THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES LAWS OF ANY STATE AND
WILL BE OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THESE LAWS BY VIRTUE OF THE COMPANY'S INTENDED COMPLIANCE WITH
SECTIONS 3(B) AND 4(2) OF THE SECURITIES ACT OF 1933, THE PROVISIONS OF
REGULATION D UNDER SUCH ACT, AND SIMILAR EXEMPTIONS UNDER STATE LAWS. THE
SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY ANY REGULATORY AUTHORITY.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE
CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT (the "Agreement") is dated as of January
22, 2001, by and between Nex2, LLC, a limited liability company organized under
the laws of the State of Utah (the "Company"), and Sensar Corporation, a Nevada
Corporation ("Purchaser"). The Company and Purchaser are hereinafter sometimes
referred collectively to as the "Parties."
RECITALS
The Company was organized in 1999 to provide electronic access to
computer based medical information, including prescription profiles and other
patient specific information for use by the insurance industry. The Company
requires additional capital in order to carry out its interim business plan, pay
ongoing organizational and operational expenses and carry out its long-term
business strategies to acquire additional financing to expand the Company's
business opportunities. The Purchaser desires to make such capital available to
the Company upon the terms and conditions set forth below in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties hereto agree as
follows:
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ARTICLE I
Purchaser Subscription and Right to Purchase Voting Units and Investor Units
1.1 Subscription and Right to Purchase Common Stock. Subject to the
terms and conditions of this Agreement, Purchaser hereby subscribes for and
agrees to purchase, and the Company hereby grants to Purchaser the right to
purchase, Two Hundred Forty-Nine Thousand Seven Hundred (249,700) Investor Units
of the Company and Three Hundred (300) Voting Units of the Company (collectively
the "Units").
1.2 Consideration. As consideration for the issuance of the Units, and
the right to receive additional Units upon the terms provided in section 1.4,
below, Purchaser hereby agrees to pay to the Company a purchase price of Three
and 00/100 dollars per Unit ($3.00/Unit) for an aggregate purchase price of
Seven Hundred Fifty Thousand Dollars and No/100 Dollars ($750,000.00) (the
"Contribution").
1.3 Closing; Issuance of the Units. Upon execution of this Agreement,
Purchaser shall pay the Contribution, in cash, cash equivalents or immediately
available funds, to the Company and the Company shall issue and deliver to
Purchaser certificate(s) representing Two Hundred Forty-Nine Thousand Seven
Hundred (249,700) Investor Units of the Company and Three Hundred (300) Voting
Units of the Company the date on which the Closing actually takes place or, if
more than one day is required to complete the Closing, the date on which the
Closing is actually accomplished, is herein referred to and designated as the
"Closing Date."
1.4 Most Favored Investor Status. If the Company issues Units to any
person or entity other than to the Company's employees (in the form of options,
outright Units, or otherwise) on terms that are more favorable than the terms
provided for herein, including, without limitation, any anti-dilution rights
(the "More Favorable Terms,") then the parties agree to revise the terms of this
Agreement so that the terms of the issuance of Units herein shall be as nearly
equivalent to the More Favorable Terms as is practicable. In the event the More
Favorable Terms include a purchase price of less than Three and 00/100 dollars
per Unit ($3.00/Unit) (the "Reduced Price") the Company shall issue to the
Purchaser an additional number of Investor Units and Voting Units equal to the
difference between the number of Investor Units and Voting Units that could have
been purchased at the Reduced Price for Seven Hundred Fifty Thousand and 00/100
dollars ($750,000.00) and the number of Units issued pursuant to section 1.1,
above. The Investor Units and Voting Units shall be issued in the same ratio as
the issuance of such Units under section 1.1, above. If the Company has not
closed on an equity investment in the Company from Merk Capital, Swiss Re, or
any other equity investor investing at least Two Million dollars ($2,000,000.00)
in the Company (a "Major Investor") prior to March 31, 2001, the Company shall
issue to the Purchaser an additional One Hundred Twenty Four Thousand Eight
Hundred Fifty (124,850) Investor Units and One Hundred Fifty (150) Voting Units
of the Company in order to reduce the effective purchase price of the Units to
Two dollars per Unit ($2.00/Unit). Upon the date which is the earlier of (1)
March 30, 2001 or (2) the date after the day on which the Company closes on an
equity investment in the Company from a Major Investor (the "Term"), the
Purchaser's right to revise the terms of this agreement to account for More
Favorable Terms shall cease. In the event the company issues Units to the
Company's current or potential data suppliers (the "Pharmaceutical Benefits
Managers" or "PBMs") during the Term for exclusive use of their data, the
issuance of Units to such PBMs shall be deemed to be terms no more favorable
than the terms of this Agreement. Additionally, in the event the Company enters
into agreements with investors or potential investors to jointly develop
software to be used in conjunction with the Company's product during the Term,
the Units issued in exchange for such development agreements shall be deemed to
be no more favorable than the terms of this Agreement. The Company makes no
assurances that any Units will be issued for exclusive arrangements with PBMs or
that any jointly developed software agreements will materialize.
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1.5 Registration Rights. The Purchaser shall receive registration
rights equivalent to other Members of Nex2, in the event of any form of public
offering.
ARTICLE II
Conditions to Performance of Obligations
2.1 Company's Obligations. The obligations of the Company under this
Agreement are subject to the following conditions:
(A) Satisfaction (or waiver by the Company) that the
representations and warranties of Purchaser made in this Agreement shall be true
and correct as of the date performance is required, and Purchaser shall have
performed or complied with all obligations and covenants required by this
Agreement to be performed or complied with by it by the time of issuance of any
of the Units.
(B) Execution by the Purchaser of a counterpart signature page
to the Company's Amended and Restated Operating Agreement, dated January 11,
2000, as amended, obligating the Purchaser to be bound by the terms of such
agreement.
2.2 Purchaser's Obligations. The obligations of Purchaser pursuant to
Article I hereof are subject to the following conditions:
(A) Satisfaction (or waiver by the Purchaser) that the
representations and warranties of the Company and Purchaser made in this
Agreement shall be true and correct as of the date performance by Purchaser is
required, and the Company shall have performed or complied with all obligations
and covenants required by this Agreement to be performed or complied with by it
at the time of any issuance of the Units.
2.3 Additional Conditions. The obligations of the Parties hereunder are
subject to the satisfaction (or waiver) of the condition that no injunction or
order of any court or administrative agency of competent jurisdiction shall be
in effect, and no statute, rule or regulation of any governmental authority of
competent jurisdiction shall have been promulgated or enacted, which restrains
or prohibits the issuance of the Units, or which would have a material adverse
effect on the issuance of the Units.
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ARTICLE III
Representations and Warranties of Purchaser
Purchaser represents and warrants as follows:
3.1 Purchase for Own Account. The Units to be acquired by Purchaser are
being purchased for investment for Purchaser's account and not with a view to
distribution or resale. No other person has an interest in the Units.
3.2 Investor Status. The Purchaser is an "accredited investor" as
defined in Rule 501 promulgated under the Securities Act of 1933, as amended,
because the Purchaser is a corporation not formed for the specific purpose of
acquiring the Units and with total assets in excess of $5,000,000.
3.3 Knowledge and Experience Purchaser has such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of an investment in the Company and is able to bear the
economic risks of an investment in the Units for an indefinite period of time.
3.4 Receipt of Information. Purchaser has met with officers and
managers of the Company, has had an opportunity to ask questions and receive
answers concerning the Company and the terms and conditions of an investment in
the Company, and has received all information that Purchaser believes is
necessary or desirable in connection with an investment in the Company.
Purchaser has been solely responsible for its own due diligence investigation of
the Company and for its own analysis of the merits and risks of an investment in
the Units, including, without limitation, the tax consequences to Purchaser of
an investment in the Units.
3.5 Financial Statements. Purchaser has received copies of the
Company's most recent financial statements.
3.6 Articles of Amendment. Purchaser has received a copy of the Amended
Articles of Organization dated January 11, 2000 and the Amended and Restated
Operating Agreement of the Company dated effective as of January 11, 2000 (the
"articles" and Operating Agreement, respectively).
3.7 Written Consents and Material Agreements. Purchaser has received
and reviewed the Written Consent of the Board of Managers and the agreements
which the Company has entered into that are included in Exhibit "A," attached
hereto.
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3.8 Authority. The Board of Directors of the Purchaser has authorized
the officers of the Purchaser to enter into the transaction contemplated herein.
3.9 No Inconsistent Representations or Warranties. This Agreement
contains all the terms of this offering and supersedes any inconsistent or
additional terms in any other document. No officer or manager of the Company has
made any representations or warranties that are inconsistent with the statements
in this Agreement.
3.10 No Representation by Broker or Sales Agent. The Purchaser has not
engaged a broker or sales agent in connection with this transaction, and agrees
to hold harmless and indemnify the Company from any brokerage or similar fee.
ARTICLE IV
Representations and Warranties of Company
Company represents and warrants as follows:
4.1 Authority. The execution, delivery and performance of this
Contribution Agreement by the Company will have been duly approved by the Board
of Managers of the Company and all other actions required to authorize and
effect the offer and sale of the Units will have been duly taken and approved.
4.2 Organization. The Company is a limited liability company duly
organized, existing and in good standing under the laws of the State of Utah and
has the authority to conduct the business which it conducts and proposes to
conduct.
4.3 Issuance of Units. The Units have been duly and validly authorized
are validly issued and outstanding.
4.4 Licenses/Permits. To the extent necessary, the Company has
obtained, or is in the process of obtaining, all licenses, permits and other
governmental authorizations necessary to the conduct of its business; such
licenses, permits and other governmental authorizations obtained are in full
force and effect; and the Company is in all material respects complying
therewith.
4.5 Pending Legal Action. The Company knows of no pending or threatened
legal or governmental proceedings, to which the Company is a party, which could
materially adversely affect the business, property, financial condition or
operations of the Company.
4.6 No Violation/Default. The Company is not in violation of, or
default under, nor will the execution and delivery of this Contribution
Agreement, the issuance of the Units, and the incurrence of the obligations
herein and therein set forth and the consummation of the transactions herein or
therein contemplated, result in a violation of, or constitute a default under,
the Articles of Organization or Operating Agreement, in the performance or
observance of any material obligations, agreement, covenant or condition
contained in any bond, debenture, note or other evidence of indebtedness or in
any material contract, indenture, mortgage, loan agreement, lease, joint venture
or other agreement or instrument, to which the Company is a party or by which it
or any of its properties may be bound, or in violation of any material order,
rule, regulation, writ, injunction or decree of any government, governmental
instrumentality or court, domestic or foreign.
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4.7 No Representation by Broker or Sales Agent. The Company has not
engaged a broker or sales agent in connection with this transaction, and agrees
to hold harmless and indemnify the Purchaser from any brokerage or similar fee.
ARTICLE V
Acknowledgments
Purchaser understands and acknowledges that:
5.1 Determination of Purchase Price; Tax Treatment. The purchase price
for the Units has been arbitrarily determined in a manner consented to by
Purchaser, and such purchase price is not based on any formal valuation of the
Company or any advice or information received by Purchaser from the accounting
or legal advisors to the Company. Purchaser will be solely responsible for any
tax treatment accorded to the purchase price paid for the Units, as it affects
the Purchaser.
5.2 Restricted Securities. The Units have not been registered or
qualified under any federal or state securities laws in reliance upon exemptions
from the registration requirements of such laws, and the Units may not be
transferred by Purchaser except in compliance with the registration requirements
of such laws or pursuant to available exemptions from registration. The offer
and sale of the Units have not been approved or disapproved by the United States
Securities and Exchange Commission or any state regulatory authority, and any
representation to the contrary is unlawful.
5.3 Unit Transfer Restriction Agreement. The Units will be subject to
the terms and conditions of the Amended and Restated Operating Agreement of the
Company dated January 11, 2000, attached hereto as Exhibit A Tab 1, as amended,
which Purchaser has carefully reviewed and agrees to sign, and by which
Purchaser agrees to be bound by its terms.
5.4 Unit Certificate Legends. The certificates for the Units will
include substantially the following legends:
"THE UNITS REPRESENTED BY THIS CERTIFICATE WERE OFFERED AND
SOLD TO THE HOLDER WITHOUT REGISTRATION UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE
SECURITIES LAWS. THE UNITS MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, OR HYPOTHECATED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND UNDER ANY
APPLICABLE STATE SECURITIES LAWS, OR IN ACCORDANCE WITH AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION IS NOT REQUIRED."
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"THE UNITS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS UPON TRANSFER AS SET FORTH IN THE
OPERATING AGREEMENT OF THE COMPANY, A COPY OF WHICH IS ON FILE
AT THE PRINCIPAL OFFICE OF THE COMPANY."
5.5 Capitalization. Under the Articles, the Company is authorized to
issue 100,000 Voting Units and 100,000,000 Investor Units. Immediately prior to
the issuance of the Units, Sixteen Thousand Two Hundred Ninety-One (16,291) of
the Voting Units of the Company and Thirteen Million One Hundred Ninety-One
Thousand Seven Hundred Forty-Eight (13,191,748) of the authorized Investor Units
of the Company were outstanding.
ARTICLE VI
Risk Factors
This offering involves a high degree of risk. Purchaser has reviewed
and considered carefully the following risk factors before deciding to purchase
the Units.
6.1 Limited Operating History. The Company was formed in 1999 and has a
limited operating history. The Company's prospects must be considered in light
of the risks, uncertainties, expenses and difficulties frequently encountered by
companies in their early stages of development.
6.2 Dependence on Key Personnel. The success of the Company's business
will depend to a large extent on the abilities and continued participation of
certain key employees. The loss of key employees could have a material adverse
effect on the Company's business. As the Company grows, it will be required to
retain the services of additional experienced personnel. Competition for such
personnel is intense, and there is no assurance that they will be available when
required or that the Company will have the ability to attract or retain such
personnel.
6.3 Distribution Policy. The Company does not intend to pay any cash or
other distributions in the foreseeable future.
6.4 No Assurance of Profitability. The Company believes that its growth
and anticipated profitability will depend in large part on its ability to
implement its plan for contracting with pharmacy benefit managers and marketing
its prescription profile product to the insurance industry. In view of the
rapidly evolving nature of the Company's business and its limited operating
history, there can be no assurance that the Company will become profitable or be
able to sustain profitability.
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6.5 Need for Additional Funds. The Company will require additional
funds to pursue its long-term goals. The Company has no commitments with respect
to any such financing arrangements. There is no assurance that the Company will
be successful in financing its contemplated operations. In addition, any further
financing obtained by the Company may be on terms disadvantageous to existing
Members, including the Purchaser.
6.6 Intense Competition. Technology-based business operations are
rapidly evolving and intensely competitive, and the Company expects competition
to intensify further in the future. The Company potentially will compete with a
number of other companies. Competitive pressures created by any one of these
companies, or by the Company's competitors collectively, could have a material
adverse effect on the Company's business, results of operations and financial
condition.
6.7 Risks Inherent in Technology Business. The Company cannot rely
proprietary technology to prevent competitive encroachment. The Company will
rely on its "speed-to-market" advantage to create barriers to entry. However,
delays in obtaining sufficient funding may cause the Company to miss the current
window of opportunity and lose its advantage.
6.8 Governmental Regulation and Legal Uncertainties. In addition to
laws and regulations applicable to businesses generally, the Company is subject
to federal, state or local law and regulation applicable to its ongoing
business, specifically, law and regulation governing the privacy of personal
health information. It is possible that additional, possibly more restrictive,
laws and regulations may be adopted with respect to the type of business engaged
in by the Company. The nature of such legislation and the manner in which it may
be interpreted and enforced cannot be fully determined and, therefore, could
subject the Company and/or its customers to business restrictions, potential
liability or increased costs, which in turn could have an adverse effect on the
Company's business, results of operations and financial condition.
6.9 Control by Principal Members. Upon issuance of the Units, a
signification proportion of the Company's total Investor Units and Voting Units
will be owned or controlled by six founding Members. As a result, such Members,
acting in concert will have the ability to control many of the matters submitted
to Members of the Company for approval.
6.10 Unit Price. The price of the Units to be sold in this offering has
been determined solely by the Company in negotiation with Purchaser. The current
offering price does not bear any direct relationship to the Company's earnings,
book value, assets, revenue or other typical measure of financial performance or
value. Because the Company has a limited operating history and no market exists
for the Units, potential future offering prices of the Units should be
considered highly uncertain.
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ARTICLE VII
Indemnification
The Purchaser and Company agree to indemnify and hold harmless the
other party and its managers, officers, agents, employees, representatives,
affiliates and controlling persons harmless from and against any and all loss,
damage or liability (including reasonable attorneys' fees and disbursements in
connection with any investigation, enforcement action, trial or appeal) due to
or arising out of any untruth, inaccuracy, or breach of any representation,
warranty or covenant of Purchaser or Company, as the case may be, in this
Agreement.
ARTICLE VIII
Termination
8.1 Termination. Notwithstanding anything to the contrary herein, this
Agreement may be terminated only by mutual written consent of the Parties.
8.2 Notice. In the event of termination by a Party pursuant to this
Article VIII, written notice thereof shall forthwith be given to the other
Party.
8.3 Effect. If this Agreement is terminated and the transaction is
abandoned as described in this Article VIII, this Agreement shall become void
and of no further force and effect as to any obligations of the parties from and
after such date.
ARTICLE IX
Miscellaneous
9.1 Assignment. This Agreement shall be binding on and inure to the
benefit of the successors and assigns of the Parties.
9.2 Notices. All notices, including, without limitation, a notice of
exercise of the options, requests and other communications hereunder shall be in
writing and shall be deemed to have been duly given five (5) days after dispatch
by certified or registered first-class mail, postage prepaid, from any post
office addressed to the address previously provided by each Party to the other.
9.3 Waiver and Delay. No waiver by a Party of any breach or default in
performance by the other Party and no failure, refusal or neglect of a Party to
exercise any right, power or option given to it hereunder or to insist upon
strict compliance with or performance of the obligations of the other Party
under this Agreement, shall constitute a waiver of the provisions of this
Agreement with respect to any subsequent breach thereof or a waiver by a Party
of its right at any time thereafter to require exact and strict compliance with
the provisions thereof.
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9.4 Governing Law and Dispute Resolution.
------------------------------------
(A) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Utah, applicable to
contracts made and to be wholly performed within such State, without regard to
the conflicts of law principles of such state.
(B) Good Faith Negotiations. Any disagreement, dispute,
controversy or claim arising out of or relating to this Agreement including,
without limitation, the interpretation hereof and any breach, termination or
invalidity hereof, shall be settled exclusively and finally (i) through good
faith negotiation of the Parties for a period not in excess of thirty (30) days
and (ii) in the event such negotiations do not yield a settlement within such
30-day period, by arbitration (irrespective of the magnitude thereof, the amount
in controversy or whether such matter would otherwise be considered justiciable
or ripe by a court or arbitral tribunal).
(C) Arbitration Rules. The arbitration shall be conducted in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "Arbitration Rules"), except as those rules conflict with the
provisions of this Section 9.4, in which event the provisions of this Section
9.4 shall control.
(D) Arbitrators. The arbitral tribunal shall consist of three
(3) arbitrators chosen in accordance with the Arbitration Rules. The arbitration
shall be conducted in Salt Lake County, Utah or such other location as shall be
agreed to by the Parties. Any submission of a matter for arbitration shall
include joint written instructions of the Parties requiring the arbitral
tribunal to render a decision resolving the matters submitted within sixty (60)
days following the submission thereof.
(E) Decision or Award. Any decision or award of the arbitral
tribunal shall be final and binding upon the Parties to the arbitration
proceeding. The Parties agree that the arbitral award may be enforced against
the Parties to the arbitration proceeding or their assets wherever they may be
found and that a judgment upon the arbitral award may be entered in any court
having jurisdiction thereof. The Parties further agree that the arbitral
tribunal shall have no power or authority to award punitive or exemplary
damages.
(F) Costs and Expenses. All out-of-pocket costs and expenses
incurred by either Party in connection with the resolution of any disagreement,
dispute, controversy or claim pursuant to this Section 9.4, including, but not
limited to, reasonable attorney's fees and disbursements, shall be borne by the
Party incurring the same; provided, however, that the arbitral tribunal shall
have the discretion to declare either Party to the arbitration proceeding as a
"prevailing party" with respect to one or more of the issues that were the
subject of the arbitration and to require the other Party to the arbitration to
reimburse such "prevailing party" for some or all of its costs and expenses
incurred in connection with such proceeding.
9.5 Integrated Contract. This Agreement constitutes the entire
agreement between the Parties relating to the subject matter hereof and
supersedes all prior or contemporaneous negotiations, representations,
agreements and understandings (both oral and written) of the Parties.
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9.6 Modifications and Amendments. No supplement, modification or
amendment of this Agreement shall be binding unless it is in writing and
executed by all of the Parties.
9.7 Counterpart Signatures. This Agreement may be executed by
counterpart signature and/or via facsimile transmission. The parties agree that
a signature on a facsimile transmission will be binding upon all parties hereto
as though such signature had been executed and delivered in person.
This Page Ends Here Intentionally
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their respective duly authorized representatives as of the day and
the year first above written.
Sensar Corporation, a Nevada NEX2, LLC
Corporation
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxxx X. Xxxxxx
---------------------- -------------------
Xxxxxx X. Xxxxxxxx Xxxxx X. Xxxxxx
Its: CEO Its: CEO
By: /s/ Xxxxxx Xxxx By: /s/ Xxxxx X. Xxxxx
--------------- ------------------
Xxxxxx Xxxx Xxxxx X. Xxxxx
Its: Secretary Its: Chairman of the Board
of Managers
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