EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION
THIS EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION (hereinafter referred to
as this "Agreement"), is entered into this 6th day of October, 1999, by and
among SENSAR CORPORATION, a Nevada corporation ("Sensar"), I.T.E.S ltd., an
entity organized under the laws of the State of Israel ("ITES") and the
shareholders of ITES named on the signature pages of this Agreement
(collectively, the "ITES Shareholders"), based on the following:
Premises
A. Sensar is a publicly-held corporation with its common stock listed on
the NASDAQ Small Cap Market.
B. The ITES Shareholders are the owners of 100% of the equity interest in
ITES (the "ITES Stock").
C. This Agreement provides for the acquisition by Sensar of all of the
issued and outstanding shares of ITES Stock currently held by the ITES
Shareholders solely in exchange for voting shares of the common stock of Sensar,
par value $0.001 per share (the "Sensar Common Stock"), on the terms and
conditions hereinafter provided, all for the purpose of effecting a "tax free"
reorganization pursuant to section 368(a)(1)(B) of the Internal Revenue Code of
1986, as amended (the "Code") for those ITES Shareholders who are resident in
the United States.
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 Closing. The consummation of the transactions contemplated
by this Agreement.
Section 1.02 Closing Date. The date on which the Closing occurs.
Section 1.03 Code. The Internal Revenue Code of 1986, as amended.
Section 1.04 Exchange Act. The Securities Exchange Act of 1934, as
amended.
Section 1.05 Exchanged Sensar Stock. The shares of Sensar Common Stock
to be issued and delivered by Sensar pursuant to this Agreement in exchange for
the shares of ITES Stock issued and outstanding on the Closing Date in order to
consummate the acquisition of 100% of the equity interest in ITES by Sensar.
Section 1.06 GAAP. United States generally accepted accounting
principles, as in effect on the date of determination, applied on a consistent
basis.
Section 1.07 ITES I.T.E.S ltd., an entity organized under the laws of
the State of Israel.
Section 1.08 Sensar Common Stock. The authorized common stock, par value
$0.001 per share, of Sensar.
Xxxxxxx 0.00 XXX. Xxx Xxxxxx Xxxxxx Securities and Exchange Commission.
Section 1.10 Securities Act. The Securities Act of 1933, as amended.
Section 1.11 Sensar. Sensar Corporation, a Nevada corporation.
Section 1.12 ITES Stock. All of the ordinary shares of ITES 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.
ARTICLE II
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF ITES
As an inducement to and to obtain the reliance of Sensar, ITES represents
and warrants, except as set forth on the ITES Schedules, as follows:
Section 2.01 Organization. ITES is a corporation duly organized, validly
existing, and in good standing under the Company Ordinance (New Version) of the
State of Israel 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
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 ITES.
Included in the ITES Schedules (as hereinafter defined) are complete and correct
copies of the Memorandum of Association and Articles of Association of ITES 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 ITES's
memorandum of association or articles of association.
Section 2.02 Approval of Agreement. The board of directors of ITES has
authorized the execution and delivery of this Agreement by ITES and has approved
the consummation of the transactions contemplated hereby. Included in the ITES
Schedules is a signed copy of a consent duly adopted by the board of directors
of ITES evidencing such approval. ITES has full power, authority, and legal
right, and has taken all action required by law, its articles of incorporation,
its bylaws, or otherwise, to consummate the transactions contemplated hereby.
Section 2.03 Capitalization. All issued and outstanding ITES Stock is
held by the ITES Shareholders as set forth in Schedule 2.03. There are no
options, rights, convertible securities, calls, or commitments to which ITES is
a party or to which it is subject requiring the issuance of the ITES Stock. All
issued and outstanding shares of ITES are validly authorized, legally issued,
fully paid, and nonassessable and not issued in violation of the preemptive or
other right of any person.
Section 2.04 No Subsidiary or Predecessor. ITES does not own,
beneficially or of record, any equity securities in any other entity. Since
inception, ITES has not had any predecessor, as that term is defined under GAAP.
Section 2.05 Financial Information.
(a) Included in the ITES Schedules are the audited balance
sheets of ITES as of December 31, 1998 and, to the extent required by
applicable SEC requirements, 1997, and the related audited statements of
operations and cash flows for the periods then ended. Also included is the
unaudited balance sheet as of September 30, 1998 and the related unaudited
statements of operations for the nine months then ended.
(b) Such financial information has been prepared in accordance
with GAAP, except as disclosed in the ITES Schedules. ITES 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 ITES, as of the date of
such balance sheet. The statement of operations for the nine months ended
September 30, 1999 presents fairly the information required to be set forth
therein in accordance with GAAP.
(c) ITES 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. ITES 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 ITES Schedules and all such dates
and years and periods prior thereto and for which ITES 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 ITES has been audited or is currently
being audited by any governmental agency. ITES has not made any tax
election which would have a material adverse effect on ITES, 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 ITES.
(d) The books and records, financial and otherwise, of ITES 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 ITES. ITES 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 ITES Schedules, the balance sheet
included in the ITES Schedules, or in the notes thereto, ITES (i) has good
and marketable title to its accounts receivable, and other debts due or
recorded in the records and books of account of ITES, 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 ITES for the total dollar amount thereof
shown on the books of ITES and resulted from the regular course of its
business; and (ii) the accounts receivable, invoices, and debts set forth
on the ITES 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 ITES or successor personnel and without resorting to litigation and in
any event not later than ninety (90) days after the date billed.
Section 2.06 Information. The information concerning ITES set forth in
this Agreement and in the ITES 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 2.07 Options or Warrants. At the Closing Date there will be no
existing options, warrants, calls, commitments, or other rights of any character
relating to authorized and unissued ITES Stock or other securities of ITES.
Section 2.08 Absence of Certain Changes or Events. Except as set forth
in this Agreement or in the ITES Schedules, since the date of the balance sheet
included in the ITES Schedules:
(a) There has not been (i) any material adverse change in the
business, operations, assets, or condition of ITES, except for changes
occurring as a result of transactions in the normal course of business of
ITES, or (ii) any damage, destruction, or loss to ITES (whether or not
covered by insurance) materially and adversely affecting the business,
operations, assets, or condition of ITES;
(b) ITES has not (i) amended its memorandum of association and
articles of association; (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
ITES; (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) ITES 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 ITES 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 ITES; 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) ITES 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 ITES.
Section 2.09 Title to Personal and Real Property.
(a) Except as disclosed in the balance sheet included in the
ITES Schedules, ITES 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 ITES Schedules,
or are used in ITES'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 ITES 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) ITES does not own any real property in fee simple.
(c) Included in the ITES Schedules is an accurate and complete
list of all personal property owned by ITES 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 ITES Schedules are copies of all
leases for real and personal property to which ITES is a party. Except as
disclosed in the ITES 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 ITES. ITES 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 ITES 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 2.10 Intellectual Property. ITES owns the entire right, title,
and interest to all trade secrets, technology, know-how, tradenames, trademarks,
servicemarks, and other proprietary information owned by, or used in connection
with the business of, ITES, including all copyrights, patents, patent
applications, registrations, and applications with respect thereto (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 ITES owns, directly or indirectly, any right,
title, or interest in or to the Intellectual Property. Hemi Davidson hereby
waives, assigns, and transfers to ITES 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 ITES Schedules, there are no pending or
threatened proceedings, litigation, or other adverse claims to the Intellectual
Property of which ITES is aware. 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 ITES as now being conducted and as proposed to be
conducted.
Section 2.11 Litigation and Proceedings. Except as set forth in the ITES
Schedules, there are no actions, suits, or proceedings pending or, to the
knowledge of ITES or its officers and directors, threatened in writing by or
against ITES or affecting ITES 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. ITES 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 2.12 Contracts.
(a) Included in the ITES Schedules is a description of every
contract, agreement, distributorship, franchise, license, or other
agreement, arrangement, or commitment to which ITES is a party or by which
its assets or properties are bound, which calls for the payment by ITES of
more than $2,000 a month, or $24,000 in the aggregate;
(b) Except as described in this Agreement or in the ITES
Schedules, ITES is not a party to or bound by, and the properties of ITES
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 ITES can now reasonably foresee) materially and
adversely affect, the business operations, properties, assets, or financial
condition of ITES; and
(c) Except as included or described in the ITES Schedules or
reflected in the accompanying ITES balance sheet, ITES 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 ITES 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 2.13 Material Contract Defaults. ITES 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 ITES, 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 ITES has not taken adequate steps to prevent such a default
from occurring.
Section 2.14 Insurance Claims. Except as set forth in the ITES
Schedules, during the last three years ITES 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. ITES is not currently aware of any
pending or unasserted claims.
Section 2.15 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 ITES is a
party or to which any of its properties or operations are subject, which would
have a material adverse affect on ITES.
Section 2.16 Governmental Authorizations. ITES 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. ITES has all
required approvals, including any approvals required 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 ITES of this Agreement and the consummation by ITES of the
transactions contemplated hereby.
Section 2.17 Compliance With Laws and Regulations. ITES 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 ITES or except to the extent that
noncompliance would not result in the incurrence of any material liability for
ITES. Included in the ITES 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 2.18 Insurance. Included in the ITES Schedules is a complete
list of all business liability, casualty, automobile, extended coverage, and
other insurance policies which ITES 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 ITES 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 2.19 Transactions With Affiliates. Set forth in the ITES
Schedules is a description of every contract, agreement, or arrangement between
ITES and any person who is or has ever been during the previous three years an
officer or director of ITES or person owning of record, or known by ITES to own
beneficially, 5% or more of the issued and outstanding common stock of ITES 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 ITES and the amount paid or received, whether in cash, in
services, or in kind, was, has been during the full term thereof, and is
required to be during the unexpired portion of the term thereof, no less
favorable to ITES than terms available from otherwise unrelated parties in arm's
length transactions. Except as disclosed in the ITES Schedules or otherwise
disclosed herein, no officer or director of ITES or 5% shareholder of ITES has,
or has had during the preceding three years, any interest, directly or
indirectly, in any material transaction with ITES. The ITES Schedules also
include a description of any commitment by ITES, 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 2.20 Labor Agreements and Actions. ITES 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 ITES. There is no strike or other
labor dispute involving ITES pending or threatened, which could have a material
adverse effect on the assets, properties, financial condition, operating
results, or business of ITES or (as such business is presently conducted and as
it is proposed to be conducted), and ITES is not aware of any labor organization
activity involving its employees. ITES is not aware that any officer or key
employee, or that any group of key employees, intends to terminate their
employment with ITES, nor does ITES have a present intention to terminate the
employment of any of the foregoing. Except as set forth in the ITES Schedules,
the employment of each officer and employee of ITES is terminable at the will of
ITES.
Section 2.21 Pension Obligations. ITES does not have any unfunded
pension liability to any person or entity in connection with any retirement,
pension plan, or similar arrangement.
Section 2.22 ITES Schedules. Within twenty (20) days of the date of this
Agreement, ITES shall deliver to Sensar the following schedules, which are
collectively referred to as the "ITES Schedules." The ITES Schedules shall be
updated through the date of Closing and shall be certified by the chief
executive officer of ITES as complete, true, and accurate:
(a) A schedule including copies of the memorandum of association
and articles of association of ITES in effect as of the date of this
Agreement as referred to in section 2.01;
(b) A schedule containing copies of resolutions adopted by the
board of directors of ITES approving this Agreement and the transactions
herein contemplated as referred to in section 2.02;
(c) A schedule listing the shares of ITES Stock held by each of
the ITES Shareholders.
(d) A schedule including the financial information identified in
section 2.05;
(e) A schedule including copies of all income tax returns filed
for ITES, as identified in section 2.05;
(f) A schedule listing the accounts receivable and notes and
other obligations receivable of ITES as of the date of the most recent
balance sheet included in the ITES 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 ITES as of the date of the most recent balance sheet
included in the ITES Schedules or that arose thereafter other than in the
ordinary course of the business of ITES, 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 ITES 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 ITES since the most recent balance sheet included in
the ITES Schedules, required to be provided pursuant to section 2.08
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 ITES 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 ITES;
(j) A schedule containing a description of all personal property
owned by ITES 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 ITES 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 2.11;
(m) A schedule listing all material contracts, agreements,
franchises, license agreements, or other commitments to which ITES is a
party or by which their properties are bound, as referred to in section
2.12, but excluding those with affiliates which are described in section
2.19;
(n) A schedule of any insurance claims as referenced in section
2.14;
(o) Copies of all licenses, permits, and other governmental
authorizations (or requests or applications therefor) pursuant to which
ITES carries on or proposes to carry on its business (except those which
are immaterial to the present or proposed business of ITES), as referred to
in section 2.16;
(p) A schedule describing the matters regarding compliance with
laws and regulations as referred to in section 2.17;
(q) A schedule showing details of all insurance coverage as
referred to in section 2.18;
(r) A schedule containing a description of all material
contracts, leases, agreements, and other instruments between ITES and any
affiliates, as referred to in section 2.19,
(s) A schedule showing the name and location of each bank or
other institution in which ITES 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 ITES 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 ITES
Schedules by sections 2.01 through 2.21.
ARTICLE III
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF
THE ITES SHAREHOLDERS
As an inducement to and to obtain the reliance of Sensar, the ITES
Shareholders represent and warrant as follows:
3.01 Ownership of ITES Stock. Each of the ITES Shareholders,
individually and not jointly and severally, represent and warrant, (i) that the
number of shares of ITES Stock set forth in Schedule 2.03 as being held by them
is all of the shares of ITES Stock held by such Shareholder; (ii) that such
shares are held both beneficially and of record by such Shareholder; (iii) that
such shares are held free and clear of any and all liens, claims, or
encumbrances; (iv) that such Shareholder has not transferred or created any
right in any other person or entity to acquire such shares; and (v) that the
Shareholder has the free and unqualified right to bargain, sell, convey,
transfer, and assign the ITES Stock, without the authorization, consent, or
approval of any other person or entity.
3.02 Continuity of Investment. The ITES Shareholders are acquiring
the Exchanged Sensar Stock pursuant to this Agreement and the Proxy
Statement/Prospectus for investment and not with a view to the distribution
thereof. None of the ITES Shareholders has any agreement nor made any
commitment to sell the shares of the Exchanged Sensar Stock to be acquired
hereunder and none of the ITES Shareholders has the present intent to sell or
liquidate the Exchanged Sensar Stock to be acquired hereunder.
3.03 Release Agreements. Each of the ITES Shareholders shall execute
and deliver an agreement releasing any and all claims such Shareholder may have
at or prior to the Closing Date against ITES or the technology or other assets
held by ITES.
ARTICLE IV
REPRESENTATIONS, COVENANTS, AND WARRANTIES OF SENSAR
As an inducement to, and to obtain the reliance of the ITES Shareholders,
Sensar represents and warrants, except as set forth on the Sensar Schedules, as
follows:
Section 4.01 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 have
taken all action required by law, its articles of incorporation, bylaws, and
otherwise to consummate the transactions herein contemplated.
Section 4.02 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 4.03 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 approximately 3,000,000
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. 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 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 4.04 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 ITES Stock held by the ITES 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 4.05 Financial Statements. Included in the reports referred to
in section 4.04 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. 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.
Section 4.06 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
Sensar balance sheet described in section 4.05 and 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) except for a claim filed by certain former
employees of Sensar, any claim or litigation brought against Sensar;
(b) Sensar has not (i) amended its articles of incorporation or
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 their capital stock; (iii) waived any rights of value which in the
aggregate are extraordinary or material; (iv) made any change in its method
of management, operation, or accounting which is material to Sensar; or (v)
entered into any other transaction which is material to Sensar; and
(c) Sensar has not granted or agreed to grant any options,
warrants, or other rights for its respective stocks, bonds, or other
corporate securities calling for the issuance thereof.
Section 4.07 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 4.08 Sensar Schedules. Within twenty (20) days of the date of
this Agreement, Sensar will deliver to ITES the following schedules, which are
collectively referred to as the "Sensar Schedules" and which consist of separate
schedules dated as of the date of execution of this Agreement and updated
through the date of Closing, and instruments and data as of such date, or the
date indicated on such schedules, all 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 4.01;
(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 4.02;
(c) A schedule containing the annual report of Sensar on form
10-K for the year ended December 31, 1998;
(d) A schedule containing the quarterly report of Sensar on form
10-Q for the quarter ended March 31, 1999;
(e) A schedule containing the report of Sensar on form 8-K dated
April 21, 1999;
(f) A schedule containing the quarterly report of Sensar on form
10-Q for the quarter ended June 30, 1999;
(g) A schedule containing the report of Sensar on form 8-K dated
August 4, 1999;
(h) A schedule containing the report of Sensar on form 8-K dated
September 3, 1999.
(i) A schedule setting forth a description of any material
change in the business, operations, assets, or condition of Sensar since
June 30, 1999, required to be provided pursuant to section 4.06 hereof; and
(j) A schedule setting forth any other information, together
with any required copies of documents, required to be disclosed in the
Sensar Schedules by sections 4.01 through 4.07.
ARTICLE V
PLAN OF EXCHANGE
Section 5.01 Terms of the Exchange. The acquisition of ITES as a wholly-
owned subsidiary of Sensar shall be completed, subject to all of the terms,
covenants, and conditions set forth in this Agreement, by the issuance of
8,000,000 shares of the Exchanged Sensar Stock to the ITES Shareholders in
exchange for all of the shares of ITES Stock, which represent 100% of the equity
interest in ITES. In addition, Sensar shall issue 500,000 shares of the
Exchanged Sensar Stock to parties identified by ITES in full satisfaction of all
finders, brokerage or similar fees incurred by ITES. The Exchanged Sensar Stock
shall be issued in the names and denominations set forth on Schedule 2.03
attached hereto and incorporated herein by this reference.
Section 5.02 Closing. The closing ("Closing") of the transactions
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 transaction by the stockholders of Sensar.
Section 5.03 Closing Events. At the Closing:
(a) The ITES Shareholders shall deliver the original
certificates representing all of the ITES Stock, duly executed, with
appropriate signature guarantees, for transfer to Sensar. Sensar shall
deliver the original of the certificates representing 8,500,000 shares of
common stock of Sensar, registered in the names and denominations set forth
on Schedule 2.03.
(b) The current directors of Sensar shall resign and Xxxxxx
Xxxxxxxxxx and four nominees of ITES shall be appointed to be the board of
directors of Sensar. All current officers shall resign and the new board
of directors shall appoint the officers of Sensar and ITES. Hemi Davidson
will be appointed as the Chief Executive Officer of Sensar and ITES.
(c) Sensar and Xxxxxx Xxxxxxxxxx shall enter into an employment
agreement in form and substance as attached hereto as Schedule 5.03(c), and
incorporated herein by this reference, providing for the employment of Xx.
Xxxxxxxxxx for two years at an annual salary of $240,000 per year and the
grant of a fully vested option to acquire 250,000 shares of Sensar Common
Stock at an exercise price of $4.00 per share at any time prior to two
years subsequent to the Closing Date.
(d) 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, or 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
(e) 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 transactions herein contemplated in accordance
with the requirements of the Code and shall treat such transactions for all
tax purposes consistently with the other parties' treatment thereof and
with such characterization as a reorganization under Code section
368(a)(1)(B).
ARTICLE VI
PRE-CLOSING COVENANTS
Section 6.01. Affirmative and Negative Covenants of ITES.
(a) ITES hereby covenants and agrees that, prior to the Closing,
unless otherwise expressly contemplated by this Agreement or consented to
in writing by Sensar, ITES will:
(i) operate its business in all material respects in the
usual and ordinary course, consistent with past practice;
(ii) 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;
(iii) 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
(iv) 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 or
otherwise consented to in writing by Sensar, from the date of this
Agreement until the Closing Date, ITSE 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;
(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 ITES
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
ITES or any investment banker, financial advisor, attorney, accountant
or other representative retained by ITES to take any such action, and
ITES shall promptly notify Sensar of all relevant terms of any such
inquiries and proposals received by ITES 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, ITES shall promptly deliver or cause to be
delivered to Sensar a copy of such inquiry or proposal;
(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
memorandum of association or articles of association, 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 in effect at
December 31, 1998, 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), 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;
(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 $10,000 in the aggregate;
(xi) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other material reorganization of ITES;
(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 ITES, (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 ITES
contained herein inaccurate in any respect at, or as of any time prior
to, the Closing;
(xiv) ITES will not engage in any transaction with, or enter
into any agreement, arrangement, or understanding with, directly or
indirectly, any of ITES 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, ITES
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 6.02 Affirmative Covenants of Sensar. Sensar hereby covenants
and agrees that, prior to the Closing, unless otherwise expressly contemplated
by this Agreement or consented to in writing by ITES, Sensar will:
(a) timely file all SEC reports that may become due subsequent to
the date of this Agreement;
(b) take such steps as are necessary so that at the Closing Sensar
has no material liabilities and a minimum of an aggregate of $4.5 million
in cash and note receivables due in less than 12 months;
(c) terminate all of its employment and consulting agreements,
except for those 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) eliminate, either by termination or exercise, all options,
warrants, or other rights to acquire stock or securities of Sensar except
for the warrants to acquire 58,775 shares of common stock at $2.50 per
share held by prior holders of Sensar's preferred stock and such rights as
may exist with an exercise price of in excess of $8.00 per share; and
(e) use its best efforts to maintain the listing of its common
stock on the NASDAQ Small Cap Market.
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 promissory notes
payable in less than 12 months as of the Closing Date and does not have in
excess of 4,000,000 shares of Sensar Common Stock issued and outstanding as of
the Closing Date.
Section 6.03. Access and Information.
(a) Sensar shall, and shall cause its subsidiaries to, afford ITES
and its officers, directors, employees, accountants, consultants, legal
counsel, agents and other representatives (collectively, the "ITES
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 ITES and the ITES 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 ITES or such Representatives.
(b) ITES 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
ITES and to its books and records and (ii) furnish promptly to Sensar and
Sensar Representatives such information concerning the business,
properties, contracts, records and personnel of ITES (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 6.04(a) and (b)
shall be deemed to be "confidential information" and shall not be disclosed
to any other person or entity, except tot he parties' representatives, and
shall not be used for any purpose other than the transactions contemplated
by this Agreement.
Section 6.04 Termination.
(a) This Agreement may be terminated at any time prior to the
Closing Date by the consent of both Sensar and ITES through action of
their respective boards of directors. This Agreement may be terminated by
either Sensar or ITES in the event the transactions contemplated hereby
have not been completed on or before February 28, 2000. In the event of
termination pursuant to this subparagraph (a) of section 6.04, no
obligation, right, remedy, or liability shall arise hereunder, 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 ITES or the ITES
Shareholders shall fail to comply in any material respect with any of their
covenants or agreements contained in this Agreement, if any of the
representations or warranties of ITES or the ITES Shareholders contained
herein shall be inaccurate in any material respect, or if the holders of
more than 5% of the ITES Stock exercise their right not to proceed under
section 9.02. In the event of termination pursuant to this
subparagraph (b) of section 6.04, no obligation, right, remedy, or
liability shall arise hereunder, 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 and the merger may be terminated at any time
prior to the Effective Date by action of ITES's board of directors if
Sensar shall fail to comply in any material respect with any of their
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 6.04, no obligation, right, remedy, or
liability shall arise hereunder, 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 6.05 Post-Closing Covenants of Sensar and ITES. Subsequent to
the Closing of the transactions contemplated by this Agreement, neither Sensar,
ITES, nor the ITES Shareholders 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)(1)(B) of the Code. Sensar, ITES, and the
ITES Shareholders 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 6.05 shall survive the Closing and the
consummation of the transactions contemplated herein.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.01 Meeting of Stockholders. Sensar shall, promptly after the
effectiveness of the Proxy Statement/Prospectus provided for in section 7.02,
take all actions necessary in accordance with Nevada Law and its articles of
incorporation and bylaws to convene a special meeting of Sensar's stockholders
to approve this Agreement and the transactions contemplated hereby (the "Sensar
Stockholders Meeting"), and Sensar shall consult with ITES in connection
therewith. Sensar shall use its best efforts to solicit from stockholders of
Sensar proxies and to secure the vote of stockholders required by Nevada Law and
its articles of incorporation and bylaws to approve and adopt this Agreement.
In addition, the board of directors of Sensar will, subsequent to the Closing
Date, adopt a new stock option plan covering up to 1,500,000 shares of Sensar
Common Stock (the "Stock Option Plan"). The Stock Option Plan will also be
submitted to the stockholders at the Sensar Stockholders Meeting with the
recommendation of the board of directors that it be approved.
Section 7.02. S-4 Registration Statement.
(a) As promptly as practicable after the execution of this
Agreement, ITES 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 a prospectus for the issuance by Sensar of the
Common Stock to the ITES Shareholders (the "Proxy Statement/Prospectus").
Each of ITES, Sensar and the ITES 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 Exchanged Sensar Stock. Each of Sensar, ITES, and the
ITES Shareholders shall furnish all information concerning them as may
reasonably be necessary or advisable in connection with such actions. 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 to the ITES Shareholders. The Proxy
Statement/Prospectus shall include the recommendation of Sensar'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 ITES thereof in writing.
(c) The information supplied by ITES 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 ITES 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 ITES or any of its affiliates, or to their
respective officers or directors, is discovered by ITES that should be set
forth in a supplement to the Proxy Statement/Prospectus, ITES shall
promptly inform Sensar thereof in writing.
Section 7.03 S-3 Registration Statement.
(a) Concurrently with the preparation of the Proxy Statement/Proxy,
Sensar shall also prepare a registration statement on Form S-3 registering
the resale of up to 1,100,000 shares of estimated Sensar Common Stock or
Sensar Common Stock held by affiliates of Sensar prior to the Closing Date
(the "Resale Registration"). Such Resale Registration shall be filed
immediately following the approval of this Agreement by the stockholders of
Sensar and 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 selling stockholders shall be
as listed in Schedule 7.03. Notwithstanding the foregoing, the selling
shareholders listed in Schedule 7.03 shall agree that 500,000 shares
subject to the S-3 shall not be sold prior to the date that is one hundred
eighty (180) days subsequent to the Closing Date. The obligations of this
section 7.03 shall be for the benefit of the selling shareholders
identified in Schedule 7.03 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 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
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.
(c) The information supplied by ITES for inclusion in the Form S-3
shall not, at the time the Resale Registration is mailed to the
stockholders of Sensar and the ITES 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 while the Resale Registration is effective, any
event or circumstance relating to ITES or any of its affiliates is
discovered by ITES that should be set forth in a supplement to the Resale
Registration, ITES shall promptly inform Sensar thereof in writing.
Section 7.04 Appropriate Action; Consents; Filings.
(a) Sensar, ITES, and the ITES Shareholders 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 ITES
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) ITES, Sensar, and the ITES Shareholders 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 ITES 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 Merger 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 ITES 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.
(ii) 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 ITES
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 ITES 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 7.05 Public Announcements. The press release announcing the
execution and delivery of this Agreement shall be a joint press release of ITES
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.
Section 7.06 NASDAQ. Each party hereto shall use all reasonable efforts
to cause the shares of the Exchanged Sensar Stock to be issued to be approved
for listing (subject to official notice of issuance) on the NASDAQ Small Cap
Market or another national securities exchange prior to the Closing Date.
Section 7.07 Stock Resale Agreement. The ITES Shareholders each agree to
deliver, on or prior to the Closing Date, agreements, in substantially the form
of Schedule 7.07, attached hereto and incorporated herein by this reference, not
to effect any sales of the Common Stock for a period of ninety (90) days
subsequent to the Closing Date and thereafter not to effect any sales of the
Common Stock in excess of the volume limitations of Rule 144, promulgated under
the Securities Act; such restriction to continue in force and effect for a
period of 12 months after the Closing Date.
ARTICLE VlII
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 ITES and the ITES Shareholders in
this Agreement shall be true as of the Closing, and ITES and the ITES
Shareholders shall have performed or complied with all material covenants and
conditions required by this Agreement to be performed or complied with by ITES
or the ITES Shareholders prior to or at the Closing. Sensar shall be furnished
with certificates, signed by the chief executive officer of ITES and the ITES
Shareholders and dated the Closing Date, to the foregoing effect.
Section 8.02 ITES Disclosure Schedules. Sensar shall have received all
of the ITES Disclosure Schedules and such Schedules shall be acceptable, in form
and content, to Sensar.
Section 8.03 Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved by the stockholders of Sensar at a
duly held meeting called for that purpose.
Section 8.04 ITES Shareholder Election. Holders of not more than 5% of
the ITES Stock shall have failed to provide notification to Sensar of their
desire to proceed under the provisions of section 9.02.
Section 8.05 Good Standing. Sensar shall have received a certification
that ITES 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 ITES, other
than those disclosed in the ITES Schedules.
Section 8.07 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 ITES
AND THE ITES SHAREHOLDERS
The obligations of ITES 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 ITES Shareholder Election. The ITES Shareholders shall have
received a definitive Proxy Statement/Prospectus. Each ITES Shareholder shall
have a period of ten (10) business days subsequent to receipt of the Proxy
Statement/Prospectus to indicate in writing to Sensar that such ITES Shareholder
accepts the exchange offer of Sensar. Each ITES Shareholder that does not
provide written notification to Sensar as set forth above shall thereafter not
be bound by the terms of this Agreement.
Section 9.03 Sensar Disclosure Schedules. ITES shall have received all
of the Sensar Disclosure Schedules and such Schedules shall be acceptable, in
form and content, to ITES Sensar.
Section 9.04 Sensar Commitments. Sensar shall have a minimum of an
aggregate of $4.5 million in cash and notes receivable due in 12 months or less,
with no material liabilities, and shall have not more than 4,000,000 shares of
common stock outstanding prior to the Closing.
Section 9.05 Good Standing. ITES 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 Other Items. ITES shall have received such further
documents, certificates, or instruments relating to the transactions
contemplated hereby as ITES may reasonably request.
ARTICLE X
MISCELLANEOUS
Section 10.01 Brokers. Sensar and the ITES Shareholders agree 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. Sensar
and the ITES Shareholders each 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 8.01 shall survive the Closing and the
consummation of the transactions herein contemplated.
Section 10.02 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)(1)(B) 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)(1)(B) 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)(1)(B) 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 10.03 Governing Law. This Agreement shal1 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 10.04 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 Incorporated
Xxxxxx X. Xxxxx
00 Xxxx Xxxxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Fax: (000) 000-0000
Confirmation: (000) 000-0000
With copies o: 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 The ITES Shareholders, Sensar Corporation
to: 000 Xxxx 0000 Xxxxx
Xxxxx, Xxxx 00000
Fax: (000)000-0000
Confirmation: (000) 000-0000
With copies to: Xxxxx Xxxxxx
000 0xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Confirmation: (000) 000-0000
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 10.05 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 10.06 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 10.07 Schedules; Knowledge. Whenever in any section of this
Agreement reference is made to information set forth in the Sensar Schedules or
ITES 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 that such
officer or director has made a reasonable investigation of such matters.
Section 10.08 Third-Party Beneficiaries. This Agreement is solely between
Sensar and ITES and the ITES 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 10.09 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 10.10 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 10.11 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 10.12 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 10.13 Successors and Assigns. This Agreement shall inure to the
benefit of and be binding on the parties and their successors, assigns, heirs,
executors, and administrators.
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
Xxxxxx X. Xxxxx, CEO
ITES
I.T.E.S ltd.
By
Hemi Davidson, CEO
The ITES Shareholders:
Hemi Davidson
Xxxxx Xxxxxxxxx
Xxxxx Xxxxxx
(Signatures continued on following pages)
Nachsoni
Xxxxxx Xxxxxx
Espeka Ltd.
Metropolitan Vastgoed Amsterdam B.V.
Yuhda Xxxxx
Geldzaeler Xxxxxx
Xxxx Xxxxxxxx
Xxxxx Sand
Nachsoni (as trustee)
Xxxxx Xxxxx
Xxxx Xxxxxx
Yoshuv Shor Institute
(Signatures continued on following page)
Xxxxx Xxxxxx
Xxxxx Xxxxxx
Xxxxxx Xxxxxxxxx
