AGREEMENT
THIS AGREEMENT (this "Agreement") is entered into this 8th day of December,
1999, by and among SENSAR CORPORATION, a Nevada corporation ("Sensar") and
Net2Wireless, Inc., a Delaware corporation ("Net"), based on the following:
Premises
A. Sensar is a publicly-held corporation with its common stock listed
on the NASDAQ Small Cap Market.
B. Net is an emerging growth company that has the right to acquire
development technology with potential applications in the wireless
communications field.
C. Sensar and Net have discussed the possibility of a business
transaction to the mutual benefit of both parties and have agreed to enter into
the transactions set forth in this Agreement.
Agreement
NOW, THEREFORE, based on the stated premises, which are incorporated herein
by this reference, and for and in consideration of the mutual covenants and
agreements hereinafter set forth and the mutual benefits to the parties to be
derived therefrom, it is hereby agreed as follows:
ARTICLE I
DEFINITIONS
When used herein, the following terms shall have the meanings indicated:
Section 1.01 Code. The Internal Revenue Code of 1986, as amended.
Section 1.02 Exchange Act. The Securities Exchange Act of 1934, as
amended.
Section 1.03 GAAP. United States generally accepted accounting
principles, as in effect on the date of determination, applied on a consistent
basis.
Section 1.04 Net. Net2Wireless, Inc., a corporation organized under
the laws of the state of Delaware and its wholly owned subsidiaries.
Section 1.05 Net Stock. All of the shares of Net issued and
outstanding as of the Closing Date, which are to be exchanged for shares of
Sensar Common Stock pursuant to the terms of this Agreement.
Xxxxxxx 0.00 XXX. Xxx Xxxxxx Xxxxxx Securities and Exchange
Commission.
Section 1.07 Securities Act. The Securities Act of 1933, as amended.
Section 1.08 Sensar. Sensar Corporation, a Nevada corporation.
Section 1.09 Sensar Common Stock. The authorized common stock, par
value $0.001 per share, of Sensar.
ARTICLE II
TRANSACTION
Section 2.01 Loan. On the terms and conditions hereinafter set forth,
Sensar agrees to loan to Net Two Million Dollars ($2,000,000) (the "Funding").
The Funding will be made to Net subsequent to the successful completion of the
following:
(a) The acquisition (the "Asset Acquisition"), directly or
indirectly through wholly-owned subsidiaries of Net, of the following from
I.T.E.S. Ltd., an Israeli corporation ("ITES"):
(i) All intellectual property owned by ITES related to wireless
multi-media streaming;
(ii) Any intellectual property owned by ITES necessary to permit the
development by Net of related wireless applications such as e-mail, messaging,
etc.; and
(iii) The tangible property owned by ITES associated with the
intellectual property transferred to Net.
(b) The delivery of, and acceptance by Sensar, of the Net Schedules
required by Section 5.22, including the audited financial statements of Net, as
required by Section 5.05;
(c) The written agreement by the holders of at least 67% of the Net
Stock outstanding subsequent to the Asset Acquisition to approve the execution
and delivery of this Agreement by Net and to vote in favor of the acquisition of
Net as a wholly-owned subsidiary of Sensar if a Reorganization Notice (as
defined in Section 2.04) is given; and
(d) Net shall enter into an agreement with Partner Communications Ltd.
("Partner"), in form and substance acceptable to Sensar, that provides for the
installation and testing of Net's wireless multi-media streaming platform with
Partner's existing wireless network; and
(e) The execution and delivery of a security agreement in form and
substance acceptable to Sensar granting the security interest set forth in
Section 2.03.
Section 2.02 Note. The obligation of Net with respect to the Funding
and any subsequent amounts advanced to Net by Sensar shall be evidenced by a
promissory note, in a form satisfactory to Sensar. All such amounts shall bear
interest at eight percent (8%) per annum, from the date advanced until paid.
The principal and all accrued but unpaid interest shall be due in full on or
before September 30, 2000.
Section 2.03 Security. The obligations of Net to Sensar shall be
secured by a perfected security interest in all of the assets of Net, including
the shares of its operating subsidiaries.
Section 2.04 Reorganization.
(a) At any time after the commencement by Net of the pilot program
under the agreement with Partner until 30 days following the receipt of written
notice from Net that Net has completed its pilot program under the terms of the
agreement with Partner (the "Completion Date"), but in no event later than
December 31, 0000, Xxxxxx may, by prior written notice (the "Reorganization
Notice") to Net, elect to acquire 100% of the equity interest of Net under the
terms set forth in Section 2.05.
(b) Within 30 days following the Completion Date and prior to
December 31, 2000, Net may deliver a Reorganization Notice to Sensar.
(c) On delivery of such Reorganization Notice, whether by Sensar
or Net, the parties shall be bound to proceed with the reorganization as set
forth below.
Section 2.05 Terms of the Reorganization. If a Reorganization Notice
is delivered, the acquisition of Net shall be accomplished either as an
acquisition of Net as a wholly-owned subsidiary of Sensar or through a merger of
Net with and into Sensar, in accordance with the representations, covenants, and
conditions set forth in this Agreement. All of the issued and outstanding
shares, and rights to acquire shares, of Net shall be cancelled as of the
effective time of the merger and Sensar shall issue an aggregate of 8,000,000
shares of Sensar common stock to the former holders of Net Stock, including the
holders, other than Sensar, of any rights to acquire Net Stock, pro rata, as
each holder's rights may be determined by the board of directors of Net;
provided that in addition to such 8,000,000 shares, options or a plan to issue
options existing as of the Closing to acquire Net Stock will be assumed as
options to acquire a maximum of 5,500,000 shares of Sensar Common Stock. If the
amount received by Sensar with respect to the short term notes receivable
reflected on the financial statements of Sensar as of September 30, 1999 on or
before the date that is 60 days subsequent to the due date of such receivables,
when added to the net cash held by Sensar at the Closing is less than $4.5
million, the number of shares of Sensar stock to be delivered to the former
holders of Net stock shall be increased, in the aggregate, by the number of
shares calculated in accordance with the following formula: [$4.45 million -
(net cash + amount received with respect to the short-term receivables on or
before sixty days subsequent to the due date)] by 4 = number of shares. For
purposes of this calculation "net cash" shall mean the cash held by Sensar as of
the Closing plus the amount due from Net for amounts advanced by Sensar under
the Funding (including accrued interest) less the liabilities of Sensar as of
the Closing, excluding any liability for which Sensar is indemnified by Xxxxxx
X. Xxxxx under the provisions of Section 4.08 and to the extent then included,
any deferred gain reflected as a liability on the balance sheet of Sensar.
Section 2.06 Closing of Acquisition. The closing ("Closing") of the
acquisition contemplated by this Agreement shall be on a date and at such time
as the parties may agree ("Closing Date") within the 10-day period subsequent to
the approval of the acquisition by the stockholders of Sensar and Net.
Section 2.07 Closing Events. At the Closing:
(a) The shareholders of Net shall deliver the original
certificates representing all of the issued and outstanding stock and rights to
acquire stock of Net, duly executed, with appropriate signature guarantees, for
cancellation by Net. Sensar shall deliver the original of the certificates
representing 8,000,000 shares of Sensar Common Stock (subject to the adjustments
provided for in this Agreement), registered in the names and denominations set
forth on Schedule 2.10.
(b) The current directors of Sensar shall resign and Xxxxxx
Xxxxxxxxxx and four nominees of Net shall be appointed to the board of directors
of Sensar. All current officers of Sensar shall resign and the new board of
directors shall appoint the officers of Sensar and Net.
(c) Each of the respective parties hereto shall execute,
acknowledge, and deliver (or shall cause to be executed, acknowledged, and
delivered) any and all certificates, financial statements, schedules,
agreements, resolutions, r other instruments required by this Agreement to be
so delivered at or prior to the Closing together with such other items as may be
reasonably requested by the parties hereto and their respective legal counsel in
order to effectuate or evidence the transactions contemplated hereby; and
(d) In addition to the foregoing, each of the parties shall
execute and deliver such additional documents as may reasonably be required in
order to effectuate the acquisition herein contemplated in accordance with the
requirements of the Code and shall treat such acquisition for all tax purposes
consistently with the other parties' treatment thereof and in accordance with
the requirements as a reorganization under Code section 368(a).
ARTICLE III
PRE-CLOSING COVENANTS
Section 3.01 Affirmative and Negative Covenants of Net.
(a) Net hereby covenants and agrees that, during the term of this
Agreement and prior to the Closing, unless otherwise expressly contemplated by
this Agreement (including, without limitation, the Asset Acquisition) or
consented to in writing by Sensar, Net will:
(ii) operate its business in all material respects in the usual
and ordinary course, consistent with past practice;
(iii) use all reasonable efforts to preserve substantially intact
its business organization, maintain its material rights and franchises, retain
the services of its officers and employees and maintain its relationships with
its material customers and suppliers;
(iv) maintain and keep its material properties and assets in as
good repair and condition as at present, ordinary wear and tear excepted, and
maintain supplies and inventories in quantities consistent with its customary
business practice; and
(v) use all reasonable efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that currently
maintained.
(b) Except as expressly contemplated by this Agreement (including,
without limitation, the Asset Acquisition) or otherwise consented to in writing
by Sensar, during the term of this Agreement and prior to the Closing Date, Net
will not do any of the foregoing:
(i) declare or pay any dividend on, or make any other distribution in
respect of, outstanding shares of capital stock;
(ii) (A) redeem, purchase or otherwise acquire any shares of its
capital stock or any securities or obligations convertible into or exchangeable
for any shares of its capital stock, or any options, warrants or conversion or
other rights to acquire any shares of its capital stock or any such securities
or obligations (except in connection with the exercise of outstanding stock
options in accordance with their terms); (B) effect any reorganization or
recapitalization; or (C) split, combine or reclassify any of its capital stock
or issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for, shares of its capital stock;
(iii) (A) issue, deliver, award, grant or sell, or authorize or propose
the issuance, delivery, award, grant or sale (including the grant of any
security interests, liens, claims, pledges, limitations in voting rights,
charges or other encumbrances) of, any shares of any class of its capital stock
(including shares held in treasury), any securities convertible into or
exercisable or exchangeable for any such shares, or any rights, warrants or
options to acquire any such shares; (B) amend or otherwise modify the terms of
any such rights, warrants or options the effect of which shall be to make such
terms more favorable to the holders thereof; or (C) take any action to
accelerate the exercisability of stock options or other rights to acquire Net
Stock provided, however, that Net shall be permitted to issue stock options
which will be assumed as options to acquire 5,500,000 shares of Sensar Common
Stock following the Closing;
(iv) acquire or agree to acquire, by merging or consolidating with, by
purchasing any equity interest in or a portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets of any other person (other than pursuant to this Agreement or
for the purchase of assets from suppliers or vendors in the ordinary course of
business and consistent with past practice);
(v) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any assets material to Net or its business;
(vi) initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal relating to, or that may reasonably be
expected to lead to, any transaction that would be inconsistent with the
transactions contemplated by this Agreement, or enter into discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain such a competing transaction, or agree to or endorse any competing
transaction, or authorize or permit any of the officers, directors or employees
of Net or any investment banker, financial advisor, attorney, accountant or
other representative retained by Net to take any such action, and Net shall
promptly notify Sensar of all relevant terms of any such inquiries and proposals
received by Net or by any officer, director, investment banker, financial
advisor, attorney, accountant or other representative relating to any of such
matters and if such inquiry or proposal is in writing, Net shall promptly
deliver or cause to be delivered to Sensar a copy of such inquiry or proposal
provided that, notwithstanding any provision of this Agreement to the contrary,
if Net shall breach the provisions of this Section 3.01(b)(vi), Sensar shall
have the right to convert the $2 million note evidencing the Funding into Net
Stock representing 33% of the equity ownership of Net on a fully diluted basis;
(vii) release any third party from its obligations, or grant any
consent, under any existing standstill provision relating to a competing
transaction or otherwise under any confidentiality or other agreement, or fail
to fully enforce any such agreement;
(viii) adopt or propose to adopt any amendments to its certificate of
incorporation or bylaws, which would alter the terms of its capital stock or
would have an adverse impact on the consummation of the transactions
contemplated by this Agreement;
(ix) (A) change any of its methods of accounting employed in the
preparation of the financial statements described in Section 5.05 below , or (B)
make or rescind any express or deemed election relating to taxes, settle or
compromise any claim, action, suit, litigation, audit or controversy relating to
taxes (except where the amount of such settlement or controversy, individually
or in the aggregate, does not exceed $10,000);
(x) incur any obligations for borrowed money, incur any purchase money
indebtedness, or provide a guarantee, whether or not evidenced by a note, bond,
debenture or similar instrument, except in the ordinary course of business
consistent with past practice and in no event in excess of $100,000 in the
aggregate;
(xi) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other material
reorganization of Net;
(xii) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction of any such claims, liabilities or
obligations, (x) reflected on, or reserved against in, or contemplated by, the
financial statements (or the notes thereto) of Net, (y) incurred in the ordinary
course of business consistent with past practice or (z) which are legally
required to be paid, discharged or satisfied;
(xiii) knowingly take, or agree to commit to take, any action that
would make any representation or warranty of Net contained herein inaccurate in
any respect at, or as of any time prior to, the Closing;
(xiv) Net will not engage in any transaction with, or enter into any
agreement, arrangement, or understanding with, directly or indirectly, any of
Net affiliates, including, without limitation, any transactions, agreements,
arrangements or understanding with any affiliate or other person covered under
Item 404 of Regulation S-K promulgated under the Securities Act, other than
pursuant to such agreement, arrangements or understandings existing on the date
of this Agreement or as disclosed in writing to Sensar on the date hereof or
which are contemplated under this Agreement; provided that, Net provides Sensar
with all information concerning any such agreement, arrangement or understanding
that Sensar may reasonably request;
(xv) engage in any futures or options trading or be a party to any
price or currency swaps, xxxxxx, futures or derivative instruments; or
(xvi) agree in writing or otherwise to do any of the foregoing.
Section 3.02 Affirmative Covenants of Sensar. Sensar hereby covenants
and agrees that, during the term of this Agreement and prior to the Closing,
unless otherwise expressly contemplated by this Agreement or consented to in
writing by Net, Sensar will:
(a) timely file all SEC reports that may become due subsequent to the
date of this Agreement. Sensar will provide a draft of any such SEC report to
Net prior to its release in order to solicit Net's comments;
(b) take such steps as are necessary so that at the Closing Sensar has
no liabilities other than current liabilities not yet due, not to exceed $50,000
in the aggregate, and a minimum of an aggregate of $4.5 million in cash and note
receivables due no later than October 1, 2000 (with the maximum principal amount
of such notes not to exceed $3.5 million inclusive of the $2 million note (and
accrued and unpaid interest) evidencing the Funding);
(c) terminate all of its employment and consulting agreements, except
for such agreements as may be terminable at will on thirty (30) days or less
notice, without payment of penalty or any other amount other than the current
amount due for services;
(d) cause to be exercised all options, warrants, or other rights to
acquire stock or securities of Sensar identified in Schedule 3.02(d). When such
options are exercised on a cashless basis in connection with the Closing, the
average of the closing prices for Sensar Common Stock for the 20 trading days
with reported trading volume of at least 50,000 shares preceding the Closing
shall be used to calculate the number of shares to be issued;
(e) use its best efforts to maintain the listing of its common stock on
the NASDAQ Small Cap Market;
(f) maintain and keep its material properties and assets in as good
repair and condition as at present, ordinary wear and tear excepted, and
maintain supplies and inventories in quantities consistent with its customary
business practice; and
(g) use all reasonable efforts to keep in full force and effect
insurance and bonds comparable in amount and scope of coverage to that currently
maintained.
In the course of accomplishing the foregoing, Sensar may make cash
payments, distribute assets, enter into transactions, and issue Sensar Common
Stock so long as it has a minimum of $4.5 million in cash and notes payable no
later than October 1, 2000 (with the maximum principal amount of such notes not
to exceed $3.5 million inclusive of the $2 million note (and accrued and unpaid
interest therein) evidencing the Funding) as of the Closing Date and does not
have in excess of 3,150,000 (plus any additional shares issued subsequent to the
date of this Agreement pursuant to the exercise of the options or warrants
identified in schedule 7.03) shares of Sensar Common Stock issued and
outstanding as of the Closing Date.
Section 3.03 Negative Covenants of Sensar. Except as expressly
contemplated by this Agreement or otherwise consented to in writing by Net (and
in addition to the covenant set forth in the preceding paragraph), during the
term of this Agreement and prior to the Closing Date, Sensar will not do any of
the following:
(a) declare or pay any dividend on, or make any other distribution
in respect of, outstanding shares of capital stock;
(b) redeem, purchase or otherwise acquire any shares of its
capital stock or any securities or obligations convertible into or exchangeable
for any shares of its capital stock, or any options, warrants or conversion or
other rights to acquire any shares of its capital stock or any such securities
or obligations (except in connection with the exercise of outstanding stock
options in accordance with their terms); (2) effect any reorganization or
recapitalization; or (3) split, combine or reclassify any of its capital stock
or issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for, shares of its capital stock;
(c) except for the rights identified in schedule 7.03, (1) issue,
deliver, award, grant or sell, or authorize or propose the issuance, delivery,
award, grant or sale (including the grant of any security interests, liens,
claims, pledges, limitations in voting rights, charges or other encumbrances)
of, any shares of any class of its capital stock (including shares held in
treasury), any securities convertible into or exercisable or exchangeable for
any such shares, or any rights, warrants or options to acquire any such shares;
(2) amend or otherwise modify the terms of any such rights, warrants or options
the effect of which shall be to make such terms more favorable to the holders
thereof; or (3) take any action to accelerate the exercisability of stock
options or other rights to acquire Sensar Common Stock;
(d) acquire or agree to acquire, by merging or consolidating with,
by purchasing any equity interest in or a portion of the assets of, or by any
other manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets of any other person (other than pursuant to this Agreement or
for the purchase of assets from suppliers or vendors in the ordinary course of
business and consistent with past practice);
(e) sell, lease, exchange, mortgage, pledge, transfer or otherwise
dispose of, or agree to sell, lease, exchange, mortgage, pledge, transfer or
otherwise dispose of, any assets material to Sensar or its business;
(f) initiate, solicit or encourage (including by way of furnishing
information or assistance), or take any other action to facilitate, any
inquiries or the making of any proposal relating to, or that may reasonably be
expected to lead to, any transaction that would be inconsistent with the
transactions contemplated by this Agreement, or enter into discussions or
negotiate with any person or entity in furtherance of such inquiries or to
obtain such a competing transaction, or agree to or endorse any competing
transaction, or authorize or permit any of the officers, directors or employees
of Sensar or any investment banker, financial advisor, attorney, accountant or
other representative retained by Sensar to take any such action, and Sensar
shall promptly notify Net of all relevant terms of any such inquiries and
proposals received by Sensar or by any officer, director, investment banker,
financial advisor, attorney, accountant or other representative relating to any
of such matters and if such inquiry or proposal is in writing, Sensar shall
promptly deliver or cause to be delivered to Net a copy of such inquiry or
proposal;
(g) release any third party from its obligations, or grant any
consent, under any existing standstill provision relating to a competing
transaction or otherwise under any confidentiality or other agreement, or fail
to fully enforce any such agreement;
(h) adopt or propose to adopt any amendments to its certificate of
incorporation or bylaws, which would alter the terms of its capital stock or
would have an adverse impact on the consummation of the transactions
contemplated by this Agreement;
(i) change any of its methods of accounting in effect at December
31, 1998, or (2) make or rescind any express or deemed election relating to
taxes, settle or compromise any claim, action, suit, litigation, audit or
controversy relating to taxes (except where the amount of such settlement or
controversy, individually or in the aggregate, does not exceed $10,000), or
change any of its methods of reporting income or deductions for income tax
purposes from those employed in the preparation of the federal income tax
returns for the taxable year ended December 31, 1998, except in each case, as
may be required by law or GAAP;
(j) incur any obligations for borrowed money, incur any purchase
money indebtedness, or provide a guarantee, whether or not evidenced by a note,
bond, debenture or similar instrument;
(k) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other material
reorganization of Sensar;
(l) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of any such
claims, liabilities or obligations, (x) reflected on, or reserved against in, or
contemplated by, the financial statements (or the notes thereto) of Sensar, (y)
incurred in the ordinary course of business consistent with past practice or (z)
which are legally required to be paid, discharged or satisfied;
(m) knowingly take, or agree to commit to take, any action that
would make any representation or warranty of Sensar contained herein inaccurate
in any respect at, or as of any time prior to, the Closing;
(n) Sensar will not engage in any transaction with, or enter into
any agreement, arrangement, or understanding with, directly or indirectly, any
of Sensar affiliates, including, without limitation, any transactions,
agreements, arrangements or understanding with any affiliate or other person
covered under Item 404 of Regulation S-K promulgated under the Securities Act,
other than pursuant to such agreement, arrangements or understandings existing
on the date of this Agreement or as disclosed in writing to Net on the date
hereof or which are contemplated under this Agreement; provided that, Sensar
provides Net with all information concerning any such agreement, arrangement or
understanding that Net may reasonably request;
(o) engage in any futures or options trading or be a party to any
price or currency swaps, xxxxxx, futures or derivative instruments; or
(p) agree in writing or otherwise to do any of the foregoing.
Section 3.04 Interim Reports. During the term of this Agreement, each
party shall provide the other with monthly reports. Such reports shall be
delivered by the 15th of the month following the month reported commencing the
month following the Funding and shall contain a copy of the internal financial
statements of such party, certified by the chief financial officer of such party
as true and correct and a fair representation of the financial condition and
results of operation for such party as of and for the periods presented; with
respect to Net, a summary of the development of the technology and future steps
required or intended to be taken by Net with respect to the technology; a
summary and, if requested by the other party, a copy of any material agreement
entered into or proposed to be entered into by the other party; and with respect
to Net, a summary of the current status, and prospective business plan, of Net.
Section 3.05 Access and Information.
(a) Sensar shall, and shall cause its subsidiaries to, afford Net
and its officers, directors, employees, accountants, consultants, legal counsel,
agents and other representatives (collectively, the "Net Representatives")
reasonable access at reasonable times, upon reasonable prior notice, to the
officers, employees, agents, properties, offices and other facilities of Sensar
and its subsidiaries and to the books and records thereof and furnish promptly
to Net and the Net Representatives such information concerning the business,
properties, contracts, records and personnel of Sensar and its subsidiaries
(including, without limitation, financial, operating and other data and
information) as may be reasonably requested, from time to time, by Net or such
Representatives.
(b) Net shall (i) afford to Sensar and its officers, directors,
employees, accountants, consultants, legal counsel, agents and other
representatives (collectively, the "Sensar Representatives") reasonable access
at reasonable times, upon reasonable prior notice, to the officers, employees,
accountants, agents, properties, offices and other facilities of Net and its
subsidiaries and to their respective books and records and (ii) furnish promptly
to Sensar and Sensar Representatives such information concerning the business,
properties, contracts, records and personnel of Net (including, without
limitation, financial, operating and other data and information) as may be
reasonably requested, from time to time, by Sensar or such Representatives.
(c) The information received pursuant to section 3.05(a) and (b)
shall be deemed to be "confidential information" and shall not be disclosed to
any other person or entity, except to the parties' representatives, and shall
not be used for any purpose other than the transactions contemplated by this
Agreement.
Section 3.06 Termination.
(a) This Agreement may be terminated at any time prior to the
Closing Date by the mutual consent of both Sensar and Net through action of
their respective boards of directors. This Agreement may be terminated by
either Sensar or Net in the event that (x) neither Sensar nor Net has delivered
to the other the Reorganization Notice on or before September 30, 2000 or (y)
the Closing shall not have occurred by December 31, 2000 as a result of the
failure of the other party to satisfy the conditions required to be met by such
other party prior to Closing. In the event of termination pursuant to this
subparagraph (a) of section 3.06, no obligation, right, remedy, or liability
shall arise hereunder, other than the obligations of Net to Sensar with respect
to any amounts advanced upon the Funding, and the parties shall bear their own
costs incurred in connection with the preparation and execution of this
Agreement, the preparation and review of financial statements required to be
delivered pursuant hereto, and the negotiation of the transactions contemplated
hereby.
(b) This Agreement may be terminated at any time prior to the
Closing Date by action of Sensar's board of directors if Net shall fail to
comply in any material respect with any of its covenants or agreements contained
in this Agreement, if any of the representations or warranties of Net contained
herein shall be inaccurate in any material respect at or subsequent to the
Funding, or if the stockholders of Net fail to approve the transactions
contemplated by this Agreement including the acquisition of Net. In the event
of termination pursuant to this subparagraph (b) of section 3.06, no obligation,
right, remedy, or liability shall arise hereunder, other than the obligations of
Net to Sensar with respect to amounts advanced upon the Funding, and the parties
shall bear their own costs incurred in connection with the preparation and
execution of this Agreement, the preparation and review of financial statements
required to be delivered pursuant hereto, and the negotiation of the
transactions contemplated hereby.
(c) This Agreement may be terminated at any time prior to the
Closing Date by action of Net's board of directors if Sensar shall fail to
comply in any material respect with any of its covenants or agreements contained
in this Agreement, if any of the representations or warranties of Sensar
contained herein shall be inaccurate in any material respect, or if the
stockholders of Sensar fail to approve this Agreement. In the event of
termination pursuant to this subparagraph (c) of section 3.06, no obligation,
right, remedy, or liability shall arise hereunder, other than the obligations of
Net to Sensar with respect to any amounts advanced upon the Funding, and the
parties shall bear their own costs incurred in connection with the preparation
and execution of this Agreement, the preparation and review of financial
statements required to be delivered pursuant hereto, and the negotiation of the
transactions contemplated hereby.
Section 3.07 Post-Closing Covenants of Sensar and Net. Subsequent to
the Closing of the transactions contemplated by this Agreement, neither Sensar
nor Net shall undertake (or fail to undertake) any action that would result in
the merger failing to qualify as a reorganization within the meaning of section
368(a) of the Code. Sensar and Net shall execute and deliver any and all
documents, instruments, and agreements necessary to effectuate the purposes of
this Agreement. All of the provisions of this section 3.07 shall survive the
Closing and the consummation of the transactions contemplated herein.
ARTICLE IV
ADDITIONAL AGREEMENTS
Section 4.01 Meeting of Sensar Shareholders. Sensar shall, promptly
after the effectiveness of the Proxy Statement/Prospectus provided for in
section 4.03, take all actions necessary in accordance with Nevada Law and its
articles of incorporation and bylaws to convene a meeting of Sensar's
stockholders (the "Sensar Stockholders Meeting") to approve
(a) the acquisition of Net; and
(b) to the extent subject to shareholder approval, the options
granted to current officers, directors, consultants, and advisors of Sensar, all
as disclosed in Schedule 7.03;
and Sensar shall consult with Net in connection therewith. The Board of
Directors of Sensar shall recommend that its stockholders vote in favor of the
foregoing proposals and shall cause such recommendation to be included in the
Proxy Statement/Prospectus (as defined in Section 4.03 below).
Section 4.02 Meeting of Net Shareholders. Net shall, promptly after
the effectiveness of the Proxy Statement/Prospectus provided for in section
4.03, take all actions necessary in accordance with Delaware law and its
articles of incorporation and bylaws to convene a special meeting of Net's
shareholders to approve the acquisition of Net (the "Net Shareholders Meeting"),
and Net shall consult with Sensar in connection therewith. The Net Shareholders
agree to vote all of the shares of Net Stock held by them at the time of the
record date for the Net Shareholders Meeting in favor of the acquisition of Net.
Net shall recommend approval of the acquisition to its shareholders and use its
best efforts to solicit from the other shareholders of Net proxies to approve
and adopt the acquisition.
Section 4.03 S-4 Registration Statement.
(a) As promptly as practicable after delivery of the Acquisition
Notice, Net and Sensar shall prepare and file with the SEC a Form S-4, including
a proxy statement for use in connection with obtaining the approval of the
transactions contemplated by this Agreement by the stockholders of Sensar and
Net and a prospectus for the issuance by Sensar of the Common Stock to the Net
Shareholders (the "Proxy Statement/Prospectus"). Each of Net, Sensar and the
Net Shareholders shall use their best efforts to cause the Form S-4 to be
declared effective by the SEC as promptly as practicable, and shall take any
action required to be taken under any applicable federal or state securities
laws in connection with the issuance of shares of the Sensar Common Stock. Each
of Sensar, Net, and the Net Shareholders shall furnish all information
concerning them as may reasonably be necessary or advisable in connection with
such actions. In addition, Net shall provide disclosure concerning tax
consequences to the stockholders of Net under the tax laws of the State of
Israel, if any. As promptly as practicable after the Form S-4 shall have been
declared effective by the SEC, Sensar shall mail the Proxy Statement/Prospectus
to its stockholders entitled to notice of and to vote at the Sensar Stockholders
Meeting and Net shall mail the Proxy Statement/Prospectus to its shareholders
entitled to vote at the Net Stockholders Meeting. The Proxy
Statement/Prospectus shall include the recommendation of Sensar's and Net's
Board of Directors in favor of the adoption of this Agreement.
(b) The information supplied by Sensar for inclusion in the Form
S-4 shall not, at the time the Proxy Statement/Prospectus is mailed to the
stockholders of Sensar, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein not misleading. If at any time prior to the
Closing Date any event or circumstance relating to Sensar or any of its
affiliates, or its or their respective officers or directors, is discovered by
Sensar that should be set forth in a supplement to the Proxy
Statement/Prospectus, Sensar shall promptly inform Net thereof in writing.
Sensar will indemnify and hold harmless Net, each of its officers, directors,
shareholders and each person who controls Net within the meaning of Section 15
of the Securities Act from and against any and all losses, claims, damages,
expenses, liabilities, or actions to which it may become subject under
applicable law (including the Securities Act and the Exchange Act) and will
reimburse it for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any claims or actions, whether or not
resulting in liability, insofar as such losses, claims, damages, expenses,
liabilities, or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact or the omission of a material fact
required to be stated therein, or necessary in order to make the statements
therein not misleading except insofar as any statement or omission was made in
reliance upon and in conformity with information furnished in writing by Net
expressly for use therein.
(c) The information supplied by Net for inclusion in the Form S-4
shall not, at the time the Proxy Statement/Prospectus is mailed to the
stockholders of Sensar and the Net Shareholders, contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. If at any
time prior to the Closing Date any event or circumstance relating to Net or any
of its affiliates, or to their respective officers or directors, is discovered
by Net that should be set forth in a supplement to the Proxy
Statement/Prospectus, Net shall promptly inform Sensar thereof in writing. Net
will indemnify and hold harmless Sensar, each of its officers, directors and
each person who controls Sensar within Section 15 of the Securities Act from and
against any and all losses, claims, damages, expenses, liabilities, or actions
to which it may become subject under applicable law (including the Securities
Act and the Exchange Act) and will reimburse it for any legal or other expenses
reasonably incurred by it in connection with investigating or defending any
claims or actions, whether or not resulting in liability, insofar as such
losses, claims, damages, expenses, liabilities, or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
or the omission of a material fact required to be stated therein, or necessary
in order to make the statements therein not misleading, but only insofar as any
statement or omission was made in reliance upon and in conformity with
information furnished in writing by Net expressly for use therein.
Section 4.04 S-3 Registration Statement.
(a) Either prior to or concurrently with the filing of the Proxy
Statement/Prospectus Sensar shall file a registration statement on Form S-3
registering the resale of the stock of the individuals and entities set forth on
Schedule 4.04 not currently covered by a registration statement (the "Resale
Registration"); provided that such individuals and entities shall each execute
an agreement satisfactory to Sensar pursuant to which they shall agree not to
publicly sell or dispose of 50% of the registered shares until the expiration of
180 days following the effective date of the registration statement. Such
Resale Registration shall be kept effective by Sensar until all of the shares of
Sensar Common Stock covered thereby have been sold or can otherwise be sold free
of any restriction or limitation. The obligations of this section 4.04 shall be
for the benefit of the selling shareholders identified on schedule 4.04 and
shall survive the consummation of the transactions contemplated by this
Agreement.
(b) The information supplied by Sensar for inclusion in the Form
S-3 shall not, at the time the Resale Registration is filed, becomes effective,
or thereafter, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein not misleading. If at any time while the Resale
Registration is effective, any event or circumstance relating to Sensar or any
of its affiliates is discovered by Sensar that should be set forth in an
amendment to the Resale Registration, Sensar shall promptly prepare and file
such amendment. Sensar will indemnify and hold harmless each person or entity
selling shares pursuant to the Resale Registration, and each of their respective
officers, directors, shareholders and each person who controls such selling
shareholders within the meaning of Section 15 of the Securities Act from and
against any and all losses, claims, damages, expenses, liabilities, or actions
to which it may become subject under applicable law (including the Securities
Act and the Exchange Act) and will reimburse it for any legal or other expenses
reasonably incurred by it in connection with investigating or defending any
claims or actions, whether or not resulting in liability, insofar as such
losses, claims, damages, expenses, liabilities, or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
or the omission of a material fact required to be stated therein, or necessary
in order to make the statements therein not misleading, except insofar as any
statement or omission was made in reliance upon and in conformity with
information furnished in writing by such selling shareholder expressly for use
therein.
(c) The information supplied by Net for inclusion in the Form S-3
shall not, at the time the Resale Registration is filed, becomes effective, or
thereafter, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading. If at any time while the Resale Registration
is effective, any event or circumstance relating to Net or any of its affiliates
is discovered by Net that should be set forth in a supplement to the Resale
Registration, Net shall promptly inform Sensar thereof in writing. Net will
indemnify and hold harmless Sensar and each of its officers, directors and each
person who controls Sensar within the meaning of Section 15 of the Securities
Act from and against any and all losses, claims, damages, expenses, liabilities,
or actions to which it may become subject under applicable law (including the
Securities Act and the Exchange Act) and will reimburse it for any legal or
other expenses reasonably incurred by it in connection with investigating or
defending any claims or actions, whether or not resulting in liability, insofar
as such losses, claims, damages, expenses, liabilities, or actions arise out of
or are based upon any untrue statement or alleged untrue statement of a material
fact or the omission of a material fact required to be stated therein, or
necessary in order to make the statements therein not misleading, but only
insofar as any statement or omission was made in reliance upon and in conformity
with information furnished in writing by Net expressly for use therein.
Section 4.05 Appropriate Action; Consents; Filings.
(a) Sensar and Net shall each use all reasonable efforts to (i)
take, or cause to be taken, all appropriate action, and do, or cause to be done,
all things necessary, proper or advisable under applicable law or otherwise to
consummate and make effective the transactions contemplated by this Agreement,
(ii) obtain from any governmental entities any consents, licenses, permits,
waivers, approvals, authorizations or orders required to be obtained or made by
Net or Sensar or any of its subsidiaries in connection with the authorization,
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, (iii) make all necessary filings, and
thereafter make any other required submissions, with respect to this Agreement
required under (A) the Securities Act and the Exchange Act and the rules and
regulations thereunder, and any other applicable federal or state securities
laws, and (B) any other applicable Law.
(b) Net and Sensar agree to cooperate with respect to, and agree
to use all reasonable efforts vigorously to contest and resist, any action,
including legislative, administrative or judicial action, and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction or other order
(whether temporary, preliminary or permanent) (an "Order") of any Governmental
Entity that is in effect and that restricts, prevents or prohibits the
consummation of the transactions contemplated by this Agreement, including,
without limitation, by vigorously pursuing all available avenues of
administrative and judicial appeal and all available legislative action. Each
of Net and Sensar also agree to take any and all actions, including, without
limitation, the disposition of assets or the withdrawal from doing business in
particular jurisdictions, required by regulatory authorities as a condition to
the granting of any approvals required in order to permit the consummation of
the Acquisition or as may be required to avoid, lift, vacate or reverse any
legislative or judicial action which would otherwise cause any condition to
Closing not to be satisfied.
(c) (i) Each of Sensar and Net shall give any notices to third
parties, and use all reasonable efforts to obtain any third party consents (A)
necessary, proper or advisable to consummate the transactions contemplated by
this Agreement, or (B) otherwise required under any contracts, licenses, leases
or other agreements in connection with the consummation of the transactions
contemplated hereby.
(iii) In the event that any party shall fail to obtain any third
party consent described in subsection (c)(i) above, such party shall use all
reasonable efforts, and shall take any such actions reasonably requested by the
other party, to limit the adverse effect upon Net and Sensar and their
respective businesses resulting, or which could reasonably be expected to result
after the Closing Date, from the failure to obtain such consent.
(d) Each of Net and Sensar shall promptly notify the other of (A)
any material change in its current or future business, assets, liabilities,
financial condition or results of operations, (B) any complaints, investigations
or hearings (or communications indicating that the same may be contemplated) of
any Governmental Entities with respect to its business or the transactions
contemplated hereby, (C) the institution or the threat of material litigation or
(D) any event or condition that might reasonably be expected to cause any of its
representations, warranties, covenants or agreements set forth herein not to be
true and correct at the Closing Date. As used in the preceding sentence,
"material litigation" means any case, arbitration or adversary proceeding or
other matter which would have been required to be disclosed on the Sensar
disclosure schedules, if in existence on the date hereof, or in respect of which
the legal fees and other costs might reasonably be expected to exceed $10,000
over the life of the matter.
Section 4.06 Public Announcements. The press release announcing the
execution and delivery of this Agreement shall be a joint press release of Net
and Sensar. In addition, Sensar shall be entitled to make such press releases
and file such information as it deems advisable to comply with its requirements
under United State securities laws. Sensar will provide a draft of any such
press release to Net prior to its release in order to solicit Net's comments.
Section 4.07 NASDAQ. Each party hereto shall use all reasonable
efforts to cause the shares of Sensar Common Stock to be issued to the
shareholders of Net to be approved for listing (subject to official notice of
issuance) on the NASDAQ Small Cap Market or another over-the-counter national
securities exchange prior to the Closing Date.
Section 4.08 Indemnification by Xxxxxx X. Xxxxx. Xxxxxx X. Xxxxx shall
agree to assume all obligations, including costs of defense, associated with the
litigation brought by former employees on the terms acceptable to Net.
ARTICLE V
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF NET
As an inducement to and to obtain the reliance of Sensar, Net represents
and warrants after giving effect to the Asset Acquisition and thereafter, and
except as set forth on the Net Schedules, as set forth below in this Article V.
As used in this Article V, the term "Net" shall include Net and the Subsidiaries
(as defined in Section 5.04) unless the context otherwise requires.
Section 5.01 Organization. Net is a corporation duly organized,
validly existing, and in good standing under the corporate laws of the state of
Delaware and each subsidiary of Net is duly organized, validly existing, and in
good standing under the laws of its jurisdiction of organization and each has
the corporate power to own all of its properties and assets and to carry on its
business in all material respects as it is now being conducted, and there is no
jurisdiction in which it is not so qualified in which the character and location
of the assets owned by it or the nature of the business transacted by it
requires qualification, except where failure to do so would not have a material
adverse effect on the business or properties of Net. Included in the Net
Schedules (as hereinafter defined) are complete and correct copies of the
certificate of incorporation and bylaws of Net and its subsidiaries as in effect
on the date hereof. The execution and delivery of this Agreement does not, and
the consummation of the transactions contemplated by this Agreement in
accordance with the terms hereof will not, violate any provision of Net's or its
subsidiaries certificate of incorporation or bylaws.
Section 5.02 Approval of Agreement. The board of directors of Net has
authorized the execution and delivery of this Agreement by Net and has approved
the consummation of the transactions contemplated hereby. Included in the Net
Schedules is a signed copy of a consent duly adopted by the board of directors
of Net evidencing such approval. Net has full power, authority, and legal
right, and has taken all action required by law, its certificate of
incorporation, its bylaws, or otherwise, to consummate the transactions
contemplated hereby.
Section 5.03 Capitalization. Net has authorized capital of 3,000
shares of common stock, par value $0.01 per share. All issued and outstanding
Net Stock is held by the individuals and entities set forth on Schedule 5.03 in
the amount set forth opposite their respective names. There are no options,
rights, convertible securities, calls, or commitments to which Net is a party or
to which it is subject requiring the issuance of any additional shares of Net
Stock. All issued and outstanding shares of Net are validly authorized, legally
issued, fully paid, and nonassessable and not issued in violation of the
preemptive or other right of any person.
Section 5.04 No Subsidiary or Predecessor. Net does not own,
beneficially or of record, any equity securities in any other entity other than
the subsidiaries listed on Schedule 5.04 (the "Subsidiaries"). Net owns all of
the outstanding capital stock of each of the Subsidiaries.
Section 5.05 Financial Information.
(a) Included in the Net Schedules are the audited consolidated
financial statements of Net and the Subsidiaries as of the closing of the Asset
Acquisition.
(b) Such financial information has been prepared in accordance
with GAAP, except as disclosed in the Net Schedules. Such financial statements
contain all of the periods and notes that would be required to be included in a
registration statement filed by Net by the provisions of Regulations S-X
promulgated under the Securities Act of 1933, as amended. Net did not have, as
of the date of the most recent balance sheet, except as and to the extent
reflected or reserved against therein, any liabilities or obligations (absolute
or contingent) which should be reflected in a balance sheet prepared in
accordance with GAAP. All assets reflected on the most recent balance sheet
present fairly the assets of Net, as of the date of such balance sheet.
(c) Net has filed all tax returns and reports as required by law.
All such returns and reports are accurate and correct in all material respects.
There are no income taxes currently due to any governmental agency that have not
been paid. Net does not have any liabilities with respect to the payment of any
tax (including any deficiencies, interest, or penalties) accrued for or
applicable to the period ended on the date of the most recent balance sheet
included in the Net Schedules and all such dates and years and periods prior
thereto and for which Net may be liable in its own right or as transferee of the
assets of, or as successor to, any other corporation or other entity, except for
taxes accrued but not yet due and payable. None of the tax returns of Net has
been audited or is currently being audited by any governmental agency. Net has
not made any tax election which would have a material adverse effect on Net, its
financial condition, its business as presently conducted or as proposed to be
conducted, or any of its properties or material assets. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any tax return of Net.
(d) The books and records, financial and otherwise, of Net are in
all material respects complete and correct and have been made and maintained in
accordance with sound business and bookkeeping practices and, in reasonable
detail, accurately and fairly reflect the transactions involving the assets of
Net. Net has maintained a system of internal accounting controls sufficient to
provide reasonable assurances that (i) transactions have been and are executed
in accordance with management's general or specific authorization; (ii)
transactions are recorded as necessary to permit the preparation of financial
statements in conformity with GAAP and any other criteria applicable to such
statements and to maintain accountability for assets; (iii) access to assets is
permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals, and appropriate action is taken
with respect to any differences.
(e) Except as set forth in the Net Schedules, the balance sheet
included in the Net Schedules, or in the notes thereto, Net (i) has good and
marketable title to its accounts receivable, and other debts due or recorded in
the records and books of account of Net, free of any security interests or liens
and free of any material defenses, counterclaims, and set-offs, and all of such
accounts receivable, invoices, and debts are actual and bona fide amounts due
Net for the total dollar amount thereof shown on the books of Net and resulted
from the regular course of its business; and (ii) the accounts receivable,
invoices, and debts set forth on the Net balance sheets arose in the ordinary
course of business and are, net of any reserves shown on the balance sheet,
collectible in full in all material respects on the continuation of reasonable
collection efforts by Net or successor personnel and without resorting to
litigation and in any event not later than ninety (90) days after the date
billed.
Section 5.06 Information. The information concerning Net set forth in
this Agreement and in the Net Schedules is complete and accurate in all material
respects and does not contain any untrue statement of a material fact or omit to
state a material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading.
Section 5.07 Options or Warrants. Except as set forth on Schedule 5.07,
there are no existing options, warrants, calls, commitments, or other rights of
any character relating to authorized and unissued Net Stock or other securities
of Net or the Subsidiaries. Other than the convertible obligations incurred in
connection with the Asset Acquisition, all such rights shall be cancelled as of
the effective time of the acquisition in accordance with Section 2.06 above.
Section 5.08 Absence of Certain Changes or Events. Except as set forth
in this Agreement or in the Net Schedules, since the date of the balance sheet
included in the Net Schedules:
(a) There has not been (i) any material adverse change in the
business, operations, assets, or condition of Net, except for changes occurring
as a result of transactions in the normal course of business of Net, or (ii) any
damage, destruction, or loss to Net (whether or not covered by insurance)
materially and adversely affecting the business, operations, assets, or
condition of Net;
(b) Net has not (i) amended its certificate of incorporation and
bylaws; (ii) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever to stockholders
or purchased or redeemed, or agreed to purchase or redeem, any of its capital
stock; (iii) waived any rights of value which in the aggregate are extraordinary
or material considering the business of Net; (iv) made any material change in
its method of management, operation, or accounting; (v) entered into any other
material transactions, (vi) made any accrual or arrangement for or payment of
bonuses or special compensation of any kind or any severance or termination pay
to any present or former officer, employee, or shareholder; (vii) increased the
rate of compensation payable or to become payable by it to any of its officers
or directors or any of its employees whose monthly compensation exceeds $5,000;
or (viii) made any increase in any profit sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan, payment, or
arrangement made to, for, or with its officers, directors, or employees;
(c) Net has not (i) granted or agreed to grant any options,
warrants, or other rights to acquire its stocks, bonds, or other corporate
securities; (ii) borrowed or agreed to borrow any funds or incurred, or become
subject to, any material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business; (iii) paid any material
obligation or liability (absolute or contingent) other than current liabilities
reflected in or shown on the most recent balance sheet included in the Net
Schedules and current liabilities incurred since that date in the ordinary
course of business; (iv) sold or transferred, or agreed to sell or transfer, any
of its assets, properties, or rights (except assets, properties, or rights not
used or useful in its business which, in the aggregate have a value of less than
$10,000 or assets, properties, or rights disposed of in the ordinary course of
business); (v) made or permitted any amendment or termination of any contract,
agreement, or license to which it is a party if such amendment or termination is
material, considering the business of Net; or (vi) issued, delivered, or agreed
to issue or deliver any stock, bonds, or other corporate securities including
debentures (whether authorized and unissued or held as treasury stock); and
(d) Net has not become subject to any law or regulation which
materially and adversely affects, or may in the future materially and adversely
affect, the business, operations, properties, assets, or condition of Net.
Section 5.09 Title to Personal and Real Property.
(a) Except as disclosed in the balance sheet included in the Net
Schedules, Net has good and marketable title to all its properties, inventory,
know-how, interests in properties, and assets, which are reflected in the most
recent balance sheet included in the Net Schedules, or are used in Net's
business, or acquired after that date (except those sold or otherwise disposed
of since such date in the ordinary course of business), free and clear of all
material mortgages, security interests, royalties, liens, pledges, charges, or
encumbrances, except (i) statutory liens or claims for amounts not yet
delinquent; and (ii) such imperfections of title and easements as do not and
will not materially detract from or interfere with the present or proposed use
of the properties subject thereto or affected thereby or otherwise materially
impair present business operations on such properties. All personal property
held by Net is in a state of good maintenance and repair, excepting only
reasonable wear and tear, and is adequate and suitable for the purposes for
which it is presently being used.
(b) Net does not own any real property in fee simple.
(c) Included in the Net Schedules is an accurate and complete list
of all personal property owned by Net or used in its business and having a
purchase price of over $10,000, together with a description of any mortgages,
financing instruments, or other encumbrances to the title to such properties.
Also included in the Net Schedules are copies of all leases for real and
personal property to which Net is a party. Except as disclosed in the Net
Schedules, each such lease is in full force and effect; all rents and additional
fees due to date on each such lease have been paid; in each case, the lessee has
been in peaceable possession since the commencement of the original term of such
lease and is not in default thereunder and no waiver, indulgence, or
postponement of the lessee's obligation thereunder has been granted by the
lessor; and there exists no event of default or event, occurrence, condition, or
act, which, with the giving of notice, the lapse of time, or the happening of
any further event or condition, would become a default under such lease, the
occurrence of which would have a material adverse affect on Net. Net has not
violated any of the terms or conditions under any such lease in any material
respect, and all of the material covenants to be performed by any other party
under any such lease have been fully performed. The property leased by Net is
in a state of good maintenance and repair, except reasonable wear and tear, and
is adequate and suitable for the purposes for which it is presently being used.
Section 5.10 Intellectual Property. Net owns the entire right, title,
and interest to all trade secrets, technology, know-how, tradenames, trademarks,
servicemarks, and other proprietary information owned by, used, or licensed in
connection with the business of, Net, including all copyrights, patents, patent
applications, registrations, and applications with respect thereto, all of which
is described in Section 2.01(a) (collectively the "Intellectual Property").
Such Intellectual Property is not subject to the payment of royalties or any
other obligation to any other person or entity. No employee or former employee
of Net owns, directly or indirectly, any right, title, or interest in or to the
Intellectual Property. Hemi Davidson hereby waives, assigns, and transfers to
Net any and all rights or claims he may have to the Intellectual Property. None
of the Intellectual Property is subject to any material order, decree, judgment,
stipulation, settlement, encumbrance, or attachment. Except as set forth in the
Net Schedules, there are no pending or threatened proceedings, litigation, or
other adverse claims to the Intellectual Property of which Net is aware. To
Net's knowledge, the Intellectual Property does not infringe on the copyright,
patent, trade secret, know-how, or other proprietary right of any other person
or entity and comprises all such rights necessary to permit the operation of the
business of Net as now being conducted and as proposed to be conducted.
Section 5.11 Litigation and Proceedings. Except as set forth in the
Net Schedules, there are no actions, suits, or proceedings pending or, to the
knowledge of Net or its officers and directors, threatened in writing by or
against Net or affecting Net or its properties, at law or in equity, before any
court or other governmental agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind. Net is not in material default with respect
to any judgment, order, writ, injunction, decree, award, rule, or regulation of
any court, arbitrator, or governmental agency or instrumentality.
Section 5.12 Contracts.
(a) Included in the Net Schedules is a description of every
contract, agreement, distributorship, franchise, license, or other agreement,
arrangement, or commitment to which Net is a party or by which its assets or
properties are bound, which calls for the payment by Net of more than $2,000 a
month, or $24,000 in the aggregate;
(b) Except as described in this Agreement or in the Net Schedules,
Net is not a party to or bound by, and the properties of Net are not subject to,
any contract, agreement, other commitment or instrument or any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, or award
which materially and adversely affects, or in the future may (as far as Net can
now reasonably foresee) materially and adversely affect, the business
operations, properties, assets, or financial condition of Net; and
(c) Except as included or described in the Net Schedules or
reflected in the accompanying Net balance sheet, Net is not a party to any oral
or written (i) contract for the employment of any officer, director, or
employee, whose compensation is greater than $5,000 per month, which is not
terminable on thirty (30) days (or less) notice; (ii) profit sharing, bonus,
deferred compensation, stock option, severance pay, pension benefit or
retirement plan; (iii) agreement, contract, or indenture relating to the
borrowing of money in amounts greater than $10,000 in the aggregate; (iv)
guarantee of any obligation for the borrowing of money or otherwise, excluding
endorsements made for collection and other guarantees of obligations, which, in
the aggregate do not exceed $10,000; (v) consulting or other similar contract
with an unexpired term of more than one year or providing for payments in excess
of $10,000 in the aggregate; (vi) collective bargaining agreement; (vii)
agreement with any present or former officer or director of Net whose
compensation was or is greater than $5,000 per month; or (viii) other contract,
agreement, or other commitment, except normal ongoing monthly operating
expenses, involving payments by it in the future of more than $10,000 in the
aggregate per contract.
Section 5.13 Material Contract Defaults. Net is not in default in any
respect under the terms of any outstanding contract, agreement, lease, or other
commitment which is material to the business, operations, properties, assets, or
financial condition of Net, and there is no event of default or other event
which, with notice or lapse of time or both, would constitute a default in any
material respect under any such contract, agreement, lease, or other commitment
in respect of which Net has not taken adequate steps to prevent such a default
from occurring. Net's agreements with Partner remain in full force and effect,
Net is current and in full compliance with its obligations thereunder, and Net
has not received any notice from Partner that it intends to terminate such
agreements or requesting any material change or modification to such agreements.
Section 5.14 Insurance Claims. Except as set forth in the Net
Schedules, during the last three years Net has not received, or informed its
insurance carriers of, any claims for damages, whether or not covered by
insurance, for amounts greater than $10,000. Net is not currently aware of any
pending or unasserted claims.
Section 5.15 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust, or other material contract, agreement, or instrument to which Net is a
party or to which any of its properties or operations are subject, which would
have a material adverse affect on Net.
Section 5.16 Governmental Authorizations. Net has all licenses,
franchises, permits, and other governmental authorizations that are legally
required to enable it to conduct its business in all material respects as
conducted on the date hereof or as presently contemplated. Net required
approvals, if any, for the export of its technology, necessary to permit it to
conduct its business and provide its proposed services outside of the State of
Israel. No authorization, approval, consent, or order of, or registration,
declaration, or filing with, any court or other governmental body is required in
connection with the execution and delivery by Net of this Agreement and the
consummation by Net of the transactions contemplated hereby.
Section 5.17 Compliance With Laws and Regulations. Net has complied
with all applicable statutes and regulations of any federal, state, or other
governmental entity or agency thereof, except to the extent that noncompliance
would not materially and adversely affect the business, operations, properties,
assets, or financial condition of Net or except to the extent that noncompliance
would not result in the incurrence of any material liability for Net. Included
in the Net Schedules is a copy of each letter of inquiry, review, or
investigation or other writing from or to any governmental authority subsequent
to December 31, 1997, evidencing a violation or possible or alleged violation of
any of the foregoing.
Section 5.18 Insurance. Included in the Net Schedules is a complete
list of all business liability, casualty, automobile, extended coverage, and
other insurance policies which Net maintains respecting its products, services,
business, properties, and employees, showing for each type of coverage the
policy limits, principal exclusions, deductibles, insurer, and other relevant
information. Such policies are in full force and effect and are free from any
right of termination by the insurance carriers. All of the insurable properties
of Net are insured for its benefit in the amount of their full replacement value
(subject to reasonable deductibles) against losses due to fire and other
casualty, with extended coverage, and other risks customarily insured against by
persons operating similar properties in the localities where such properties are
located and under valid and enforceable policies issued by insurers of
recognized responsibility.
Section 5.19 Transactions With Affiliates. Set forth in the Net
Schedules is a list of every contract, agreement, or arrangement between Net and
any person who is or has ever been during the previous three years an officer or
director of Net or person owning of record, or known by Net to own beneficially,
5% or more of the issued and outstanding common stock of Net and which is to be
performed in whole or in part after the date hereof. In all of such
circumstances, the contract, agreement, or arrangement was for a bona fide
business purpose of Net. Except as disclosed in the Net Schedules or otherwise
disclosed herein, no officer or director of Net or 5% shareholder of Net has, or
has had during the preceding three years, any interest, directly or indirectly,
in any material transaction with Net. The Net Schedules also include a
description of any commitment by Net, whether written or oral, to lend any funds
to, borrow any money from, or enter into any other material transaction with,
any such affiliated person.
Section 5.20 Labor Agreements and Actions. Net is not bound by or
subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment, or arrangement with
any labor union, and no labor union has requested or sought to represent any of
the employees, representatives, or agents of Net. There is no strike or other
labor dispute involving Net pending or threatened, which could have a material
adverse effect on the assets, properties, financial condition, operating
results, or business of Net or (as such business is presently conducted and as
it is proposed to be conducted), and Net is not aware of any labor organization
activity involving its employees. Net is not aware that any officer or key
employee, or that any group of key employees, intends to terminate their
employment with Net, nor does Net have a present intention to terminate the
employment of any of the foregoing. Except as set forth in the Net Schedules,
the employment of each officer and employee of Net is terminable at the will of
Net.
Section 5.21 Pension Obligations. Net does not have any unfunded
pension liability to any person or entity in connection with any retirement,
pension plan, or similar arrangement.
Section 5.22 Net Schedules. Prior to the Funding, Net shall deliver to
Sensar the following schedules, which are collectively referred to as the "Net
Schedules." On delivery, Sensar shall have five days to review the Net
Schedules. If Sensar does not object to the Net Schedules within such period,
they shall be deemed accepted by Sensar. The Net Schedules shall be updated as
of Closing and shall be certified by the chief executive officer of Net as
complete, true, and accurate:
(a) A schedule including copies of the certificate of
incorporation and bylaws of Net in effect as of the date of this Agreement as
referred to in section 5.01;
(b) A schedule containing copies of resolutions adopted by the
board of directors of Net approving this Agreement and the transactions herein
contemplated as referred to in section 5.02;
(c) A schedule listing the shares of Net Stock held by each of the
Net Shareholders;
(d) A schedule including the financial information required by
section 5.05;
(e) A schedule including copies of all income tax returns filed
for Net, as identified in section 5.05;
(f) A schedule listing the accounts receivable and notes and other
obligations receivable of Net as of the date of the balance sheet included in
the Net Schedules or that arose thereafter other than in their ordinary course
of business, indicating the debtor and amount, classifying the accounts to show
in reasonable detail the length of time, if any, overdue, and stating the nature
and amount of any refunds, setoffs, reimbursements, discounts, or other
adjustments, which in the aggregate are greater than $1,000, due to or claimed
by such debtors;
(g) A schedule listing the accounts payable and notes and other
obligations payable of Net as of the date of the balance sheet included in the
Net Schedules or that arose thereafter other than in the ordinary course of the
business of Net, indicating the creditor and amount, classifying the accounts to
show in reasonable detail the length of time, if any, overdue, and stating the
nature and amount of any refunds, setoffs, reimbursements, discounts, or other
adjustments, which in the aggregate are greater than $1,000, payable to Net from
any one such creditor;
(h) A schedule setting forth a description of any material adverse
change in the business, operations, property, inventory, assets, or financial
condition of Net since the balance sheet included in the Net Schedules, required
to be provided pursuant to section 5.08 hereof;
(i) Copies of all agreements or arrangements and all written
statements of practice followed with regard to the payment of compensation,
bonuses, deferred compensation, profit sharing, pension, vacation, retirement,
or other compensation benefits to officers, directors, or employees whose
monthly compensation exceeds $5,000 (and descriptions of any such agreements,
arrangements, or practices which are not in writing), together with a schedule
setting forth the name or identification of each officer, director, or employee
whose monthly compensation exceeds $5,000 and of each former officer or former
employee of Net who is currently being paid or who is entitled to, or may become
entitled to, compensation in amounts greater than $5,000 per month of any of
such compensation benefits and the rate or amounts thereof and showing the
nature of any family relationship of such person to each stockholder owning 5%
or more of the stock of Net;
(j) A schedule containing a description of all personal property
owned by Net or used in its business and having a purchase price of over
$10,000, including a description of every material mortgage, financing
instrument, or encumbrance to which such personal property of Net is subject
(except statutory liens or claims not yet delinquent and except liens, claims,
encumbrances, or equities which do not or in the future will not materially
detract from or interfere with the present or proposed use of the property
subject thereto or affected thereby);
(k) A schedule containing a description of each lease, rental
agreement, or similar instrument, including a description of each oral
arrangement;
(l) A schedule setting forth the litigation and proceedings
referred to in section 5.11;
(m) A schedule listing all material contracts, agreements,
franchises, license agreements, or other commitments to which Net is a party or
by which their properties are bound, as referred to in section 5.12, but
excluding those with affiliates which are described in section 5.19;
(n) A schedule of any insurance claims as referenced in section
5.14;
(o) Copies of all licenses, permits, and other governmental
authorizations (or requests or applications therefor) pursuant to which Net
carries on or proposes to carry on its business (except those which are
immaterial to the present or proposed business of Net), as referred to in
section 5.16;
(p) A schedule describing the matters regarding compliance with
laws and regulations as referred to in section 5.17;
(q) A schedule showing details of all insurance coverage as
referred to in section 5.18;
(r) A schedule containing a description of all material contracts,
leases, agreements, and other instruments between Net and any affiliates, as
referred to in section 5.19;
(s) A schedule showing the name and location of each bank or other
institution in which Net has an account or safe deposit box, and the names of
all persons authorized to draw thereon or to have access thereto;
(t) Copies of all powers of attorney given by Net now in effect or
to be in effect; and
(u) A schedule setting forth any other information, together with
any required copies of documents, required to be disclosed in the Net Schedules
by sections 5.01 through 5.21.
ARTICLE VI
Intentionally deleted
ARTICLE VII
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF SENSAR
As an inducement to, and to obtain the reliance of Net, Sensar represents
and warrants, except as set forth on the Sensar Schedules, as follows:
7.01 Organization. Sensar is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Nevada, and has
the corporate power to own all of its properties and assets and to carry on its
business in all material respects as it is now being conducted, and there is no
jurisdiction in which it is not so qualified in which either the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification, except where failure to do so would not have a
material adverse effect on the business or properties of Sensar. Included in
the Sensar Schedules (as hereinafter defined) are complete and correct copies of
the articles of incorporation and bylaws of Sensar in effect on the date hereof.
The execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated by this Agreement in accordance with the terms
hereof will not, violate any provision of the articles of incorporation or
bylaws of Sensar. Sensar has full power, authority, and legal right and has
taken all action required by law, its articles of incorporation, bylaws, and
otherwise to consummate the transactions herein contemplated. Effective as of
the Closing, Sensar shall have no subsidiaries.
Section 7.02 Approval of Agreements. The board of directors of Sensar
has authorized the execution and delivery of this Agreement by Sensar and has
approved the consummation of the transactions contemplated hereby. Included in
the Sensar Schedules are copies of resolutions duly adopted by the board of
directors of Sensar evidencing such approval. Prior to Closing, Sensar shall
obtain the approval of the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby by its stockholders.
Subject to such approval, Sensar has full power, authority, and legal right, and
has taken all action required by law, its articles of incorporation, its bylaws,
or otherwise, to execute this Agreement and consummate the transactions
contemplated hereby.
Section 7.03 Capitalization. The authorized capitalization of Sensar
consists of 10,000,000 shares of preferred stock, par value $0.001 per share, of
which no shares are issued and outstanding, and 290,000,000 shares of Sensar
Common Stock, par value $0.001 per share, of which 3,150,000 shares are issued
and outstanding. In addition, Sensar has shares of Sensar Common Stock reserved
for issuance on the exercise of outstanding and committed options and warrants
as set forth in Schedule 7.03. All issued and outstanding shares of Sensar
Common Stock are validly authorized, legally issued, fully paid, and
nonassessable and not issued in violation of the preemptive or other right of
any person. All shares of Sensar Common Stock to be issued pursuant to this
Agreement are validly authorized and will be, when issued, legally issued, fully
paid, and nonassessable and not issued in violation of the preemptive or other
right of any person.
Section 7.04 SEC Reports. Sensar has filed all reports required by the
provisions of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the Securities Act of 1933, as amended (the Securities Act"). In
addition, Sensar shall file a registration statement (the "Registration
Statement"), registering the issuance of the common stock of Sensar in exchange
for the Net Stock held by the Net Shareholders as contemplated by this
Agreement. None of the filings of Sensar contained, when filed, and the
Registration Statement will not contain, when it becomes effective, any untrue
statement of a material fact or omission of a material fact necessary to make
the statements made therein, in light of the circumstances under which they were
made, not misleading.
Section 7.05 Financial Statements.
(a) Included in the reports referred to in section 7.04 are the
audited consolidated balance sheets of Sensar as of December 31, 1998 and 1997,
and the related audited consolidated statements of operations and stockholders'
equity and changes in financial position for the periods then ended, together
with the notes to such statements and the opinion of Xxxxx Xxxxxxxx LLP,
certified public accountants, with respect to such financial statements. Also
included are the unaudited financial statements for the interim period ended
September 30, 1999. All such financial statements have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved and present fairly the financial position of
Sensar as of the dates and for the periods stated herein.
(b) Sensar has filed all tax returns and reports as required by
law. All such returns and reports are accurate and correct in all material
respects. There are no income taxes currently due to any governmental agency
that have not been paid. Sensar does not have any liabilities with respect to
the payment of any tax (including any deficiencies, interest, or penalties)
accrued for or applicable to the period ended on the date of the most recent
balance sheet included in the Sensar Schedules and all such dates and years and
periods prior thereto and for which Sensar may be liable in its own right or as
transferee of the assets of, or as successor to, any other corporation or other
entity, except for taxes accrued but not yet due and payable. None of the tax
returns of Sensar has been audited or is currently being audited by any
governmental agency. Sensar has not made any tax election which would have a
material adverse effect on Sensar, its financial condition, its business as
presently conducted or as proposed to be conducted, or any of its properties or
material assets. There are no outstanding agreements or waivers extending the
statutory period of limitation applicable to any tax return of Sensar.
(c) The books and records, financial and otherwise, of Sensar are
in all material respects complete and correct and have been made and maintained
in accordance with sound business and bookkeeping practices and, in reasonable
detail, accurately and fairly reflect the transactions involving the assets of
Sensar. Sensar has maintained a system of internal accounting controls
sufficient to provide reasonable assurances that (i) transactions have been and
are executed in accordance with management's general or specific authorization;
(ii) transactions are recorded as necessary to permit the preparation of
financial statements in conformity with GAAP and any other criteria applicable
to such statements and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals, and appropriate action is taken
with respect to any differences.
(d) Except as set forth in the Sensar Schedules, the balance sheet
included in the Sensar Schedules, or in the notes thereto, Sensar (i) has good
and marketable title to its accounts receivable, and other debts due or recorded
in the records and books of account of Sensar, free of any security interests or
liens and free of any material defenses, counterclaims, and set-offs, and all of
such accounts receivable, invoices, and debts are actual and bona fide amounts
due Sensar for the total dollar amount thereof shown on the books of Sensar and
resulted from the regular course of its business; and (ii) the accounts
receivable, invoices, and debts set forth on the Sensar balance sheets arose in
the ordinary course of business and are, net of any reserves shown on the
balance sheet, collectible in full in all material respects on the continuation
of reasonable collection efforts by Sensar or successor personnel and without
resorting to litigation and in any event not later than ninety (90) days after
the date billed.
Section 7.06 Information. The information concerning Sensar set forth
in this Agreement and in the Sensar Schedules is complete and accurate in all
material respects and does not contain any untrue statement of a material fact
or omit to state a material fact required to make the statements made, in light
of the circumstances under which they were made, not misleading.
Section 7.07 Options or Warrants. At the Closing Date there will be no
existing options, warrants, convertible securities, calls, commitments, or other
rights of any character relating to authorized and unissued Sensar Common Stock
or other securities of Sensar other than as set forth on schedule 7.03 (a
portion of which shall be exercised pursuant to Section 3.02(d)).
Section 7.08 Absence of Certain Changes or Events. Except as set forth
in this Agreement or in the Sensar Schedules, since the date of the most recent
balance sheet included in the Sensar Schedules:
(a) There has not been (i) any material adverse change in the
business, operations, assets, or condition of Sensar, (ii) any damage,
destruction, or loss to Sensar (whether or not covered by insurance) materially
and adversely affecting the business, operations, assets, or condition of
Sensar; or (iii) any claim or litigation brought against Sensar;
(b) Sensar has not (i) amended its certificate of incorporation
and bylaws; (ii) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any assets of any kind whatsoever to stockholders
or purchased or redeemed, or agreed to purchase or redeem, any of its capital
stock; (iii) waived any rights of value which in the aggregate are extraordinary
or material considering the business of Sensar; (iv) made any material change in
its method of management, operation, or accounting; (v) entered into any other
material transactions; (vi) made any accrual or arrangement for or payment of
bonuses or special compensation of any kind or any severance or termination pay
to any present or former officer, employee, or shareholder; (vii) increased the
rate of compensation payable or to become payable by it to any of its officers
or directors or any of its employees whose monthly compensation exceeds $5,000;
or (viii) made any increase in any profit sharing, bonus, deferred compensation,
insurance, pension, retirement, or other employee benefit plan, payment, or
arrangement made to, for, or with its officers, directors, or employees;
(c) Sensar has not (i) granted or agreed to grant any options,
warrants, or other rights to acquire its stocks, bonds, or other corporate
securities; (ii) borrowed or agreed to borrow any funds or incurred, or become
subject to, any material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business; (iii) paid any material
obligation or liability (absolute or contingent) other than current liabilities
reflected in or shown on the most recent balance sheet included in the Sensar
Schedules and current liabilities incurred since that date in the ordinary
course of business; (iv) sold or transferred, or agreed to sell or transfer, any
of its assets, properties, or rights (except assets, properties, or rights not
used or useful in its business which, in the aggregate have a value of less than
$10,000 or assets, properties, or rights disposed of in the ordinary course of
business); (v) made or permitted any amendment or termination of any contract,
agreement, or license to which it is a party if such amendment or termination is
material, considering the business of Sensar; or (vi) issued, delivered, or
agreed to issue or deliver any stock, bonds, or other corporate securities
including debentures (whether authorized and unissued or held as treasury
stock); and
(d) Sensar has not become subject to any law or regulation which
materially and adversely affects, or may in the future materially and adversely
affect, the business, operations, properties, assets, or condition of Sensar.
Section 7.09 Title to Personal and Real Property. Sensar does not own
any real property. The only lease to which Sensar is a party will be assumed by
a third party in connection with the Closing.
Section 7.10 No Conflict With Other Instruments. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust, or other material contract, agreement, or instrument to which Sensar is a
party or to which any of its properties or operations are subject which would
have a material adverse affect on Sensar.
Section 7.11 Litigation and Proceedings. Except as set forth in the
Sensar Schedules, there are no actions, suits, or proceedings pending or, to the
knowledge of Sensar or its officers and directors, threatened in writing by or
against Sensar or affecting Sensar or its properties, at law or in equity,
before any court or other governmental agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind. Sensar is not in material
default with respect to any judgment, order, writ, injunction, decree, award,
rule, or regulation of any court, arbitrator, or governmental agency or
instrumentality.
Section 7.12 Contracts.
(a) Included in the Sensar Schedules is a description of every
contract, agreement, distributorship, franchise, license, or other agreement,
arrangement, or commitment to which Sensar is a party or by which its assets or
properties are bound, which calls for the payment by Sensar of more than $2,000
a month, or $24,000 in the aggregate;
(b) Except as described in this Agreement or in the Sensar
Schedules, Sensar is not a party to or bound by, and the properties of Sensar
are not subject to, any contract, agreement, other commitment or instrument or
any charter or other corporate restriction or any judgment, order, writ,
injunction, decree, or award which materially and adversely affects, or in the
future may (as far as Sensar can now reasonably foresee) materially and
adversely affect, the business operations, properties, assets, or financial
condition of Sensar; and
(c) Except as included or described in the Sensar Schedules or
reflected in the accompanying Sensar balance sheet, Sensar is not a party to any
oral or written (i) contract for the employment of any officer, director, or
employee, whose compensation is greater than $5,000 per month, which is not
terminable on thirty (30) days (or less) notice; (ii) profit sharing, bonus,
deferred compensation, stock option, severance pay, pension benefit or
retirement plan; (iii) agreement, contract, or indenture relating to the
borrowing of money in amounts greater than $10,000 in the aggregate; (iv)
guarantee of any obligation for the borrowing of money or otherwise, excluding
endorsements made for collection and other guarantees of obligations, which, in
the aggregate do not exceed $10,000; (v) consulting or other similar contract
with an unexpired term of more than one year or providing for payments in excess
of $10,000 in the aggregate; (vi) collective bargaining agreement; (vii)
agreement with any present or former officer or director of Sensar whose
compensation was or is greater than $5,000 per month; or (viii) other contract,
agreement, or other commitment, except normal ongoing monthly operating
expenses, involving payments by it in the future of more than $10,000 in the
aggregate per contract.
Section 7.13 Material Contract Defaults. Sensar is not in default in
any respect under the terms of any outstanding contract, agreement, lease, or
other commitment which is material to the business, operations, properties,
assets, or financial condition of Sensar, and there is no event of default or
other event which, with notice or lapse of time or both, would constitute a
default in any material respect under any such contract, agreement, lease, or
other commitment in respect of which Sensar has not taken adequate steps to
prevent such a default from occurring.
Section 7.14 Intentionally deleted.
Section 7.15 Governmental Authorizations. Sensar has all licenses,
franchises, permits, and other governmental authorizations that are legally
required to enable it to conduct its business in all material respects as
conducted on the date hereof. Other than as required by state and Federal
securities laws, no authorization, approval, consent, or order of, or
registration, declaration, or filing with, any court or other governmental body
is required in connection with the execution and delivery by Sensar of this
Agreement and the consummation by Sensar of the transactions contemplated
hereby.
Section 7.16 Compliance With Laws and Regulations. Sensar has complied
with all applicable statutes and regulations of any federal, state, or other
governmental entity or agency thereof, except to the extent that noncompliance
would not materially and adversely affect the business, operations, properties,
assets, or financial condition of Sensar or except to the extent that
noncompliance would not result in the incurrence of any material liability for
Sensar. Included in the Sensar Schedules is a copy of each letter of inquiry,
review, or investigation or other writing from or to any governmental authority
subsequent to December 31, 1997, evidencing a violation or possible or alleged
violation of any of the foregoing.
Section 7.17 Transactions With Affiliates. Set forth in the Sensar
Schedules is a description of every contract, agreement, or arrangement between
Sensar and any person who is or has ever been during the previous three years an
officer or director of Sensar or person owning of record, or known by Sensar to
own beneficially, 5% or more of the issued and outstanding common stock of
Sensar and which is to be performed in whole or in part after the date hereof.
In all of such circumstances, the contract, agreement, or arrangement was for a
bona fide business purpose of Sensar. Except as disclosed in Sensar's periodic
reports filed with the SEC, the Sensar Schedules, or otherwise disclosed herein,
no officer or director of Sensar or 5% shareholder of Sensar has, or has had
during the preceding three years, any interest, directly or indirectly, in any
material transaction with Sensar. The Sensar Schedules also include a
description of any commitment by Sensar, whether written or oral, to lend any
funds to, borrow any money from, or enter into any other material transaction
with, any such affiliated person.
Section 7.18 Labor Agreements and Actions. Sensar has two employees,
Xxxxxxx X. Xxxxx, whose employment terminates December 31, 1999, and Xxxxxx X.
Xxxxx, whose employment will terminate at Closing.
Section 7.19 Pension Obligations. Sensar does not have any unfunded
pension liability to any person or entity in connection with any retirement,
pension plan, or similar arrangement.
Section 7.20 Sensar Schedules. Prior to the Funding, Sensar shall
deliver to Net the following schedules, which are collectively referred to as
the "Sensar Schedules." On delivery Net shall have five days to review the
Sensar Schedules. If Net does not object to the Sensar Schedules within such
period, they shall be deemed accepted by Net. The Sensar Schedules shall be
updated as of Closing, and shall be certified by the chief executive officer of
Sensar as complete, true, and accurate.
(a) A schedule including copies of the articles of incorporation
and bylaws of Sensar in effect as of the date of this Agreement, as referred to
in section 7.01;
(b) A schedule containing copies of resolutions adopted by the
board of directors of Sensar approving this Agreement and the transactions
herein contemplated as referred to in section 7.02;
(c) A schedule setting forth all warrants, options and other
rights to acquire Sensar Common Stock to which Sensar is a party or by which it
is bound as referred to in section 7.03;
(d) A schedule containing the annual report of Sensar on form 10-K
for the year ended December 31, 1998;
(e) A schedule containing the quarterly report of Sensar on form
10-Q for the quarter ended March 31, 1999;
(f) A schedule containing the report of Sensar on form 8-K dated
April 21, 1999;
(g) A schedule containing the quarterly report of Sensar on form
10-Q for the quarter ended June 30, 1999;
(h) A schedule containing the report of Sensar on form 8-K dated
August 4, 1999;
(i) A schedule containing the report of Sensar on form 8-K dated
August 19, 1999;
(j) A schedule containing the report of Sensar on form 10-Q for
the period ended September 30, 1999;
(k) A schedule containing the report of Sensar on form 8-K dated
October 7, 1999;
(l) A schedule containing the report of Sensar on form 8-K dated
October 12, 1999;
(m) A schedule setting forth a description of any material change
in the business, operations, assets, or condition of Sensar since September 30,
1999, required to be provided pursuant to section 7.08 hereof;
(n) A schedule setting forth a description of pending litigation
as required by section 7.12;
(o) A schedule of contracts as required by section 7.13;
(p) A schedule of transactions with affiliates; and
(q) A schedule setting forth any other information, together with
any required copies of documents, required to be disclosed in the Sensar
Schedules by sections 7.01 through 7.20.
ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF SENSAR
The obligations of Sensar under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 8.01 Accuracy of Representations and Satisfaction of Covenants.
The representations and warranties made by Net in this Agreement shall be true
as of the Closing, and Net shall have performed or complied with all material
covenants and conditions required by this Agreement to be performed or complied
with by Net prior to or at the Closing. Sensar shall be furnished with
certificates, signed by the chief executive officer of Net and dated the Closing
Date, to the foregoing effect.
Section 8.02 Net Disclosure Schedules. Sensar shall have received an
update all of the Net Disclosure Schedules and any material change to such
Schedules from the Schedules delivered in connection with the execution of this
Agreement shall be reasonably acceptable, in form and content, to Sensar.
Section 8.03 Stockholder Approval. The proposals submitted to the
stockholders at the Sensar Stockholders' Meeting shall have been approved.
Section 8.04 Net Shareholder Election. Holders of not more than 5% of
the Net Stock shall have exercised their dissenter's rights under Delaware
corporate law.
Section 8.05 Good Standing. Sensar shall have received a certification
that Net is in good standing, dated as of a date within ten (10) days prior to
the Closing Date.
Section 8.06 UCC Certificate. Sensar shall have received a Commercial
Code certificate as of a date within five (5) days of the Closing Date to the
effect that there are no encumbrances of record on the assets of Net, other than
those disclosed in the Net Schedules.
Section 8.07 Regulatory Action. Net shall have not received any notice
of a regulatory action pending or contemplated by any governmental agency
against Net or with respect to its intellectual property.
Section 8.08 Other Items. Sensar shall have received such further
documents, certificates, or instruments relating to the transactions
contemplated hereby as Sensar may reasonably request.
ARTICLE IX
CONDITIONS PRECEDENT TO OBLIGATIONS OF NET
The obligations of Net under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
Section 9.01 Accuracy of Representations and Satisfaction of Covenants.
The representations and warranties made by Sensar in this Agreement shall be
true as of the Closing, and Sensar shall have performed and complied with all
material covenants and conditions required by this Agreement to be performed or
complied with by Sensar prior to or at the Closing. Sensar shall have been
furnished with a certificate, signed by the duly authorized chief executive
officer of Sensar, and dated the Closing Date, to the foregoing effect.
Section 9.02 Sensar Commitments. Sensar shall have a minimum of an
aggregate of $4.5 million in cash and notes receivable due no later than October
1, 2000, with no liabilities except as permitted by this Agreement, and shall
have not more than 3,150,000 (plus any shares issued on the exercise of the
options and warrants identified on schedule 7.03 subsequent to the date of this
Agreement) shares of common stock outstanding prior to the Closing.
Section 9.03 Indemnification. Xxxxxx X. Xxxxx shall have indemnified
Sensar as set forth in section 4.08.
Section 9.04 Intentionally omitted.
Section 9.05 Good Standing. Net shall have received a certificate of
good standing from the Secretary of State of Nevada with respect to Sensar,
dated as of a date within ten (10) days prior to the date of this Agreement,
certifying that Sensar is in good standing as a corporation in the state of
Nevada.
Section 9.06 Options and Warrants. The options, warrants and other
rights to acquire stock or securities of Sensar identified in Schedule 3.02(d)
shall have been exercised.
Section 9.07 Financial Statements. Net shall have received the audited
consolidated financial statements of Sensar at, and for the year ended, December
31, 1999 prepared in accordance with GAAP and Regulation S-X. If the Closing
shall occur after March 31, 2000, Net shall have also received the consolidated
financial statements of Sensar at, and for the quarter ended, March 31, 2000,
which financial statements shall be unaudited but reviewed pursuant to SAS 71.
Section 9.08 Other Items. Net shall have received such further
documents, certificates, or instruments relating to the transactions
contemplated hereby as Net may reasonably request.
ARTICLE X
MISCELLANEOUS
Section 10.01 Survival of Representations and Warranties. Except as
otherwise provided, the representations, warranties, covenants, and agreements
of the parties shall not survive the Closing.
Section 10.02 Brokers. Sensar agrees that there were no finders or
brokers involved in bringing the parties together or who were instrumental in
the negotiation, execution, or consummation of this Agreement other than those
entitled to receive the 500,000 shares of common stock, all of whom are set
forth on Schedule 10.02 to be delivered by Sensar prior to the Closing. Sensar
and Net agree to indemnify the other against any claim by any third person for
any commission, brokerage, or finder's fee or other payment with respect to this
Agreement or the transactions contemplated hereby based on any alleged agreement
or understanding between such party and such third person, whether express or
implied, resulting from the actions of such party. The covenants set forth in
this section 10.02 shall survive the Closing and the consummation of the
transactions herein contemplated.
Section 10.03 Tax Treatment. No representation or warranty is being
made or legal opinion given by any party to any other regarding the treatment of
this transaction for federal or state income taxation. All parties intend for
the transaction to be treated as a "tax-free" reorganization under the
provisions of the Code and agree to take all corporate action necessary, to file
all tax returns and reports, and prepare financial statements consistent with
the treatment of the transaction as a reorganization under section 368(a) for
those shareholders resident in the United States. Shareholders not resident in
the United States or otherwise unable to qualify for "tax-free" treatment under
section 368(a) shall be solely responsible for any tax consequences to them
resulting from the consummation of the transactions contemplated hereby.
Although this transaction has been structured in an effort to qualify for
treatment under section 368(a) of the Code, there is no assurance that any part
of this transaction in fact meets the requirements for such qualification. Each
party has relied exclusively on its own legal, accounting, and other tax
advisers regarding the treatment of this transaction for federal and state
income taxes.
Section 10.04 Governing Law. This Agreement shall be governed by,
enforced, and construed under and in accordance with the laws of the United
States of America and, with respect to matters of state law, with the laws of
the state of Utah.
Section 10.05 Notices. Any notices or other communications required or
permitted hereunder shall be in writing and shall be deemed sufficiently given
if personally delivered, if sent by facsimile or telecopy transmission or other
electronic communication confirmed by registered or certified mail, postage
prepaid, or if sent by prepaid overnight courier addressed as follows:
If to Sensar, to: Sensar Corporation
Xxxxxx X. Xxxxx
00 Xxxx Xxxxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Fax: (000) 000-0000
Confirmation: (000) 000-0000
With copies to: Xxxxx X. Xxxx, Esq.
Xxxxx, Xxxxx & Xxxxxxx, L.L.C.
Eighth Floor, Bank Xxx Xxxxx
00 Xxxx Xxxxxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Fax: (000)000-0000
Confirmation: (000) 000-0000
If to Net: Hemi Davidson
Net2Wireless, Inc.
00 Xxx-Xxxxxx Xxxxxx
Xxxx Xxxx
Xxx Xxxx 00000
Israel
Fax: 000-0000-000-0000
Confirmation: 011-9867-570-6193
With copies to: Xxxxxxx X. Xxxxxx, Esq.
Fulbright & Xxxxxxxx L.L.P
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Confirmation: (000) 000-0000
and
Xxxxx Xxxxx
Attorney at Law
00 Xxxxxxxxxx Xxxx.
Xxx Xxxx 00000
XXXXXX
Fax: 000-000-0-000-0000
Confirmation: 011-972-3-566-0595
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered or sent by facsimile or
telecopy transmission or other electronic communication, or one day after the
date so sent by overnight courier.
Section 10.06 Attorneys' Fees. In the event that any party institutes
any action or suit to enforce this Agreement or to secure relief from any
default hereunder or breach hereof, the breaching party or parties shall
reimburse the nonbreaching party or parties for all costs, including reasonable
attorneys' fees, incurred in connection therewith and in enforcing or collecting
any judgment rendered therein.
Section 10.07 Costs. Each of the parties shall bear its respective
costs associated with this Agreement and the transactions contemplated hereby,
including legal fees, accounting fees, and other costs and expenses.
Section 10.08 Schedules; Knowledge. Whenever in any section of this
Agreement reference is made to information set forth in the Sensar Schedules or
Net Schedules such reference is to information specifically set forth in such
schedules and clearly referenced to identify the section of this Agreement to
which the information relates. Whenever any representation is made to the
"knowledge" of any party, it shall be deemed to be a representation as to actual
knowledge only.
Section 10.09 Third-Party Beneficiaries. This Agreement is solely
between Sensar and Net and the Net Shareholders, and no director, officer,
stockholder, employee, agent, independent contractor, or any other person or
entity shall be deemed to be a third party beneficiary of this Agreement.
Section 10.10 Entire Agreement. This Agreement, together with the
other agreements entered into between the parties contemporaneously with this
Agreement (this Agreement and such other documents collectively referred to as
the "Transaction Documents"), represent the entire agreement between the parties
relating to the subject matter hereof. All previous agreements between the
parties, whether written or oral, have been merged into the Transaction
Documents. The Transaction Documents fully and completely express the agreement
of the parties relating to the subject matter hereof. There are no other
courses of dealing, understandings, agreements, representations, or warranties,
written or oral, except as set forth in the Transaction Documents.
Section 10.11 Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which taken
together shall be but a single instrument.
Section 10.12 Amendment or Waiver. Every right and remedy provided
herein shall be cumulative with every other right and remedy, whether conferred
herein, at law, or in equity, and may be enforced concurrently herewith, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. This Agreement shall only be amended by a
writing signed by all parties hereto, with respect to any of the terms contained
herein, and any term or condition of this Agreement may be waived or the time
for performance thereof may be extended by a writing signed by the party or
parties for whose benefit the Provision is intended.
Section 10.13 Severability. If and to the extent that any court of
competent jurisdiction holds any provision, or any part thereof, of this
Agreement to be invalid or unenforceable, such holding shall in no way affect
the validity of the remainder of this Agreement which shall continue in full
force and effect.
Section 10.14 Successors and Assigns. This Agreement may not be
assigned without the prior written consent of both parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, hereunto duly authorized, and the
individuals have caused this Agreement to be executed as of the date first above
written.
Sensar:
SENSAR CORPORATION
By /s/ Xxxxxx X. Xxxxx
Xxxxxx X. Xxxxx, CEO
Net:
Net2Wireless, Inc.
By /s/ Hemi Davidson
Hemi Davidson, CEO
