Agreement;
provided, however, that the foregoing shall not constitute a waiver of any
Party's right to seek specific performance of any provisions of this Agreement.
9.8 No Circular Recovery. No Shareholder will be entitled to
make any claim for indemnification against the Surviving Corporation or any of
its Affiliates by reason of the fact that such Shareholder (or any of his, her
or its officers, directors, agents or other representatives) was a controlling
person, director, officer, employee, agent or other representative of the
Company or of any of its Affiliates or was serving as such for another Person at
the request of the Company or any of its shareholders or Affiliates (whether
such claim is for losses of any kind or otherwise and whether such claim is
pursuant to any statute, charter, by-law, contractual obligation or otherwise)
with respect to any action brought by Quentra or the Surviving Corporation
against such Shareholder or the Shareholders generally (whether such action is
pursuant to this Agreement, applicable law, or otherwise).
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ARTICLE 10
MISCELLANEOUS
10.1 Representations. Each Party agrees that, except for the
representations and warranties contained in this Agreement, no Party has made
any other representations and warranties, and each Party disclaims any other
representations and warranties, made by itself or any of its officers,
directors, employees, agents, financial and legal advisors or other
representatives with respect to the execution and delivery of this Agreement or
the transactions contemplated by this Agreement, notwithstanding the delivery of
disclosure to any other Party or any Party's representatives of any
documentation or other information with respect to any one or more of the
foregoing.
10.2 Dispute Resolution. Any dispute between a Shareholder and
Quentra under Section 6.2(a) shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American Arbitration Association in Los
Angeles, California. The arbitration proceeding shall be conducted by one
arbitrator selected in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. The arbitration shall be conducted in
accordance with the following procedures and time schedules unless otherwise
mutually agreed to by such Shareholder and Quentra: (i) within ten (10) days
after the appointment of the arbitrator, such Shareholder and Quentra shall
provide the arbitrator with all documents, records and supporting information
reasonably necessary to resolve the dispute and a hearing on such dispute shall
be held; (ii) within three (3) days after the hearing, the arbitrator shall
render his or her decision; (iii) such Shareholder and Quentra shall each be
entitled to present the testimony of up to two (2) individuals, which testimony
shall not exceed four (4) hours in the aggregate; and (iv) no discovery shall be
allowed. The decision or award of the arbitrator shall be final and binding upon
such Shareholder and Quentra to same extent and to the same degree as if the
matter had been adjudicated by a court of competent jurisdiction and shall be
enforceable under the Federal Arbitrations Act. The costs and expenses of the
arbitration and of the prevailing party (including reasonable attorneys' fees)
shall be paid by the non-prevailing party.
10.3 Waiver. Except as expressly provided in this Agreement,
neither the failure nor any delay on the part of any Party in exercising any
right, power or remedy hereunder shall operate as a waiver thereof, or of any
other right, power or remedy; nor shall any single or partial exercise of any
right, power or remedy preclude any further or other exercise thereof, or the
exercise of any other right, power or remedy. Except as expressly provided
herein, no waiver of any of the provisions of this Agreement shall be valid
unless it is in writing and signed by the Party against whom the waiver is
sought to be enforced.
10.4 Assignment. This Agreement (and all rights hereunder)
shall be binding on and inure to the benefit of the Parties hereto and their
successors and assigns.
10.5 Notices. Any and all notices or other communications
required or permitted under this Agreement shall be given in writing and
delivered in Person or sent by United States certified or registered mail,
postage prepaid, return receipt requested, or by overnight express mail, or by
telex, facsimile or telecopy to the address of such party set forth
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below. Any such notice shall be effective upon receipt or three days after
placed in the mail, whichever is earlier.
If to Quentra:
Quentra Networks, Inc.
4360 Park Terrace Drive
Westlake Village, CA 91316
Attention: Timothy G. Atkinson, General
Counsel
Facsimile No.:
With copies to:
Morrison & Foerster, LLP
370 17th Street, Suite 5200
Denver, CO 80202
Attention: Warren L. Troupe, Esq.
Facsimile No.: (303) 592-1510
If to the Company, Conrad or Employee:
HomeAccess MicroWeb, Inc.
c/o Jerry Conrad
9500 Toledo Way
Irvine, California 92618-1806
With copies to:
Cassady & Klein
908 Kenfield Avenue
Los Angeles, CA 90049
Attention: Raymond M. Klein, Esq.
Facsimile No.: (310) 471-3006
And:
DQE Enterprises, Inc.
One Northshore Center
Suite 100
12 Federal Street
Pittsburgh, PA 15212
Attention: President
Facsimile No.: (412) 231-2140
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If to Enterprises, to the address set forth above,
with a copy to:
Kirkpatrick and Lockhart LLP
1500 Oliver Building
Pittsburgh, PA 15222
Attention: David J. Lehman, Esq.
Facsimile No.: (412) 355-6501.
Any Party may, by notice so delivered, change its address for
notice purposes hereunder.
10.6 Further Assurances. After the Closing each Party hereto
at the reasonable request of the other Party hereto and without additional
consideration, shall execute and deliver, or shall cause to be executed and
delivered, from time to time, such further certificates, agreements or
instruments of conveyance and transfer, assumption, release and acquittance and
shall take such other action as the other Party hereto may reasonably request,
to consummate or implement the transactions contemplated by this Agreement.
10.7 Severability. If any provision of this Agreement is
invalid, illegal or unenforceable, the balance of this Agreement shall remain in
full force and effect and this Agreement shall be construed in all respects as
if such invalid, illegal or unenforceable provision were omitted. If any
provision is inapplicable to any Person or circumstance, it shall, nevertheless,
remain applicable to all other Persons and circumstances.
10.8 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, and which together
shall constitute but one and the same instrument.
10.9 Construction. Any section headings in this Agreement are
for convenience of reference only, and shall be given no effect in the
construction or interpretation of this Agreement or any provisions thereof. No
provision of this Agreement will be interpreted in favor of, or against, any
Party by reason of the extent to which any such Party or its counsel
participated in the doing thereof or by reason of the extent to which any such
provision is inconsistent with any prior draft hereof or thereof.
10.10 Entire Agreement; Amendment. This Agreement, the
exhibits hereto, each of which is deemed to be a part hereof, and any other
agreements, instruments or documents executed and delivered by the Parties (or
their Subsidiaries) pursuant to the express terms of this Agreement, constitute
the entire agreement and understanding between the Parties, and it is understood
and agreed that all previous undertakings, negotiations and agreements between
the Parties regarding the subject matter hereof are merged herein; provided,
however, that the confidentiality agreement entered into between the Company and
Quentra shall remain in full force and effect. Without limitation of the
foregoing, (i) the Letter of Intent dated April 3, 2000, as amended by the
letter agreement dated April 27, 2000, and (ii) the Existing Agreement is hereby
terminated of no further force or effect. This Agreement may not be modified
orally, but only by an agreement in writing signed by each of the Parties.
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10.11 No Third Party Beneficiaries. Nothing in this Agreement
shall provide any benefit to any third party or entitle any third party to any
claim, cause of action, remedy or right of any kind, it being the intent of the
Parties that this Agreement shall not be construed as a third party beneficiary
contract.
10.12 Public Announcements. Quentra and the Company shall
consult with each other before issuing any press release with respect to the
Merger or this Agreement and shall not issue any such press release or make any
such public statement until the content thereof has been approved by the other
party, which approval shall not be unreasonably withheld; provided, however,
that a party may, without the prior consent of the other party, issue such press
release or make such public statement as may upon the advice of counsel be
required by law or the Nasdaq National Market if it has used reasonable efforts
to consult with the other party. Each of Quentra and the Company shall make all
necessary filings with Governmental Authority and shall promptly provide the
other party with copies of filings made by such party between the date hereof
and the Effective Time. Notwithstanding the foregoing, no Party shall (and each
Party shall cause its Affiliates and Associates to not) issue any press release
or make any public statement that directly or indirectly refers to (i) any other
Party or any of its respective Affiliates (by name or otherwise) without the
prior written consent of such second Party, which consent may be withheld in the
sole discretion of such second Party or (ii) the Company (by name or otherwise)
without the prior written consent of the Shareholders, which consent may be
withheld in the sole discretion of each Shareholder; provided, however, that a
Party may, without the prior written consent required above, issue such press
release or make such public statement as may upon the advice of counsel be
required by law or the Nasdaq National Market if it has used reasonable efforts
to consult with the other Party.
10.13 Waiver and Release. Except as specifically set forth in
this Agreement and in the agreements contemplated hereby, each of the Parties
hereby releases and forever discharges the other Parties, and their respective
directors, officers, employees, agents, successors and assigns from and against
any and all claims, demands, liabilities, obligations, damages, costs, expenses,
actions and causes of action, in law or in equity, known or unknown, which such
Party ever had, now has or may have against the other Parties as of the date
hereof, arising out of or related to the Existing Agreement.
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IN WITNESS WHEREOF, the Parties have duly executed and
delivered this Agreement on the date first written above.
QUENTRA NETWORKS, INC.
By /s/ James R. McCullough
------------------------------------
James R. McCullough
Chief Executive Officer
HOMEACCESS MICROWEB, INC.
By /s/ Jerry Conrad
------------------------------------
Jerry Conrad
President
DQE ENTERPRISES, INC.
By /s/ Neal G. Taylor
------------------------------------
Neal G. Taylor
Senior Vice President
EMPLOYEE
/s/ Jerry Conrad
---------------------------------------
Jerry Conrad
CONRAD
/s/ Barbara Conrad
---------------------------------------
Barbara Conrad
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JOINDER AGREEMENT
For valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and intending to be legally bound, the undersigned hereby joins in
the Amended and Restated Agreement and Plan of Merger (the "Merger Agreement")
dated October 5, 2000 among Quentra Networks, Inc., HomeAccess Microweb, Inc.,
DQE Enterprises, Inc., Barbara Conrad and Jerry Conrad to which this Joinder
Agreement is attached solely for the purpose of agreeing to be bound by the
provisions of Section 6.2 and, if applicable, Section 6.4 of said Merger
Agreement. By signing below, the undersigned agrees that it will execute and
deliver the Voting Agreement at the Closing.
Capitalized terms used but not defined herein have the meanings
ascribed to them in the Merger Agreement.
The undersigned intends to be legally bound hereby.
[ ]
-----------------------------
Dated: October 5, 2000
