LITIGATION SETTLEMENT, SECURITIES PURCHASE, RELINQUISHMENT AND EXCHANGE AGREEMENT
Exhibit
10.1
This
Litigation Settlement, Securities Purchase, Relinquishment and Exchange
Agreement (this “Agreement”)
is
made and entered into as of June 11, 2007, among Xxxxxxxx Technologies, Inc.,
a
Florida corporation (“Xxxxxxxx”
or
the
“Company”),
the
investors signatory hereto (each such investor is a “Investor”
and
all
such investors are, collectively, the “Investors”)
and
the holders signatory hereto (each such holder is a “Holder,”
and
all
such holders are, collectively, the “Holders”).
WHEREAS,
each Investor is the owner of good and marketable title to (i) the number of
shares of the Series E Convertible Preferred Stock, $0.0001 par value per share,
of Xxxxxxxx (the “Series
E Preferred Stock”)
set
forth opposite such Investor’s name on Schedule
A
hereto
(collectively, the “Series
E Preferred Shares”)
and
each Holder currently holds (ii) the number of shares of the Series F
Convertible Preferred Stock, $0.0001 par value per share, of Xxxxxxxx (the
“Series
F Preferred Stock”)
set
forth opposite such Holder’s name on Schedule
B
hereto
(collectively, the “Series
F Preferred Shares”),
in
each case free and clear of all liens, pledges and encumbrances;
and
WHEREAS,
the Holders have agreed to relinquish the Company’s outstanding Series F
Preferred Stock; and
WHEREAS,
pursuant to the terms an equity grant dated October 20, 2006 (the “Equity
Grant”) the Holders are entitled to an immediate grant of 500,000 shares of
Common Stock of Technest as a consequence of the transactions contemplated
by
the Purchase Agreement which may be deemed to include a “change of control” of
the Company and have agreed to relinquish such right in exchange for the
immediate issuance to each of them of 375,000 shares of Technest Common Stock;
and
WHEREAS,
the parties are currently involved in certain litigation captioned Aberdeen
Avenue, LLC et al. x. Xxxxxxxx Technologies, Inc.
and
filed on behalf of the Investors in New York state court (the “Lawsuit”)
and
have agreed that the Lawsuit shall be dismissed with prejudice and without
costs; and
WHEREAS,
among other things, as consideration for the settlement of such litigation
and
the release of certain existing contractual rights by the Investors, Xxxxxxxx
is
willing to offer each Investor and each Investor is willing to accept shares
of
Xxxxxxxx’x newly issued Series G Preferred Stock, $0.0001
par value per share (the “Series
G Preferred Stock”),
in
exchange for each Investor’s shares of Series
E
Preferred Stock,
subject
to the terms and conditions set forth herein (the “Share
Exchange”);
and
WHEREAS,
Xxxxxxxx also desires to raise up to $1,500,000 through the sale of three
million one hundred fifty-five thousand nine hundred forty-nine (3,155,949)
shares of common stock of Technest Holdings, Inc. (“Technest”),
$0.001 par value per share, that it holds (the “Technest
Shares”),
and
the Investors desire to purchase such Technest Shares, subject to the terms
and
conditions set forth herein; and
WHEREAS,
in order to induce the parties to agree to the purchase of the Technest Shares,
the Series F Preferred Shares relinquishment, and the Share Exchange in
accordance with the terms hereof, the parties hereto hereby agree that this
Agreement also furthers the interests of all parties by granting certain rights
and placing certain restrictions on the parties hereto.
NOW,
THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
SECTION
1. Sale
of Technest Shares; Relinquishment of Series F Preferred Shares; and Exchange
of
Series G Preferred Shares for Series E Preferred Shares.
1.1 Sale
of Technest Shares.
Subject
to the
terms
and conditions of this Agreement, Xxxxxxxx agrees to sell the Technest Shares,
free and clear of all liens and restrictions, to the Investors at a price per
share of approximately $0.4753 for an aggregate purchase price of $1,500,000
(the “Purchase
Price”).
Each
Investor, acting severally and not jointly, agrees to purchase from Xxxxxxxx
the
Technest Shares, at the aggregate purchase price, set forth opposite such
Investor’s name on Schedule
C
hereto.
The sale and purchase of the shares of Technest Shares shall take place at
the
Closing as described in Section 1.4.
1.2 Relinquishment
of Series F Preferred Shares.
Subject
to the terms and conditions of this Agreement, each
Holder hereby agrees to relinquish and tender to Xxxxxxxx the Series F Preferred
Shares set forth opposite such Holder’s name on Schedule
B
to
Xxxxxxxx, and Xxxxxxxx hereby agrees to accept such Series F Preferred Shares
from such Holder for no consideration. In addition, and in recognition that
the
sale of the Technest Shares to Investors would trigger immediate vesting of
shares of common stock of Technest to the Holders, the Company shall transfer
to
each Holder 375,000 shares of restricted common stock of Technest (750,000
shares in aggregate) (the “Relinquishment
Shares”)
in
full satisfaction of its obligation under the Equity Grant. The closing of
the
relinquishment of the Series F Preferred Shares and the transfer of the
Relinquishment Shares shall take place at the Closing.
1.3 Exchange
of Series E Preferred Shares for new Series G Preferred Shares.
Subject
to the
terms
and conditions of this Agreement, Xxxxxxxx agrees to exchange its newly issued
shares of Series G Preferred Stock for all of the shares of Series E Preferred
Stock currently owned by the Investors. Each Investor, acting severally and
not
jointly, agrees to exchange the number of shares of Series E Preferred Shares
for the number of shares of Series G Preferred Stock set forth opposite such
Investor’s name on Schedule
A
hereto.
The exchange shall take place at the Closing.
1.4 The
Closing.
(a) At
the
Closing to be held on the date hereof (the “Closing”),
(i)
Xxxxxxxx shall issue to the Investors the Series G Preferred Shares in exchange
for the Series E Preferred Shares, (ii) Xxxxxxxx shall sell, and the Investors
shall purchase, the number of Technest Shares set forth on Schedule
C,
and
(iii) the Holders shall relinquish and transfer to Xxxxxxxx their shares of
Series F Preferred Stock, and Xxxxxxxx shall transfer to each Holder the
Relinquishment Shares in full satisfaction of the Equity Grant. The Closing
shall take place on or about June 15, 2007 at the offices of Xxxxxxx Xxxxxx
LLP,
000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx or at such other location
as
may be agreed upon among the Investors and Xxxxxxxx.
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(b) In
furtherance of the transactions described in Section 1.4(a), at the Closing,
Xxxxxxxx
shall issue and deliver to each Investor (i) a certificate for the Series G
Preferred Shares being acquired by such Investor (as set forth on Schedule
A)
in
exchange for such Investor’s Series E Preferred Shares and (ii) certificates for
the Technest Shares being purchased by such Investor at the Closing (as set
forth on Schedule
C),
against payment by such Investor to Xxxxxxxx of the aggregate purchase price
therefor in the form of (A) a certified or bank check payable to the order
of
Xxxxxxxx, (B) a wire transfer to the bank account of Xxxxxxx Savage LLP, as
escrow agent (the “Escrow
Agent”),
to be
held and disbursed by the Escrow Agent in accordance with the terms of the
Escrow Agreement, or (C) any combination of (A) and (B).
(c) In
furtherance of the transactions described in Section 1.4(a), at
the
Closing, Xxxxxxxx will cause to be released pursuant to the terms of that
certain Escrow Agreement, as amended, executed in connection with that certain
Registration Rights Agreement, dated as of March 24, 2006, between Xxxxxxxx
and
the investor signatories thereto (the “Previous
Registration Rights Agreement”)
443,592 shares of Technest Common Stock, representing payment in full of any
liquidated damages under the Previous Registration Rights Agreement to the
holders of shares of Series E Preferred Stock entitled to such shares as set
forth on Schedule
D
hereto.
1.5 Defined
Terms Used in this Agreement.
In
addition to the terms defined above, the Glossary at the end of this Agreement
sets forth the definitions of certain terms used in this Agreement.
SECTION
2. Representations
and Warranties of Xxxxxxxx.
Xxxxxxxx hereby represents and warrants to each Investor as
follows:
2.1 Organization.
Xxxxxxxx is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida and has all requisite corporate
power and authority to carry out the transactions contemplated
hereby.
2.2 Authorization.
The execution, delivery and performance by Xxxxxxxx of each of the
Transaction Documents have been duly authorized by all requisite corporate
action.
2.3 Enforceability.
Each of the Transaction Documents, when executed and delivered by
Xxxxxxxx, shall constitute a legal, valid and binding obligation of Xxxxxxxx,
enforceable against Xxxxxxxx in accordance with its respective terms, except
as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered
in
a proceeding in equity or at law), except that Xxxxxxxx may not be able to
effect a conversion of Series G Preferred Stock into shares of its Common Stock
until it has sufficient authorized Common Stock to do so.
3
2.4 No
Conflicts.
The execution, delivery and performance by Xxxxxxxx of this Agreement and
the other Transaction Documents, and the consummation of the transactions
contemplated hereby and thereby, do not and will not breach or constitute a
default under any applicable law or regulation or of any agreement, judgment,
order, decree or other instrument binding on Xxxxxxxx.
2.5 Valid
Issuance of the Series G Preferred Shares
The
shares of Series G Preferred Stock, when issued, sold and delivered in
accordance with the terms of this Agreement for the consideration described
herein, will be duly and validly issued, fully paid and nonassessable and will
be free of restrictions on transfer, other than restrictions on transfer under
applicable state and federal securities laws.
2.6 No
Governmental Consent or Approval Required.
Assuming the accuracy of the representations made by the Investors in this
Agreement, no authorization, consent, approval or other order of, declaration
to, or filing with, any governmental agency or body is required for or in
connection with the valid and lawful authorization, execution and delivery
by
Xxxxxxxx of this Agreement or the other Transaction Documents for or in
connection with the valid and lawful authorization, issuance, sale and delivery
of the (a) shares of Series G Preferred Stock and (b) Technest Shares being
issued hereunder, except for (x) the filing of the Series G Articles and (y)
federal or state securities law filings which have been made or will be made
in
a timely manner.
2.7 Offering.
Assuming the accuracy of the Investors’ representations set forth in this
Agreement, and subject to the filings described in Section 2.6(x) and Section
2.6(y), as applicable, the offer, sale and issuance of the shares of Series
G
Preferred Stock and the Technest Shares contemplated by this Agreement are
exempt from the registration requirements of the Securities Act, and will be
in
compliance with all applicable state securities laws.
2.8 Technest
Common Stock
Xxxxxxxx
owns 10,535,271 shares of Technest Common Stock, representing approximately
63%
of the issued and outstanding shares of common stock of Technest. Of this
amount, 1,739,130 shares of Technest Common Stock were pledged by the Company
in
connection with a loan made by Silicon Valley Bank to Technest (the “Bank
Loan”). Subject to the terms of the Bank Loan, such common stock is duly and
validly issued, fully paid and nonassessable and is free of any restrictions
on
transfer, other than restrictions on transfer under applicable state and federal
securities laws.
2.9 No
Integrated Offering.
Neither
the Company nor any of its affiliates nor any person acting on its or their
behalf has, directly or indirectly, at any time since December 8, 2006 made
any
offer or sales of any security or solicited any offers to buy any security
under
circumstances that would eliminate the availability of the exemption from
registration under Rule 506 of Regulation D in connection with the offer and
sale of the Technest Shares and the Series G Preferred Stock as contemplated
hereby.
SECTION
3. Representations
and Warranties of the Investors and Holders.
Each Investor (and Holder where identified) hereby represents and warrants
to Xxxxxxxx as follows:
3.1 Organization.
Each
Investor is duly organized, validly existing and in good standing under the
laws
of its jurisdiction of organization, has all requisite power and authority
and
has taken all necessary action required for the due authorization, execution,
delivery and performance of this Agreement and the other Transaction Documents,
as well as the consummation of the transactions contemplated hereby, and has
not
been organized, reorganized or recapitalized specifically for the purposes
of
investing in Xxxxxxxx or Technest.
4
3.2 Enforceability.
Each of the Transaction Documents, when executed and delivered by such
Investor or Holder, shall constitute a legal, valid and binding obligation
of
such Investor or Holder, enforceable against such Investor or Holder in
accordance with its respective terms, except as enforceability may be limited
by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
3.3 No
Conflicts.
The execution, delivery and performance by such Investor of this Agreement
and the other Transaction Documents, and the consummation of the transactions
contemplated hereby and thereby, do not and will not breach or constitute a
default under any applicable law or regulation or of any agreement, judgment,
order, decree or other instrument binding on such Investor or
Holder.
3.4 Investment
Intent.
Each
Investor or Holder, as the case may be, is acquiring (i) the Relinquishment
Shares,
(ii)
the Technest Shares, (iii) the shares of Series G Preferred Stock to be issued
hereunder, and (iv) the shares of Technest Common Stock issuable upon conversion
of the shares of Series G Preferred Stock being issued to such Investor
hereunder (“Technest
Conversion Shares”)
(for
purposes of this Section 3, the securities listed in (i) - (iv) of this
subsection 3.4 being the “Securities”) for investment and not for, with a view
to or in connection with the distribution thereof. The above sentence, however,
shall not limit Investor's (or Holder’s) right to sell the Securities pursuant
to applicable state and federal securities laws.
3.5 Restricted
Securities.
Each Investor and Holder understands that the Securities have not been
registered under the Securities Act, or any state securities law, by reason
of
their issuance in a transaction exempt from the registration requirements of
the
Securities Act and such laws, and that such Securities must be held indefinitely
unless they are subsequently registered under the Securities Act and such laws
or a subsequent disposition thereof is exempt from registration. The
certificates for the Securities to be issued hereunder shall bear a legend
in
substantially the form set forth below as well as any other legends required
by
applicable law, and such Investor and Holder covenants that he or it shall
not
transfer the Securities represented by any such certificate without complying
with the restrictions on transfer described in the legends endorsed on such
certificate:
THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (“SECURITIES ACT”), OR REGISTERED OR
QUALIFIED UNDER ANY APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES MAY
NOT
BE TRANSFERRED UNLESS (A) COVERED BY AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND REGISTERED OR QUALIFIED UNDER APPLICABLE STATE SECURITIES
LAWS OR (B) EXEMPTIONS FROM SUCH REGISTRATION OR QUALIFICATION REQUIREMENTS
ARE
AVAILABLE. AS A CONDITION TO PERMITTING ANY TRANSFER OF THESE SECURITIES, THE
COMPANY MAY REQUIRE THAT IT BE FURNISHED WITH AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY TO THE EFFECT THAT NO REGISTRATION OR QUALIFICATION IS LEGALLY
REQUIRED FOR SUCH TRANSFER.
5
3.6 Rule
144.
Each Investor and Holder understands that the exemption from registration
afforded by Rule 144 promulgated by the Securities and Exchange Commission
under
the Securities Act depends upon the satisfaction of various conditions and
that,
if applicable, Rule 144 affords the basis for sales only in limited
amounts.
3.7 Experience
and Knowledge.
Each Investor and Holder: (a) has sufficient knowledge and experience
in business and financial matters and with respect to investment in restricted
securities so as to enable it to analyze and evaluate the merits and risks
of
the investment contemplated hereby; (b) is able to bear the economic risk
of such investment; and (c) is an “accredited investor” as defined in Rule
501(a) of Regulation D under the Securities Act. Each Investor and Holder
is aware of Xxxxxxxx’x business affairs and condition and Technest’s business
affairs and condition and has acquired sufficient information about Xxxxxxxx
and
Technest to reach an informed and knowledgeable decision to acquire the
Securities. Each Investor acknowledges that it has read and understands the
relative rights and preferences and other terms of the Series G Preferred Stock
as set forth in the Series G Articles.
3.8 Address.
The postal address for each Investor and Holder on such signature page
attached hereto is true, accurate and complete as of the date
hereof.
3.9 No
Brokers.
All negotiations relating to this Agreement and the transactions
contemplated hereby have been carried on without the intervention of any person
acting on behalf of such Investor or Holder in such manner as to give rise
to
any right, interest or valid claim for any brokerage or finder’s commission, fee
or similar compensation.
3.10 Title.
Each Holder is the owner of good and marketable title to the Series F
Preferred Shares set forth opposite such Holder’s name on Schedule
B
hereto,
free and clear of all liens, pledges and encumbrances. Each Investor is
the owner of good and marketable title to the Series E Preferred Shares set
forth opposite such Investor’s name on Schedule
A
hereto,
free and clear of all liens, pledges and encumbrances.
SECTION
4. Conditions
to Closing.
4.1 Conditions
to the Investors’ Obligations at Closing.
The
obligations of each Investor to purchase the Technest Shares and to exchange
its
shares of Series E Preferred Stock for the new shares of Series G Preferred
Stock at the Closing are subject to the fulfillment, on or before such Closing,
of each of the following conditions, unless otherwise waived in
writing:
(a) Representations
and Warranties.
The
representations and warranties of Xxxxxxxx contained in Section 2 shall be
true and correct in all materials respects as of such Closing.
6
(b) Performance.
Xxxxxxxx shall have performed and complied with all covenants, agreements,
obligations and conditions contained in this Agreement that are required to
be
performed or complied with by it on or before such Closing.
(c) Qualifications.
All
authorizations, approvals or permits, if any, of any governmental authority
or
regulatory body of the United States or of any state that are required in
connection with the lawful issuance and sale of the Technest Shares and the
shares of Series G Preferred Stock pursuant to this Agreement shall be obtained
and effective as of such Closing.
(d) Registration
Rights Agreement.
Xxxxxxxx shall have executed and delivered the Registration Rights
Agreement.
(e) Escrow
Agreement.
Xxxxxxxx shall have executed and delivered the Escrow Agreement.
(f) Series
G Articles.
Xxxxxxxx shall have filed the Series G Articles with the Department of State
of
the State of Florida on or prior to the Closing, which shall continue to be
in
full force and effect as of the current Closing.
(g) Security
Agreement. Xxxxxxxx
shall have executed and delivered the Security Agreement.
(h) Resignation
of Xxxxxx Xxxxxx. Xxxxxx
Xxxxxx shall have tendered his irrevocable resignation effective the
5th
business
day after the Closing, and the Board of Xxxxxxxx shall have accepted his
resignation, from his positions as Chief Executive Officer and Chairman of
the
Board of Directors of Xxxxxxxx.
(i)
Release
from Lease in Rhode Island.
Xxxxxxxx shall have assigned that certain real estate lease of office and
warehouse space located at 000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxxxx, Xxxxx Xxxxxx
(the “Lease”) to Xx. Xxxxxx. Xx. Xxxxxx shall have entered into a
indemnification agreement with Xxxxxxxx whereby Xx. Xxxxxx shall indemnify
Xxxxxxxx from any and all future obligations associated with the Lease.
4.2 Conditions
to Xxxxxxxx’x Obligations at Closing.
The
obligations of Xxxxxxxx to transfer the Relinquishment Shares, to sell the
Technest Shares, and to exchange the Company’s new shares of Series G Preferred
Stock for the Investors’ shares of Series E Preferred Stock to the Investors at
the Closing are subject to the fulfillment, on or before such Closing, of each
of the following conditions, unless otherwise waived in writing:
(a) Representations
and Warranties.
The
representations and warranties of the Investors and the Holders contained in
Section 3 shall be true and correct in all material respects as of the
Closing Date.
(b) Performance.
The
Investors and the Holders shall have performed and complied with all covenants,
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by such Investors and Holders on
or
before the Closing.
7
(c) Qualifications.
All
authorizations, approvals or permits, if any, of any governmental authority
or
regulatory body of the United States or of any state that are required in
connection with the lawful issuance and sale of the Technest Shares and the
shares of Series G Preferred Stock pursuant to this Agreement shall be obtained
and effective as of the Closing.
(d) Registration
Rights Agreement.
Each
Investor and Holder shall have executed and delivered the Registration Rights
Agreement.
(e) Escrow
Agreement.
Each
Investor and Xxxxxxx Xxxxx, as representative of the Investors, shall have
executed and delivered the Escrow Agreement.
(f) Series
F Preferred Shares.
In
connection with the Closing, the Holders shall have delivered the Series F
Preferred Shares, duly assigned to Xxxxxxxx, to Xxxxxxxx.
(g) Security
Agreement. Each
Investor shall have executed and delivered the Security Agreement.
SECTION
5. Escrow
Shares.
On or
before the date of the Closing, Xxxxxxxx shall deposit an aggregate four million
one hundred fifty-five thousand nine hundred forty-nine (4,155,949) shares
of
Technest Common Stock, which includes the Technest Shares, the Relinquishment
Shares and an additional 250,000 shares of Technest Common Stock to be used
to
pay certain creditors of Xxxxxxxx (the “Escrow
Shares”),
with
the Escrow Agent, to be held and distributed by the Escrow Agent in accordance
with the terms of the Escrow Agreement.
SECTION
6. Mutual
Release.
Effective upon the Closing, Xxxxxxxx, Xxxxxx Xxxxxx, individually and in his
capacity as a shareholder, officer and director of Xxxxxxxx, and Xxxx Xxxxxxx,
individually and in his capacity as a shareholder, officer and director of
Xxxxxxxx and the Investors, do each hereby remise, release and forever discharge
the other parties, and their representatives, officers, directors, employees,
agents, attorneys, subsidiaries, affiliates, parents, predecessors, successors
and assigns from any and all debts, demands, actions, causes of action, suits,
sums of money, contracts, controversies, agreements, promises, executions,
liabilities, and any and all other claims of any kind, nature and description
whatsoever, both in law and equity (whether known or unknown, tangible or
inchoate, asserted or unasserted), which the releasing party or its successors
or assigns now have or ever had from the beginning of the world to the date
of
the Closing, which shall include, without limitation, the parties’ respective
obligations (including without limitation any future obligations) under the
“Transaction Agreements” (as such term is defined in that certain Redemption and
Securities Purchase Agreement dated March 24, 2006 among Xxxxxxxx and the
investor signatories thereto). Notwithstanding the foregoing, the covenants,
duties and obligations of all parties under this Agreement and the other
Transaction Documents shall survive this mutual release and shall be fully
enforceable in accordance with their respective terms. The parties agree not
to
commence or maintain any lawsuit against any other party with respect to any
matter released hereby and agree that such commitment may be enforced by an
action for injunctive relief with respect thereto. In connection therewith,
the
parties to the Lawsuit agree that they and/or their representatives will execute
and cause to be filed with the court a stipulation of dismissal of the Lawsuit
with prejudice and without costs.
8
SECTION
7. Covenants. Following
the Closing, but in any event not later than June 20, 2007, the Board of
Directors of Xxxxxxxx shall appoint one (1) individual to serve as a director
on
Xxxxxxxx’x Board, subject to the approval and consent of the
Investors.
SECTION
8. [Reserved.]
SECTION
9. Other
Undertakings and Consideration. The
parties acknowledge that in addition to the investment-related undertakings
herein, the Investors are relinquishing certain existing rights, including
but
not limited to contractual rights for payment by Xxxxxxxx to Investors in
connection with Technest’s issuance of additional shares of its common stock for
cash consideration less than $5.85 per share. The parties further stipulate
that
the value of the rights being relinquished is difficult to quantify but the
Parties reasonably believe that the value of such rights or undertakings exceeds
$5,000,000.
The
parties agree that in consideration of the foregoing, Xxxxxxxx shall hold in
reserve for the exclusive benefit of the Investors holding Series G Preferred
Stock 1,739,130 shares of common stock of Technest pledged by the Company in
connection with the Bank Loan (the “Pledged Shares”). The parties stipulate that
the Pledged Shares represent consideration for the release of Investor’s
contractual rights pursuant to that certain Redemption and Securities Purchase
Agreement among the parties, dated March 24, 2006, as amended. In order to
assure that the Investor is provided with adequate consideration and to assure
that the Investor receives such Pledged Shares if and when they are released
by
Silicon Valley Bank, the Company agrees to grant the Investor a security
interest in such Pledged Shares, second only to the security interest previously
granted to Silicon Valley Bank, and to direct Silicon Valley Bank to deliver
the
Pledged Shares to the Escrow Agent immediately upon the release by Silicon
Valley Bank of its security interest in such Pledged Shares. The parties
undertake that they will enter into a security agreement contemporaneous with
this documentation.
SECTION
10. Miscellaneous.
10.1 Amendments
and Waivers.
The
provisions of this Agreement, including the provisions of this sentence, may
not
be amended, modified or supplemented, and waivers or consents to departures
from
the provisions hereof may not be given, unless the same shall be in writing
and
signed by Xxxxxxxx and a Majority Interest. Notwithstanding the foregoing,
a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of one or some Investors and that does
not directly or indirectly affect the rights of other Investors may be given
by
Investors to which such waiver or consent relates; provided,
however,
that
the
provisions of this sentence may not be amended, modified, or supplemented except
in accordance with the provisions of the immediately preceding
sentence.
10.2 Notices.
All
notices, requests, consents and other communications hereunder shall be in
writing, shall be mailed by first-class registered or certified airmail,
confirmed facsimile or nationally recognized overnight express courier postage
prepaid, and shall be deemed given when so mailed and shall be delivered as
addressed as follows:
if
to
Xxxxxxxx, to:
Xxxxxxxx
Technologies, Inc.
000
Xxxxx
Xxxxxx Xxxxxxxxx
Xxxxxxx,
XX 00000
Fax:
000-000-0000
Attn:
President
9
with
a
copy to:
Xxxxxxxxx
Traurig, LLP
00xx
Xxxxx
Xxx
Xxxxxxxxxxxxx Xxxxx
Xxxxxx,
XX 00000
Fax:
000-000-0000
Attn:
Xxxxxxxx Xxxx, Esq
if
to an
Investor, at such Investor’s address set forth on such Investor’s signature page
hereto,
with
a
copy to:
Xxxxxxx
Savage LLP
000
Xxxxxxxxx Xxxxxx, 0xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx
Fax:
000-000-0000
Attn:
Xxxxx Xxxxxxxxx, Esq.
The
designation of any such address may be changed at any time by any party upon
written notice given pursuant to the requirements of this Section.
10.3 Successors
and Assigns.
This
Agreement shall inure to the benefit of and be binding upon the successors
and
permitted assigns of each of the parties. Each Investor may assign its rights
hereunder only to transferees of the shares of the Technest Shares, Series
G
Preferred Stock or Technest Conversion Shares in accordance with applicable
state and federal securities laws.
10.4 Counterparts.
This
Agreement may be executed in any number of counterparts, each of which when
so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature
is
delivered by facsimile transmission, such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
were the original thereof.
10.5 Governing
Law.
ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH PARTY HEREBY IRREVOCABLY SUBMITS
TO
THE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW
YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR
IN
CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN, AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT,
ACTION OR
10
PROCEEDING,
ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH
COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS IMPROPER. EACH PARTY HEREBY
IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING
SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF TO
SUCH
PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES
THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND
NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY
ANY
RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. EACH PARTY HERETO HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
10.6 Cumulative
Remedies.
The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
10.7 Severability.
If any
term, provision, covenant or restriction of this Agreement is held by a court
of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their reasonable efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such term, provision, covenant or
restriction.
10.8 Headings.
The
headings in this Agreement are for convenience of reference only and shall
not
limit or otherwise affect the meaning hereof.
10.9 Independent
Nature of Investors’ Obligations and Rights.
The
obligations of each Investor hereunder are several and not joint with the
obligations of any other Investor hereunder, and no Investor shall be
responsible in any way for the performance of the obligations of any other
Investor hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Investor pursuant
hereto or thereto, shall be deemed to constitute the Investors as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert with respect
to
such obligations or the transactions contemplated by this Agreement. Each
Investor shall be entitled to protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Investor to be joined as an additional party in any
proceeding for such purpose.
10.10 Attorneys’
Fees.
At the
Closing, Xxxxxxxx shall reimburse the Investors for their reasonable out of
pocket costs and their other legal costs, including their reasonable counsel’s
fees, incurred in connection with the preparation of the Transaction Documents
and the investigation of and the consummation of the transactions contemplated
hereby, in a sum not to exceed $30,000.
11
10.11 Glossary
of Defined Terms Used in this Agreement.
In
addition to the terms defined above, the following terms used in this Agreement
shall be construed to have the meanings set forth or referenced
below:
An
“Affiliate”
of
any
Person means a Person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with
the
first mentioned Person. A Person shall be deemed to control another Person
if
such first Person possesses, directly or indirectly, the power to direct, or
cause the direction of, the management and policies of the second Person,
whether through the ownership of voting securities, by contract or
otherwise.
“Escrow
Agreement”
means
the agreement between Xxxxxxxx, the Investors, Xxxxxxx Xxxxx, as representative
of the Investors, and Xxxxxxx Savage LLP, as escrow agent, dated as of the
date
of the Closing, in substantially the form of Exhibit
A
attached
to this Agreement.
“Majority
Interest”
means
the Investors and their Affiliates holding not less than a majority of the
Technest Conversion Shares (determined on an as-converted basis).
“Person”
means
an individual, a corporation, an association, a joint venture, a partnership,
a
limited liability company, an estate, a trust, an unincorporated organization
and any other entity or organization, governmental or otherwise.
“Registration
Rights Agreement”
means
the agreement between Xxxxxxxx and the Investors, dated as of the date of the
Closing, in substantially the form of Exhibit
B
attached
to this Agreement.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Security
Agreement”
means
the agreement between Xxxxxxxx and the Investors, dated as of the date of the
Closing, in substantially the form of Exhibit
C
attached
to this Agreement.
“Series
G Articles”
means
the Articles of Amendment to the Articles of Incorporation of Xxxxxxxx for
Designation of Preferences, Rights and Limitations of Series G Preferred
Stock.
“Technest”
means
Technest Holdings, Inc., a Nevada corporation.
“Transaction
Documents”
means
this Agreement, the Security Agreement, the Escrow Agreement and the
Registration Rights Agreement.
12
IN
WITNESS WHEREOF, the parties have executed this Litigation Settlement,
Securities Purchase, Relinquishment and Exchange Agreement as of the date first
written above.
|
COMPANY:
XXXXXXXX
TECHNOLOGIES, INC.
By:
/s/ Xxxx
Xxxxxxx
Name:
Xxxx Xxxxxxx
Title:
Chief Financial Officer
INVESTORS:
SOUTHRIDGE
PARTNERS LP
By:
/s/ Xxxxx
Xxxxxxx
Name:
Xxxxx Xxxxxxx
Title:
Manager of General Partner
Address:
00 Xxxxx Xxxxxx
Xxxxxxxxxx,
XX 00000
SOUTHSHORE
CAPITAL FUND LTD
By: Illegible
Name:
Navigator Management, Ltd.
Title:
Director
Address:
Cayside, 2nd
Floor, P.O. Box 30592 SMB,
Xxxxxx
Town, Grand Cayman, Cayman Islands,
British
West Indies
ABERDEEN
AVENUE LLC
By: Illegible
Name:
Navigator Management, Ltd.
Title:
Director
Address:
Cayside, 2nd
Floor, P.O. Box 30592 SMB,
Xxxxxx
Town, Grand Cayman, Cayman Islands,
British
West Indies
|
13
|
BRITTANY
CAPITAL MANAGEMENT LTD.
By:
/s/ Xxxxx X.
Xxxxxx
Name:
Xxxxx X. Xxxxxx
Title:
President
Address:
Xxxxxxxxxx Xxxxx
00
Xxxxxxxxxx Xxxxxx
P.O.
Box N-10818
Nassau,
New Providence Island
The
Bahamas
HOLDERS:
XXXXXX
XXXXXX
/s/ Xxxxxx
Xxxxxx
XXXX
XXXXXXX
/s/ Xxxx
Xxxxxxx
|
14
Schedule
A
Exchange
of new Series G Preferred Shares for Series E Preferred Shares
|
Investor
|
Series
E Preferred
Stock
Being Exchanged
for
Series G Preferred
Stock
|
New
Series G Preferred
Stock
Being Issued in
Exchange
for Series E
Preferred
Stock
|
||
|
Southridge
Partners LP
|
450.00
|
636.25
|
||
|
Southshore
Capital Fund Ltd.
|
79.20
|
111.81
|
||
|
Aberdeen
Avenue LLC
|
690.00
|
1,203.18
|
||
|
Brittany
Capital Management Ltd.
|
13.00
|
22.67
|
||
|
Total: 1,232.20
|
1,973.91
|
15
Schedule
B
Relinquishment
of Series F Preferred Shares
|
Holder
|
Series
F Preferred Stock Being Relinquished
|
|
|
Xxxxxx
Xxxxxx
|
650
|
|
|
Xxxx
Xxxxxxx
|
700
|
|
|
Total: 1350
|
||
16
Schedule C
Technest
Shares to be Purchased for Cash at the Closing
The
following table sets forth the number of Technest Shares, and the amounts paid
for such shares, to be purchased for cash by each Investor at the
Closing:
|
Investor
|
Number
of Technest Shares
|
Purchase
Price of Technest Shares
|
|
|
Southridge
Partners LP
|
1,199,261
|
$570,000
|
|
|
Southshore
Capital Fund Ltd.
|
788,987
|
$375,000
|
|
|
Aberdeen
Avenue LLC
|
1,167,701
|
$555,000
|
|
|
Total: 3,155,949
|
$1,500,000
|
||
17
Schedule
D
Technest
Common Stock Issued to Investors representing Liquidated Damages associated
with
the Previous Registration Rights Agreement
|
Investor
|
Series
E Preferred Stock
|
Technest
Common Stock
|
||
|
Southridge
Partners LP
|
450.00
|
162,000
|
||
|
Southshore
Capital Fund Ltd.
|
79.20
|
28,512
|
||
|
Aberdeen
Avenue LLC
|
690.00
|
248,400
|
||
|
Brittany
Capital Management Ltd.
|
13.00
|
4,680
|
||
|
Total: 1,232.20
|
Total: 443,592
|
|||
18
