ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into as of
December 31, 1998, by and between NETWORK ACQUISITIONS, INC., a Colorado
corporation ("Buyer"), and CAVION TECHNOLOGIES, INC., a Colorado
corporation ("Seller").
W I T N E S S E T H:
WHEREAS, Seller provides secure Internet, intranet and extranet
products for credit unions and other financial institutions (the
"Business") and owns certain intellectual property and assets used in
connection with the Business;
WHEREAS, this Agreement sets forth the terms and conditions upon
which Seller is willing to sell and Buyer is willing to purchase
substantially all of Seller's assets.
NOW THEREFORE, in consideration of the mutual promises of the
parties, in reliance on the representations, warranties, covenants and
conditions contained in this Agreement, and for other good and valuable
consideration, the parties agree as follows:
1. PURCHASE AND SALE OF ASSETS
1.1 PURCHASE AND SALE OF ASSETS. Subject to the terms and
conditions of this Agreement, Seller shall sell, convey, assign,
transfer and deliver to Buyer, and Buyer shall purchase, at the
closing (as defined in Section 2.1), all of Seller's assets,
properties, rights, claims and goodwill, of every kind,
character and description, tangible and intangible, real and
personal, wherever located and whether or not reflected on the
books and records of Seller, which are used in the Business,
including, without limitation, the following (collectively, the
"Assets"):
(a) all furniture, furnishings, fixtures, machinery, equipment
(including computers and office equipment), and leasehold
improvements, which (i) are located at Seller's facilities
in Denver, Colorado and Colorado Springs, Colorado, which
facilities are described more particularly on Schedule
1.1(a) (the "Facilities") or (ii) are listed on Exhibit A
to the Xxxx of Sale referred to in Section 2.3(a);
(b) all cash Seller has on hand and any and all of Seller's
accounts, whether checking, savings, investment,
certificate of deposit, with any financial institution as
of the Closing Date (as defined in Section 2.1);
(c) all parts, supplies (including office supplies) and
incidentals which (i) are located at the Facilities or (ii)
are listed on Exhibit A to the Xxxx of Sale referred to in
Section 2.3(a);
(d) all accounts receivable of Seller arising in connection
with the Business ("Accounts Receivable"), subject to
Section 2.6;
(e) all credit, prepaid expenses and other items, security
deposits and unbilled costs and fees of Seller attributable
to the Assets or Business;
(f) subject to Section 1.2 regarding Excluded Assets, all
right, title and interest of Seller in and to intellectual
property and other intangible property associated with the
Business, including, without limitation, customer lists,
data bases and other goodwill, trade secrets, methods,
inventions and other know-how, and trademarks, service
marks, trade names (including the name "Cavion
Technologies"), domain names, and copyrights, whether
registered or unregistered, and any applications therefor;
(g) all rights of Seller under the Material Contracts (as
defined in section 3.10);
(h) all books, records, manuals and other materials (in any
form or medium) relating to, or used by Seller in
connection with, the Assets or Business;
(i) all rights, claims and actions arising out of occurrences
before or after the Closing, which relate to, or arise
from, the Assets or Business;
(j) all licenses, permits, authorizations and approvals of
governmental or other regulatory authorities which relate
to the Assets or Business; and
(k) subject to Section 1.2 regarding Excluded Assets, all
assets and properties reflected on the Balance Sheet (as
defined in Section 3.4(a)), excepting only those assets and
properties which have been disposed of by Seller in the
ordinary course of the Business after the date of the
Balance Sheet.
1.2 EXCLUDED ASSETS. Notwithstanding Section 1.1, this Agreement
shall not effect the transfer of, and the term "Assets" shall be
deemed not to include the following:
(a) warrants to purchase common stock of Convergent
Communications, Inc. currently held by Seller.
1.3 ASSUMPTION OF LIABILITIES. Subject to the terms and conditions
of this Agreement, at the Closing, Buyer shall assume and agree
to pay, discharge or perform, as appropriate, (i) all
obligations and liabilities of Seller reflected on the Balance
Sheet (as updated to the Closing Date), on the list of accounts
payable delivered pursuant to Section 2.7, or on Schedules 3.5
or 3.8 to this Agreement, (ii) all obligations of Seller for
accrued salaries, wages and other benefits of the Continuing
Employees (as defined in Section 2.8), and (iii) all obligations
and liabilities arising on or after the Closing Date with
respect to the Assets or the Business (collectively the "Assumed
Liabilities"). The Assumed Liabilities will include all amounts
due Buyer under the Loan Agreement dated as of September 14,
1998 between Buyer and Seller. Except as specifically assumed
by Buyer under this Section, Seller shall retain and agree to
pay, discharge or perform, as appropriate, all obligations and
liabilities arising prior to the Closing Date with respect to
the Assets or the Business.
1.4 AMOUNT OF PURCHASE PRICE. In consideration for Seller's sale of
assets, Buyer will (i) issue and deliver to Seller the number of
shares of Buyer's Class A common stock determined according to
Section 1.5, and 28,648 shares of Buyer's Class B common stock,
and (ii) assume the liabilities of Seller described in Section
1.3. The parties intend the transactions contemplated by this
Agreement to qualify as a tax-free reorganization under section
368(a)(1)(C) of the Internal Revenue Code of 1986, as amended.
1.5 CLASS A SHARES ISSUED. The number of shares of Buyer's Class A
common stock issued and delivered to Seller at the Closing will
be the number in cell J43 of the capitalization table included
in Schedule 4.6, as updated to the Closing Date. The parties
agree that this number will be equal to 12% of the equity
interest in Buyer on a fully diluted basis as of the completion
of the Closing, subject to the following adjustments:
(a) The warrants issued to purchasers of Units (consisting of
15% Secured Notes due October 19, 2000 along with Class A
Common Stock Purchase Warrants) under the Private Placement
Memorandum dated October 20, 1998 (the "Debt Offering"),
shall be counted as if exercised in full prior to the
Closing.
(b) The Convertible Preferred Stock, Series A of Buyer (the
"Preferred Stock") shall be counted as if converted in full
prior to the Closing, to the extent of (i) one-half of the
total $2 million offering of Preferred Stock, plus (ii) the
number of additional shares of Preferred Stock that, at the
offering price, results in proceeds equal to the
underwriter's total cash compensation (including expense
allowance) related to the shares counted under clause (i),
and the additional underwriter's compensation related to
all additional shares counted under this clause (ii), plus
(iii) the number of additional shares of Preferred Stock
that, at the offering price, results in proceeds equal to
Buyer's total other costs related to the offering of
Preferred Stock (including without limitation amounts
payable to counsel, accountants and the printer for the
offering).
The number shown in cell J43 of the Schedule 4.6 capitalization
table is based on Buyer's estimate of costs related to the
offering of Preferred Stock at $75,000. At the Closing, Buyer
will provide a true and accurate final accounting of Buyer's
costs related to the offering. The number of shares of Buyer's
Class A common stock issued and delivered to Seller at the
Closing will be adjusted according to (i) Buyer's final cost
accounting, and (ii) the number of shares of Preferred Stock
offered in Buyer's $2 million offering (if different from that
shown in cell L21 of the Schedule 4.6 capitalization table).
2. CLOSING AND POST-CLOSING MATTERS
2.1 TIME AND PLACE. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place
at 10:00 a.m. Mountain Time, at the principal offices of Buyer
in Englewood, Colorado, or such other place as Buyer and Seller
shall mutually agree, on the earliest date on which Buyer and
Seller are able to satisfy their respective obligations under
Sections 2.2 and 2.3 (the "Closing Date").
2.2 BUYER'S DELIVERIES AT CLOSING. At the Closing, Buyer shall
deliver to Seller the following:
(a) certificates representing the shares of Buyer's Class A
common stock and Class B common stock to be issued and
delivered to Seller under this Agreement;
(b) a Xxxx of Sale, Assignment, and Assumption Agreement, in
the form of Exhibit 2.3(a), in which Buyer assumes and
agrees to pay, discharge or perform as appropriate the
Assumed Liabilities;
(c) the other agreements, opinions, certificates and other
documents referred to in Section 7 and elsewhere in this
Agreement; and,
(d) the Buyer Balance Sheet (as defined in Section 4.4),
updated to the Closing Date. The updated Buyer Balance
Sheet shall show that Buyer has cash of at least
$1,000,000, and has no liabilities except for (i) 15%
Secured Notes issued under the Private Placement Memorandum
of Buyer dated October 20, 1998, aggregating approximately
the amount advanced by Buyer to Seller pursuant to that
certain Promissory Note dated September 8, 1998 between
Buyer and Seller, and (ii) offering costs in connection
with raising the cash and placing the Secured Notes.
2.3 SELLER'S DELIVERIES AT CLOSING. At the Closing, Seller shall
deliver to Buyer the following:
(a) a Xxxx of Sale, Assignment, and Assumption Agreement in the
form of Exhibit 2.3(a), and such other instruments of
conveyance, assignment, transfer, in form and substance
reasonably satisfactory to Buyer's counsel, as shall be
effective to transfer and assign to, and vest in, Buyer all
of the Assets; and
(b) the other agreements, opinions, certificates and other
documents referred to in Section 7 and elsewhere in this
Agreement.
In addition, Seller shall take such other steps as reasonably
may be necessary to put Buyer in actual possession and operating
control of the Assets.
2.4 THIRD PARTY CONSENTS. To the extent Seller's rights under any
agreement, commitment, plan, authorization or other Asset to be
assigned to Buyer hereunder may not be assigned without the
consent of another person or entity which has not been obtained,
this Agreement shall not constitute an agreement to assign the
same if an attempted assignment would constitute a breach
thereof or be unlawful, and Seller, at its expense, shall use
its commercially reasonable efforts to obtain any such required
consent as promptly as possible. If any such consent is not
obtained, or if any attempted assignment would be ineffective or
would impair Buyer's rights under the Asset so that Buyer would
not in effect acquire the benefit of all such rights, Seller
shall, to the maximum extent permitted by law and the Asset, act
after the Closing as Buyer's agent in order to obtain for Buyer
the benefits thereunder and shall cooperate, to the maximum
extent permitted by law and the Asset, with Buyer in any other
reasonable arrangement designed to provide such benefits to
Buyer.
2.5 SELLER'S FURTHER ASSURANCES. Seller from time to time after the
Closing shall execute, acknowledge and deliver to Buyer such
other instruments of conveyance and transfer and shall take such
other actions and execute and deliver such other documents,
certificates and further assurances as Buyer reasonably may
request in order to vest more effectively in Buyer, or to put
Buyer more fully in possession of, the Assets, or to better
enable Buyer to complete, perform or discharge the Assumed
Liabilities.
2.6 ACCOUNTS RECEIVABLE. At Closing, Seller shall deliver to Buyer
a schedule containing a complete and accurate list of all of
Seller's Accounts Receivable as of the Closing Date. All
proceeds from Accounts Receivable collected by Buyer or Seller
after Closing shall be retained by Buyer, and shall be paid by
Seller to Buyer, as applicable.
2.7 ACCOUNTS PAYABLE. At Closing, Seller shall deliver to Buyer a
schedule containing a complete and accurate list of all of
Seller's Accounts Payable as of the Closing Date.
2.8 EMPLOYMENT MATTERS. Effective as of the Closing Date, Buyer
shall offer employment to those employees listed on Schedule 2.8
who are employed by Seller principally in the operation of the
Business, at wage and salary levels and with employee benefits
as are listed on Schedule 2.8. Seller shall use its commercially
reasonable efforts to cause such employees to accept such
employment with Buyer. All such employees hired by Buyer as of
the Closing Date shall be referred to in this Agreement as the
"Continuing Employees." Except as provided herein, Buyer shall
have no liability or obligation to any employee of Seller
(including Continuing Employees) resulting from the transactions
contemplated hereby, including, without limitation, change of
control, payments or liabilities incurred upon termination of
employment by Seller. Seller specifically acknowledges that the
Assets to be transferred to Buyer pursuant to this Agreement
include Seller's rights (including rights of specific
enforcement) under all proprietary and confidentiality
agreements and agreements regarding ownership of intellectual
property between Seller and any employee of Seller, whether past
or present as of the Closing Date, regardless of whether said
employee is a Continuing Employee.
2.9 CHANGE OF NAMES. As soon as reasonably possible (taking into
consideration Colorado law), but in no event later than 30 days
after Closing, Seller shall change its corporate name to a name
not including the word "Cavion", and Buyer shall change its
corporate name to "Cavion Technologies, Inc."
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 CORPORATE ORGANIZATION. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Colorado, with full power and authority (corporate,
governmental and otherwise) to own and operate its properties
and business as currently conducted and as contemplated to be
conducted. Seller is not qualified to do business as a foreign
corporation in any jurisdiction other than the state of
Colorado.
3.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance of this Agreement by Seller
is within its corporate power and authority, and has been duly
authorized by all requisite corporate action. This Agreement
has been, and the other agreements, documents and instruments
required to be delivered by Seller pursuant to this Agreement
(together with this Agreement, the "Seller's Documents") will be
duly executed and delivered on behalf of Seller. This Agreement
constitutes, and the Seller's Documents when executed and
delivered will constitute, the legal, valid and binding
obligations of Seller, enforceable against it in accordance with
their respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency or other laws relating to
or affecting creditors' rights generally and by general
equitable principles.
3.3 NO CONFLICTS; CONSENTS. The execution, delivery and performance
of the Seller's Documents by Seller does not and will not (with
or without the giving of notice or the passage of time, or both)
violate, conflict with, result in a breach or default under,
give rise to any rights of acceleration, modification,
termination or cancellation of, result in the creation of any
lien, claim or encumbrance pursuant to, or require any notice or
consent under (except as described in Schedule 3.10), the
charter or bylaws of Seller, or any mortgage, indenture,
instrument, agreement, understanding or commitment of any kind,
or any law, regulation, rule, order, judgement or decree, to
which Seller is a party or by which Seller is bound or affected,
other than such notices and consents which have been given or
obtained. No authorization, permit, approval or consent of, and
no registration or filing with any governmental or regulatory
authority is required in connection with the execution, delivery
and performance by Seller of the Seller's Documents.
3.4 FINANCIAL STATEMENTS. Seller has delivered to Buyer true and
complete copies of the following financial statements (the
"Financial Statements") which are attached hereto as Schedule
3.4, all of which have been prepared from Seller's books and
records in accordance with generally accepted accounting
principles (except for the absence of footnotes) consistently
applied and maintained throughout the periods indicated and
present fairly and accurately the financial condition and
results of operations of the Business at the dates and for the
periods covered:
(a) balance sheet as of October 31, 1998 (the "Balance Sheet");
and
(b) income statement for the ten months ended October 31, 1998.
3.5 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on the
Balance Sheet, the list of accounts payable delivered pursuant
to Section 2.7, and the Schedules to this Agreement (including
Schedule 3.5), Seller has no material liabilities, obligations
or commitments arising from or associated with the Business or
the Assets. Without limiting the foregoing, Seller has not
incurred any obligation to pay any broker's, finder's or similar
fees or commissions based on the transactions contemplated by
this Agreement.
3.6 ABSENCE OF CHANGES OR EVENTS. Since the date of the Balance
Sheet, there has not been any change, development, event or
condition which has had or which could reasonably be expected to
have a material adverse effect on the financial condition or
operations of Seller, as reflected in the Financial Statements,
the Assets or the Business ("Material Adverse Effect"). Since
the date of the Balance Sheet, except as disclosed in the
Financial Statements and on Schedule 3.6, Seller has not
declared (directly or indirectly) or paid a dividend or made any
other distribution with respect to its capital stock (including,
without limitation, the redemption or purchase of shares), (b)
directly or indirectly acquired any shares of its capital stock,
(c) made any capital expenditures in connection with the
Business in excess of $10,000, (d) incurred any indebtedness in
connection with the Business in excess of $10,000, or (e)
entered into any transaction with respect to the Assets or
Business other than in the ordinary course.
3.7 TITLE TO AND CONDITION OF ASSETS. Seller has, and at the
Closing Buyer will obtain, good, valid and marketable title to
the Assets, free and clear of any lien, claim or encumbrance of
any kind, except (i) as expressly set forth on the Balance Sheet
or as otherwise expressly permitted by this Agreement, (ii)
liens for current taxes not yet due, (iii) Permitted Liens, as
defined in Article 1 of the Loan Agreement dated as of September
14, 1998 between Buyer and Seller, or (iv) minor matters that,
in the aggregate, are not substantial in amount and do not and
could not reasonably be expected to materially impair the use of
the Assets or the conduct of the Business. Except as set forth
in Section 1.2, the Assets constitute all of the assets and
properties used in the conduct of the Business and are adequate
and sufficient for the current operations of the Business.
Except as set forth in Section 1.2, there are no assets or
properties located at the Facilities which are not being
transferred to Buyer hereunder. All furniture, fixtures,
equipment, machinery and similar property to be acquired by
Buyer hereunder are in good operating condition and repair,
reasonable wear and tear excepted, are free from material
defects and are suitable for the purposes used.
3.8 TAXES. Seller timely has filed with the appropriate authority
all required federal, state and local income and other tax
returns and reports relating to Seller's assets or business.
Except as set forth on Schedule 3.8, Seller has paid or caused
to be paid in full all taxes, assessments and other governmental
charges (including interest and penalties thereon) which are due
and payable by Seller, or in respect of Seller's assets or
business (including, but not limited to, property, sales,
intangible and payroll taxes).
3.9 LITIGATION. Except as described on Schedule 3.9, there is no
pending claim, action, suit, proceeding or investigation
judicial, governmental or otherwise), nor any order, decree or
judgement in effect, or, to the Seller's knowledge, threatened,
against Seller which reasonably could be expected to have a
Material Adverse Effect or which relates to the transactions
contemplated by this Agreement.
3.10 CONTRACTS. Schedule 3.10 hereto contains a complete description
of each written and oral agreement, understanding and commitment
relating to the Assets or Business to which Seller is a party or
by which Seller is bound (other than agreements with Buyer),
which, measured from and after Closing, provides for aggregate
payments exceeding $1,000, has a term greater than one year, or
which is otherwise material to the Assets or Business (such oral
or written agreements, understanding and commitments are
referred to as the "Material Contracts"). Except as described
in Schedule 3.10, each Material Contract is valid, binding and
enforceable, is fully assignable to Buyer (without requiring a
consent or approval which has not been obtained), and Seller is
not in default thereunder (or will be with the giving of notice,
the passage of time, or both). Seller has no reason to believe
that any Material Contract can not be replaced on substantially
similar terms.
3.11 COMPLIANCE. Seller has complied in all material respects with
all federal, state and local ordinances, regulations and orders
applicable to the Business or the ownership of the Assets.
Seller is not in violation of any order, writ, injunction or
decree of any court or any federal, state, municipal or other
domestic governmental department, commission, board, bureau,
agency or instrumentality, which violation could reasonably be
expected to have a Material Adverse Effect. Except with respect
to regulatory approvals which may in the future be required with
respect to products or services offered or to be offered in
connection with the Business, Seller has all federal, state and
local governmental licenses and permits material to and
necessary in the conduct of the Business; such licenses and
permits are in full force and effect, no violations have been
recorded in respect of any such licenses or permits, and no
proceeding is pending or threatened to revoke or limit any
thereof. Schedule 3.11 hereto contains a list of all federal,
state and local governmental or administrative licenses and
permits obtained by Seller in force and effect as of the Closing
Date. Except as described in Schedule 3.11, none of such
licenses and permits will be affected in any material respect by
the consummation of the transaction contemplated in this
Agreement.
3.12 INSURANCE. Seller warrants that all insurance policies,
including, but not limited to, liability, theft, business
interruption, life, fire, workers' compensation, health and
other forms of insurance maintained by Seller in connection with
the Business are in full force and effect and no notice of
cancellation or similar notice has been given to Seller. Seller
will undertake all reasonably necessary steps and execute all
reasonably necessary documents to have all of Seller's insurance
policies transferred to Buyer upon Closing and to ensure that
Buyer is covered under said insurance policies for any and all
losses or claims relating to the Assets or Assumed Liabilities.
3.13 ACCOUNTS RECEIVABLE. Schedule 3.13 contains a complete and
accurate list of all Accounts Receivable as of the date of the
Balance Sheet. The schedule delivered by Seller to Buyer on the
Closing Date pursuant to Section 2.6 will contain a complete and
accurate list of all Accounts Receivable as of the Closing Date.
3.14 ACCOUNTS PAYABLE. Schedule 3.14 contains a complete and
accurate list of all Accounts Payable as of the date of the
Balance Sheet. The schedule delivered by Seller to Buyer on the
Closing Date pursuant to Section 2.7 will contain a complete and
accurate list of all Accounts Payable as of the Closing Date.
3.15 EMPLOYMENT MATTERS. Except as set forth on Schedule 3.15, all
of Seller's employees involved in the Business are employed on
an "at-will" basis and may be terminated by Buyer without
liability. Schedule 3.15 lists each salaried employee involved
in the Business and describes his or her position and salary,
and describes all benefit plans and other benefits provided or
available to Seller's employees (including, without limitation,
retirement, health and death, incentive compensation, and
vacation benefits). None of Seller's employees is a member of a
labor union, nor has Seller encountered any labor union
activity. There are no unfunded pension or similar liabilities
regarding employees of Seller. Except as set forth on Schedule
3.15, all pension plans have been properly funded and have at
all times been administered in material compliance with all
applicable laws (including, without limitation, ERISA).
3.16 INTELLECTUAL PROPERTY. Seller (i) owns or has the right to use
all trademarks, trade names, service marks, copyrights, patents,
licenses and rights with respect thereto ("Intellectual
Property"), used in or necessary for the conduct of the Business
without, to Seller's knowledge, infringing upon or otherwise
acting adversely to the right or claimed right of any person
under or with respect to any of the foregoing and (ii) is not
obligated or under any liability to make any payments by way of
royalties, fees or otherwise to any owner or licensee of, or
other claimant to, any Intellectual Property with respect to the
use thereof or in connection with the conduct of the Business,
other than license fees for third party software used to develop
and deliver Seller's products and services. A list of all
Intellectual Property used in or necessary for the conduct of
the Business and the nature of the ownership or rights with
respect thereto (including all registrations issued or applied
for in respect thereof), are set forth on Schedule 3.16.
3.17 RELATED PARTY TRANSACTIONS. Except as contemplated or otherwise
disclosed on Schedule 3.17, no shareholder, officer, director or
employee of Seller, nor any "affiliate" or "associate" of such
persons, is a party to, or otherwise has a direct or indirect
interest in, any transaction with Seller as it relates to the
Business, including without limitation, any contract, agreement
or other arrangement providing for the employment of, furnishing
of services by, rental of real or personal property from, or
otherwise requiring payments to any such person or entity.
3.18 COMPLETE AND ACCURATE DISCLOSURE. No representation or warranty
made to Buyer in this Agreement contains, or will contain, an
untrue statement of material fact, or omits or will omit to
state a material fact necessary to make such representation or
warranty not misleading. All documents and information which
have been or will be delivered to Buyer or its representatives
by or on behalf of Sellers are and will be true, correct and
complete copies of the documents they purport to represent.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that:
4.1 CORPORATE ORGANIZATION. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Colorado, with full power and authority (corporate,
governmental and otherwise) to own and operate its properties
and business as currently conducted and as contemplated to be
conducted.
4.2 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. The
execution, delivery and performance of this Agreement by Buyer
is within such party's corporate power and authority, and has
been duly authorized by all requisite corporate action. This
Agreement has been, and the other agreements, documents and
instruments required to be delivered by Buyer pursuant to this
Agreement (together with this Agreement, the "Buyer's
Documents") will be duly executed and delivered on behalf of
Buyer. This Agreement constitutes, and the Buyer's Documents
when executed and delivered will constitute, the legal, valid
and binding obligations of Buyer, enforceable against it in
accordance with their respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency
or other laws relating to or affecting creditors' rights
generally and by general equitable principles.
4.3 NO CONFLICTS; CONSENTS. The execution, delivery and performance
of the Buyer's Documents by Buyer, does not and will not (with
or without the giving of notice or the passage of time, or both)
violate, conflict with, result in a breach or default under,
give rise to any rights of acceleration, modification,
termination or cancellation of, result in the creation of any
lien, claim or encumbrance pursuant to, or require any notice or
consent under, the charter or bylaws of Buyer, or any mortgage,
indenture, instrument, agreement, understanding or commitment of
any kind, or any law, regulation, rule, order, judgement or
decree, to which Buyer is a party or by which Buyer is bound or
affected. No authorization, permit, approval or consent of, and
no registration or filing with, any governmental or regulatory
authority is required in connection with the execution, delivery
and performance by Buyer of the Buyer's Documents.
4.4 FINANCIAL STATEMENTS. Buyer has delivered to Seller true and
complete copies of the following financial statements (the
"Buyer Financial Statements") which are attached hereto as
Schedule 4.4, all of which have been prepared from Buyer's books
and records in accordance with generally accepted accounting
principles (except for the absence of footnotes) consistently
applied and maintained throughout the periods indicated and
present fairly and accurately the financial condition and
results of operations of Buyer at the dates and for the periods
covered:
(a) balance sheet as of the date hereof (the "Buyer Balance
Sheet"); and
(b) income statement for the period from inception to the date
hereof.
4.5 ABSENCE OF UNDISCLOSED LIABILITIES. Buyer has had no operations
to date except for certain financing activities as described on
Schedule 4.5. Except as set forth on the Buyer Balance Sheet and
on Schedule 4.5, Buyer has no material liabilities, obligations
or commitments. Without limiting the foregoing, Buyer has not
incurred any obligation to pay any broker's, finder's or similar
fees or commissions based on the transactions contemplated by
this Agreement.
4.6 CAPITALIZATION OF BUYER. Schedule 4.6 includes a complete
capitalization table of Buyer as of the Closing, and an accurate
and complete copy of the terms and conditions affecting each
class of security reflected in the table. Except as shown in
Schedule 4.6, Buyer does not have outstanding any securities or
rights which are convertible into or exchangeable for any of its
capital stock, any phantom stock, profit participation or
similar rights, any rights to acquire any of the foregoing, and
Buyer is not subject to any obligation (contingent or otherwise)
to reacquire any shares of its capital stock. No shareholder of
Buyer has any preemptive or other purchase rights with respect
to the issuance of Buyer's capital stock.
4.7 COMPLETE AND ACCURATE DISCLOSURE. No representation or warranty
made to Seller in this Agreement contains, or will contain, an
untrue statement of material fact, or omits or will omit to
state a material fact necessary to make such representation or
warranty not misleading. All documents and information which
have been or will be delivered to Seller or its representatives
by or on behalf of Buyer are and will be true, correct and
complete copies of the documents they purport to represent.
5. COVENANTS OF SELLER PENDING CLOSING
Seller covenants and agrees with Buyer that from the date of this
Agreement to the Closing:
5.1 CONDUCT OF BUSINESS. Seller shall conduct the Business only in
the ordinary course, consistent with its prior practices and
prudent business practices prevailing in the industry. For
example (and not in limitation of the foregoing), Seller shall
(i) preserve, maintain the condition of, and maintain insurance
at current levels on, its Assets, (ii) preserve for the benefit
of Buyer the goodwill of the Business and relations with its
employees, agents, customers and suppliers. Without limiting
the foregoing, Seller shall consult with Buyer regarding all
significant developments, transactions and proposals relating to
the Assets or Business. Seller shall not take any action or
omit to take any action which reasonably could be expected to
render inaccurate the representations and warranties contained
in this Agreement, as if such representations and warranties
were made at and as of the Closing.
5.2 ACCESS TO INFORMATION. Upon reasonable notice and during
regular business hours, Seller will give Buyer's representatives
full access to Seller's personnel and to all properties,
documents, contracts, books and records of Seller as Buyer may
reasonably require for due diligence purposes and in order to
consummate the transactions contemplated by this Agreement.
However, the representations and warranties made in this
Agreement, or in connection with this transaction, shall not be
affected or deemed waived by reason of the fact that Buyer or
its representatives knew or should have known that any such
representation or warranty is, or might be, inaccurate.
5.3 CONTINUING DISCLOSURE. Seller shall promptly disclose to Buyer
any information contained in its representations and warranties
made pursuant to this Agreement which, because of an event
occurring after the date hereof, is incomplete or no longer is
materially correct as of all times after the date hereof until
the Closing Date; provided, however, that none of such
disclosures shall be deemed to modify, amend or supplement the
representations and warranties of Seller or the schedules hereto
for the purposes of Section 7 hereof, unless Buyer shall have
consented thereto in writing.
5.4 CONFIDENTIALITY. Unless and until the Closing has been
consummated, Seller shall hold, and shall cause its employees,
agents and representatives to hold in confidence any
confidential data or information of Buyer made available to
Seller in the course of its discussions with Buyer in connection
with this Agreement, using the same standard of care to protect
such confidential data or information as is used to protect
Seller's confidential information. If the transactions
contemplated by this Agreement are not consummated, Seller shall
return or cause to be returned to Buyer all written materials
and all copies thereof that were supplied to Seller by Buyer and
that contain any such confidential data or information.
5.5 NO SHOPPING. Seller shall not negotiate with any other person,
or solicit or entertain any proposal, or furnish to any other
person any information, concerning the acquisition in any form
of the Assets or Business or a material interest therein, other
than Buyer.
5.6 PRESS RELEASES. Except as required by applicable law or as
contemplated herein, Seller shall not give notice to third
parties or otherwise make any public statement or release
concerning this Agreement or the transactions contemplated
hereby except for such written information as shall have been
approved in writing as to form and content by Buyer, which
approval shall not be unreasonably withheld.
6. COVENANTS OF BUYER PENDING CLOSING
Buyer covenants and agrees with Seller that from the date of this
Agreement to the Closing:
6.1 ACCESS TO INFORMATION. Upon reasonable notice and during
regular business hours, Buyer will give Seller's representatives
full access to Buyer's personnel and to all properties,
documents, contracts, books and records of Buyer as Seller may
reasonably require for due diligence purposes and in order to
consummate the transactions contemplated by this Agreement.
However, the representations and warranties made in this
Agreement, or in connection with this transaction, shall not be
affected or deemed waived by reason of the fact that Seller or
its representatives knew or should have known that any such
representation or warranty is, or might be, inaccurate.
6.2 CONTINUING DISCLOSURE. Buyer shall promptly disclose to Seller
any information contained in its representations and warranties
made pursuant to this Agreement which, because of an event
occurring after the date hereof, is incomplete or no longer is
materially correct as of all times after the date hereof until
the Closing Date; provided, however, that none of such
disclosures shall be deemed to modify, amend or supplement the
representations and warranties of Buyer or the schedules hereto
for the purposes of Section 8 hereof, unless Seller shall have
consented thereto in writing.
6.3 CONFIDENTIALITY. Unless and until the Closing has been
consummated, Buyer shall hold, and shall cause its employees,
agents and representatives to hold, in confidence any
confidential data or information of Seller made available to
Buyer in the course of its discussions with Seller in connection
with this Agreement, using the same standard of care to protect
such confidential data or information as is used to protect
Buyer's confidential information. Buyer will disseminate such
confidential data or information, prior to the consummation of
the Closing, only with the knowledge and consent of Seller,
which consent shall not be unreasonably withheld. Seller
recognizes that Buyer may utilize certain of Seller's
confidential data or information in preparing for the operation
of the Business following the Closing, which may include, but
shall not be limited to, Buyer's effort to secure additional
financing for the Business or to provide for a strategic
relationship with one or more persons or entities. At all
times, however, Buyer shall take reasonable care to protect
Seller's confidential data and information. If the transactions
contemplated by this Agreement are not consummated, Buyer shall
return or cause to be returned to Seller all written materials
and all copies thereof supplied to Buyer by Seller containing
any such confidential data or information.
6.4 PRESS RELEASES. Except as required by applicable law or as
contemplated herein, Buyer shall not give notice to third
parties or otherwise make any public statement or releases
concerning this Agreement or the transactions contemplated
hereby except for such written information as shall have been
approved in writing as to form and content by Seller, which
approval shall not be unreasonably withheld.
7. CONDITIONS TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to close is subject to the fulfillment of each of the
following conditions precedent (any of which may be waived by Buyer), and
Seller shall use its commercially reasonable efforts to cause each
condition to be fulfilled:
7.1 PERFORMANCE OF OBLIGATIONS. Seller shall have complied with and
performed in all material respects each agreement, covenant and
condition in this Agreement which are required to be performed
or complied with by it at or prior to Closing.
7.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Seller contained in this Agreement or made in
connection with this transaction shall be true and correct in
all material respects at and as of the date of the Closing, as
if such representations and warranties were made at and as of
Closing.
7.3 NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
no event or development has occurred, and no condition has
arisen, that has had, or reasonably could be expected to have, a
Material Adverse Effect.
7.4 KEY EMPLOYEE AGREEMENTS. Xxxxx X. Xxxxxx, Xxxx Xxxxxx and Xxxx
Xxxxxxxx ("Key Employees") shall each have executed and
delivered to Buyer an employment agreement in substantially the
form attached as Exhibit 7.4.
7.5 CONSENTS AND LICENSES. Buyer shall have obtained all
governmental approvals, permits and licenses, and shall have
obtained all other consents and approvals as are necessary in
the opinion of Buyer's counsel to consummate the transactions
contemplated herein and to enable Buyer to operate the Business
as it now is operated.
7.6 DIRECTOR AND SHAREHOLDER CONSENTS. Seller shall obtain, execute
and deliver to Buyer resolutions of the Seller's Board of
Directors and Shareholders affirming their knowledge and consent
to the transactions contemplated herein, in a manner
satisfactory to Buyer's counsel.
7.7 LOAN EXTENSIONS. Seller shall obtain and deliver to Buyer
Extension Agreements for its liabilities listed on Schedule 7.7.
The Extension Agreements shall defer the listed obligations to
the date on which 100 credit unions (or other entities
associated with the credit union industry that provide
equivalent economics) have subscribed and connected to the
Company's secure network (or equivalent Company service), or
otherwise to the satisfaction of Buyer.
7.8 SATISFACTION WITH DUE DILIGENCE. Buyer shall be satisfied, in
its sole reasonable discretion, with the results of its due
diligence investigation (including, without limitation, its
investigation of the condition of the Assets and its review of
Seller's financial statements).
7.9 ADDITIONAL DOCUMENTS. Buyer shall have received such documents,
certificates and other evidence as Buyer or its counsel
reasonably may request relating to the existence and standing of
Seller, the authorization, execution and delivery of this
Agreement by Seller, the accuracy of the representations and
warranties of Seller contained herein, and the compliance by
Seller with its obligations hereunder.
8. CONDITIONS TO SELLER'S OBLIGATIONS TO CLOSE
Seller's obligations to close is subject to the fulfillment of each of the
following conditions precedent (any of which may be waived by Seller), and
Buyer shall use its commercially reasonable efforts to cause each
condition to be fulfilled:
8.1 PERFORMANCE OF OBLIGATIONS. Buyer shall have complied with and
performed in all material respects each agreement, covenant and
condition in this Agreement which are required to be performed
or complied with by it at or prior to Closing.
8.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Buyer contained in this Agreement, or made in
connection with this transaction, shall be true and correct in
all material respects at and as of the date of the Closing, as
if such representations and warranties were made at and as of
Closing.
8.3 NO MATERIAL ADVERSE CHANGE. Since the date of this Agreement,
no event or development has occurred, and no condition has
arisen, that has had, or reasonably could be expected to have, a
Material Adverse Effect on Buyer.
8.4 KEY EMPLOYEE AGREEMENTS. Buyer shall have executed and
delivered to each of Xxxxx X. Xxxxxx, Xxxx Xxxxxx and Xxxx
Xxxxxxxx an employment agreement in substantially the form
attached as Exhibit 7.4.
8.5 CONSENTS AND LICENSES. Buyer shall have obtained all
governmental approvals, permits and licenses, and the parties
shall have obtained all other consents and approvals as are
necessary in the opinion of Seller's counsel to consummate the
transactions contemplated herein and to enable Buyer to operate
the Business as it now is operated.
8.6 SHAREHOLDER CONSENT. Seller shall have obtained consent of
Seller's Shareholders to the transactions contemplated herein
satisfactory to Seller's counsel.
8.7 SATISFACTION WITH DUE DILIGENCE. Seller shall be satisfied, in
its sole reasonable discretion, with the results of its due
diligence investigation (including, without limitation, its
review of Buyer's financial statements).
8.8 ADDITIONAL DOCUMENTS. Seller shall have received such
documents, certificates and other evidence as Seller or its
counsel reasonably may request relating to the existence and
standing of Buyer, the authorization, execution and delivery of
this Agreement by Buyer, the accuracy of the representations and
warranties of Buyer contained herein, and the compliance by
Buyer with its obligations hereunder. Buyer and Buyer's
controlling shareholders shall have executed and delivered to
Seller an Agreement for Sharing of Dilution in substantially the
form attached as Exhibit 8.8.
9. ADDITIONAL OBLIGATIONS FOLLOWING CLOSING
9.1 PRESERVATION OF GOODWILL. Following Closing, Seller and its
officers, directors, employees and shareholders will restrict
their activities so that Buyer's reasonable expectations with
respect to the goodwill, business reputation, employee
relations, and prospects connected with the Assets and the
Business will not be materially impaired thereby.
9.2 PAYMENTS RECEIVED. Seller and Buyer shall hold and promptly
will transfer and deliver to the other, from time to time as and
when received, any cash, checks (with appropriate endorsements)
or other property that properly belongs to the other, including,
without limitation, any insurance proceeds, and after the
Closing, Buyer shall have the right and authority to endorse
without recourse the name of the Seller on any check or any
other evidences of indebtedness received by Buyer on account of
the Business or the Assets.
9.3 POST-CLOSING PAYMENTS. Buyer shall pay the obligations listed
on Schedule 7.7 on the date (the "100 Customer Date") on which
100 credit unions (or other entities associated with the credit
union industry that provide equivalent economics) have
subscribed and connected to the Company's secure network (or
equivalent Company service), or otherwise in accordance with the
Extension Agreement applying to each obligation.
9.4 STOCK TRANSFERS. Upon Seller's request after Closing, Buyer
shall transfer on its books the shares of Buyer's Class A common
stock and Class B common stock delivered to Seller hereunder,
into the names of Seller's shareholders in the proportions
requested by Seller, and shall issue stock certificates
accordingly against surrender of the stock certificates
delivered to Seller at Closing.
10. INDEMNIFICATION
10.1 INDEMNIFICATION BY SELLER. Seller agrees to indemnify, defend
and hold harmless Buyer and its shareholders, officers,
directors, employees and agents, and their respective successors
and assigns, from and against any and all claims, suits, losses,
reasonable expenses (legal, accounting, investigation and
otherwise), damages and liabilities (including, without
limitation, tax liabilities), arising out of or relating to (i)
any liability, obligation or commitment of Seller other than the
Assumed Liabilities, (ii) the conduct of, or conditions existing
with respect to, the Business prior to Closing, and (iii) any
misrepresentation or breach of warranty or covenant made by
Seller in this Agreement or the Seller's Documents. However,
Seller does not indemnify any shareholder of Buyer with respect
to any claim by that shareholder.
10.2 INDEMNIFICATION BY BUYER. Buyer agrees to indemnify, defend and
hold harmless Seller and its shareholders, officers, directors,
employees and agents, and their respective successors and
assigns, from and against any and all claims, suits, losses,
reasonable expenses (legal, accounting, investigation and
otherwise), damages and liabilities, arising out of or relating
to (i) any Assumed Liability, (ii) the conduct of, or conditions
arising with respect to, the Business after Closing, except to
the extent such conduct or conditions were caused by a breach of
Seller's representations or conditions under this Agreement, and
(iii) any misrepresentation or breach of warranty or covenant
made by Buyer in this Agreement or the Buyer's Documents.
However, Buyer does not indemnify any shareholder of Seller with
respect to any claim by that shareholder.
10.3 PAYMENT. Upon the determination of the liability under Sections
10.1 and 10.2 hereof, the appropriate party shall pay the other,
as the case may be, within ten days after such determination,
the amount of any claim for indemnification made hereunder. In
the event that the indemnified party is not paid in full for any
such claim pursuant to the foregoing provisions promptly after
the other party's obligation to indemnify has been determined in
accordance herewith, it shall have the right, notwithstanding
any other rights that it may have against any other person, to
set off the unpaid amount of any such claim against any amounts
owed by it under this Agreement, the Seller's Documents or the
Buyer's Documents. Upon the payment in full of any claim,
either by set off or otherwise, the entity making payment shall
be subrogated to the rights of the indemnified party against any
person with respect to the subject matter of such claim.
10.4 NOTICE AND CONTROL. In each case, the indemnity is subject to
the conditions that (a) the indemnifying party is notified of
the claim in a timely manner; (b) the indemnified party provides
all reasonable assistance to defend against the claim at the
indemnifying party's expense; and (c) the indemnifying party is
given control of the defense and settlement.
11. MISCELLANEOUS
11.1 TERMINATION.
(a) This Agreement may be terminated by written notice of
termination at any time prior to the Closing, as follows:
(i) by mutual consent of Seller and Buyer;
(ii) by Buyer, (A) at any time if the representations and
warranties of Seller contained herein were incorrect
in any material respect when made or at any time
thereafter, (B) upon the material breach by Seller
of any covenant made herein which cannot be cured
within 30 days of breach or (C) upon written notice
to Seller given at any time after January 31, 1999
if all of the conditions precedent set forth in
Section 7 hereof have not been met (provided that
Seller shall have 10 business days after the notice
to cure the failure of condition); or
(iii) by Seller, (A) at any time if the representations
and warranties of Buyer contained herein were
incorrect in any material respect when made or at
any time thereafter, (B) upon the material breach by
Buyer of any covenant of Buyer made herein which
cannot be cured within 30 days of breach or (C) upon
written notice to Buyer given at any time after
January 31, 1999 if all of the conditions precedent
set forth in Section 8 hereof have not been met
(provided that Buyer shall have 10 business days
after the notice to cure the failure of condition).
(b) If Buyer terminates this Agreement for any reason, then, 60
days after the date of termination, (a) all amounts
outstanding under the Loan Agreement dated as of September
14, 1998 between Buyer and Seller will be due and payable,
(b) Seller will reimburse Buyer for out-of-pocket expenses
incurred during its due diligence investigation, and (c)
Seller will pay a $25,000 cancellation fee.
11.2 EXPENSES. If the Closing is completed, insurance costs, sales,
use and transfer taxes arising out of the transactions
contemplated herein, and legal, accounting and other costs and
expenses incurred in connection with the transactions
contemplated herein shall be borne by Buyer. If this Agreement
is terminated without a Closing, except as otherwise provided
herein, legal, accounting and other costs and expenses incurred
in connection with the transactions contemplated herein shall be
paid by the party incurring such expenses.
11.3 NOTICES.
(a) All notices and other communications made pursuant to this
Agreement shall be in writing and shall be deemed to have
been given upon receipt by (1) personal delivery, (2)
telephonically confirmed fax, (3) receipted courier service
or (4) certified or registered mail, return receipt
requested, addressed as shown below. Refusal to accept
delivery shall be deemed receipt. All notices shall be
directed to the following addresses:
(i) If to Seller:
Cavion Technologies, Inc.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000-0000
Fax: 000-000-0000
Voice: 000-000-0000
Attn: Chief Executive Officer
(ii) If to Buyer:
Network Acquisitions, Inc.
0000 X. Xxxxxxxx Xxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Fax: 000-000-0000
Voice: 000-000-0000
Attn: Xxxxx Xxxxx
(b) Any party hereto may change the address to which notices
shall be directed under this Section 11.3 by giving written
notice of such change to the other party.
11.4 WAIVERS. The rights and remedies under this Agreement shall be
cumulative and not exclusive of any rights or remedies which the
parties hereto otherwise would have. No failure or delay in
exercising any right shall operate as waiver of such right. Any
waiver or indulgence granted shall not constitute a modification
of this Agreement, except to the extent expressly provided in
such waiver or indulgence, or constitute a course of dealing at
variance with the terms of the Agreement such as to require
further notice of the intent to require strict adherence to the
terms of the Agreement in the future. Any such actions shall
not, in any way, affect the ability of the parties, in their
sole discretion, to exercise any rights available to them under
this Agreement.
11.5 COUNTERPARTS. This Agreement may be executed in any number of
identical counterparts, each of which shall be deemed to be an
original, but all such separate counterparts shall together
constitute but one and the same instrument.
11.6 GOVERNING LAW; BINDING EFFECT. This Agreement and each of the
other Documents attached hereto or contemplated hereby have been
delivered to and shall be deemed to have been made in Englewood,
Colorado, and shall be interpreted, and the rights and
liabilities of the parties hereto shall for all purposes be
governed by and construed and enforced without giving effect to
the principles of conflicts of laws, in accordance with the laws
of the State of Colorado applicable to agreements executed,
delivered and performed within such State.
11.7 HEADINGS. The headings used in this Agreement are for
convenience only and shall not be used in connection with the
interpretation of any provision hereof.
11.8 AMENDMENT AND WAIVER. Neither this Agreement nor any term
hereof may be amended orally, nor may any provision hereof be
waived orally but only by a written instrument signed by the
parties hereto.
11.9 ENTIRE AGREEMENT. Except as otherwise expressly provided
herein, this Agreement and the other documents described or
contemplated herein embody the entire agreement and
understanding among the parties hereto and supersede all prior
agreements and understandings relating to the subject matter
hereof.
11.10 DRAFTING PARTY. This Agreement expresses the mutual intent of
the Buyer and Seller. Accordingly, regardless of the party
preparing any document, the rule of construction against the
drafting party shall have no application to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
or caused it to be executed by their duly authorized officers as of the
day and year first above written.
CAVION TECHNOLOGIES, INC. NETWORK ACQUISITIONS, INC.
/s/Xxxxx X. Xxxxxx /s/Xxxxx Xxxxx
By: Xxxxx X. Xxxxxx, CEO By: Xxxxx Xxxxx, President
LIST OF SCHEDULES
SCHEDULE NUMBER DESCRIPTION
--------------- -----------
1.1(a) Description of Facilities
2.8 List of Employees
3.4 Financial Statements
3.5 Contingent Liabilities
3.6 Certain Changes or Events
3.8 Tax Matters
3.9 Litigation and Investigations
3.10 Material Contracts
3.11 Licenses and Permits
3.13 Accounts Receivable
3.14 Accounts Payable
3.15 Salaried Employees
3.16 Intellectual Property
3.17 Related Party Transactions
4.4 Buyer Financial Statements
4.5 Buyer Obligations
4.6 Capitalization of Buyer
7.7 Liabilities to be Deferred
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
2.3(a) Xxxx of Sale, Assignment and Assumption
Agreement
7.4 Form of Contract for Employment
8.8 Agreement for Sharing of Dilution
