Contract
EXHIBIT
4.1
EXECUTION
VERSION
THIS
WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY
STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT
BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL
REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION
OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT
FROM
REGISTRATION.
WARRANT
TO PURCHASE STOCK
| Company: | Technest Holdings, Inc., a Nevada corporation |
| Number of Shares: | 75,000 |
| Class of Stock: | Common Stock, $0.001 par value per share |
| Warrant Price: | $5.85 per share |
| Issue Date: | August 4, 2006 |
| Expiration Date: | August 3, 2013 |
|
Credit
Facility:
|
This Warrant is issued in connection with that certain Loan and Security Agreement of even date herewith between Silicon Valley Bank and the Company. |
THIS
WARRANT CERTIFIES THAT, for good and valuable consideration, SILICON VALLEY
BANK
(Silicon Valley Bank, together with any successor or permitted assignee or
transferee of this Warrant or of any shares issued upon exercise hereof, is
referred to hereinafter as "Holder") is entitled to purchase the number of
fully
paid and nonassessable shares (the "Shares") of the class of securities (the
“Class”) of the above-named company (the "Company") at the above-stated Warrant
Price, all as set forth above and as adjusted pursuant to Article 2 of this
Warrant, subject to the provisions and upon the terms and conditions set forth
in this Warrant.
ARTICLE
1. EXERCISE.
1.1 Method
of Exercise.
Holder
may exercise this Warrant by delivering the original of this Warrant together
with a duly executed Notice of Exercise in substantially the form attached
as
Appendix 1 to the principal office of the Company. Unless Holder is exercising
the conversion right set forth in Article 1.2, Holder shall also deliver to
the
Company a check, wire transfer (to an account designated by the Company), or
other form of payment acceptable to the Company for the aggregate Warrant Price
for the Shares being purchased.
1.2 Conversion
Right.
In lieu
of exercising this Warrant as specified in Article 1.1, Holder may from time
to
time convert this Warrant, in whole or in part, into a number of Shares
determined by dividing (a) the aggregate fair market value of the Shares or
other securities otherwise issuable upon exercise of this Warrant minus the
aggregate Warrant Price of such Shares by (b) the fair market value of one
Share. The fair market value of the Shares shall be determined pursuant to
Article 1.3.
1.3 Fair
Market Value.
If the
Company’s common stock is traded in a public market, the fair market value of a
Share shall be the average closing price of a share of common stock reported
for
the five business days immediately before Holder delivers this Warrant together
with its Notice of Exercise to the Company. If the Company’s common stock is not
traded in a public market, the Board of Directors of the Company shall determine
fair market value in its reasonable good faith judgment.
1.4 Delivery
of Certificate and New Warrant.
Promptly after Holder exercises or converts this Warrant and, if applicable,
the
Company receives payment of the aggregate Warrant Price, the Company shall
deliver to Holder certificates for the Shares acquired and, if this Warrant
has
not been fully exercised or converted and has not expired, a new Warrant
representing the Shares not so acquired.
1.5 Replacement
of Warrants.
On
receipt of evidence reasonably satisfactory to the Company of the loss, theft,
destruction or mutilation of this Warrant and, in the case of loss, theft or
destruction, on delivery of an indemnity agreement reasonably satisfactory
in
form and amount to the Company or, in the case of mutilation, or surrender
and
cancellation of this Warrant, the Company shall execute and deliver, in lieu
of
this Warrant, a new warrant of like tenor.
1.6 Treatment
of Warrant Upon Acquisition of Company.
1.6.1 "Acquisition".
For
the purpose of this Warrant, "Acquisition" means any sale, license, or other
disposition of all or substantially all of the assets of the Company, or any
reorganization, consolidation, merger or sale of outstanding capital stock
of
the Company where the holders of the Company's securities before the transaction
beneficially own less than a majority of the outstanding voting securities
of
the surviving entity after the transaction.
1.6.2 Treatment
of Warrant at Acquisition.
A) Upon
the
written request of the Company, Holder agrees that, in the event of an
Acquisition in which the sole consideration is cash, either (a) Holder shall
exercise its conversion or purchase right under this Warrant and such exercise
will be deemed effective immediately prior to the consummation of such
Acquisition or (b) if Holder elects not to exercise the Warrant, this Warrant
will expire upon the consummation of such Acquisition. The Company shall provide
the Holder with written notice of its request relating to the foregoing
(together with such reasonable information as the Holder may request in
connection with such contemplated Acquisition giving rise to such notice),
which
is to be delivered to Holder not less than ten (10) days prior to the closing
of
the proposed Acquisition.
B) Upon
the
written request of the Company, Holder agrees that, in the event of an
Acquisition that is an “arms length” sale of all or substantially all of the
Company’s assets (and only its assets) to a third party that is not an Affiliate
(as defined below) of the Company (a “True Asset Sale”), either (a) Holder shall
exercise its conversion or purchase right under this Warrant and such exercise
will be deemed effective immediately prior to the consummation of such
Acquisition or (b) if Holder elects not to exercise the Warrant, this Warrant
will continue until the Expiration Date if the Company continues as a going
concern following the closing of any such True Asset Sale. The Company shall
provide the Holder with written notice of its request relating to the foregoing
(together with such reasonable information as the Holder may request in
connection with such contemplated Acquisition giving rise to such notice),
which
is to be delivered to Holder not less than ten (10) days prior to the closing
of
the proposed Acquisition.
C) Upon
the
closing of any Acquisition other than those particularly described in
subsections (A) and (B) above, the successor entity shall assume the obligations
of this Warrant, and this Warrant shall be exercisable for the same securities,
cash, and property as would be payable for the Shares issuable upon exercise
of
the unexercised portion of this Warrant as if such Shares were outstanding
on
the record date for the Acquisition and subsequent closing. The Warrant Price
and/or number of Shares shall be adjusted accordingly.
As
used
herein “Affiliate”
shall
mean any person or entity that owns or controls directly or indirectly ten
percent (10%) or more of the stock of Company, any person or entity that
controls or is controlled by or is under common control with such persons or
entities, and each of such person’s or entity’s officers, directors, joint
venturers or partners, as applicable.
ARTICLE
2. ADJUSTMENTS
TO THE SHARES.
2.1 Stock
Dividends, Splits, Etc.
If the
Company declares or pays a dividend on the outstanding shares of the Class
payable in common stock or other securities, then upon exercise of this Warrant,
for each Share acquired, Holder shall receive, without cost to Holder, the
total
number and kind of securities to which Holder would have been entitled had
Holder owned the Shares of record as of the date the dividend occurred. If
the
Company subdivides the outstanding shares of the Class by reclassification
or
otherwise into a greater number of shares or takes any other action which
increase the amount of common stock into which the one share of the Class is
convertible, the number of Shares purchasable hereunder shall be proportionately
increased and the Warrant Price shall be proportionately decreased. If the
outstanding shares of the Class are combined or consolidated, by
reclassification or otherwise, into a lesser number of shares, the Warrant
Price
shall be proportionately increased and the number of Shares shall be
proportionately decreased.
2.2 Reclassification,
Exchange, Combinations or Substitution.
Upon
any reclassification, exchange, substitution, or other event that results in
a
change of the number and/or class of the securities issuable upon exercise
or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant, the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution,
or
other event. The Company or its successor shall promptly issue to Holder an
amendment to this Warrant setting forth the number and kind of such new
securities or other property issuable upon exercise or conversion of this
Warrant as a result of such reclassification, exchange, substitution or other
event that results in a change of the number and/or class of securities issuable
upon exercise or conversion of this Warrant. The amendment to this Warrant
shall
provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 2 including, without
limitation, adjustments to the Warrant Price and to the number of securities
or
property issuable upon exercise of the new Warrant. The provisions of this
Article 2.2 shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.
2.3 No
Impairment.
The
Company shall not, by amendment of its Articles or Certificate (as applicable)
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to
be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article
2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment.
2.4 Fractional
Shares.
No
fractional Shares shall be issuable upon exercise or conversion of the Warrant
and the number of Shares to be issued shall be rounded down to the nearest
whole
Share. If a fractional share interest arises upon any exercise or conversion
of
the Warrant, the Company shall eliminate such fractional share interest by
paying Holder the amount computed by multiplying the fractional interest by
the
fair market value of a full Share.
2.5 Certificate
as to Adjustments.
Upon
each adjustment of the Warrant Price, the Company shall promptly notify Holder
in writing, and, at the Company’s expense, promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE
3. REPRESENTATIONS
AND COVENANTS OF THE COMPANY.
3.1 Representations
and Warranties.
The
Company represents and warrants to, and agrees with, the Holder as
follows:
(a) All
Shares which may be issued upon the exercise of the purchase right represented
by this Warrant, and all securities, if any, issuable upon conversion of the
Shares, shall, upon issuance, be duly authorized, validly issued, fully paid
and
nonassessable, and free of any liens and encumbrances except for restrictions
on
transfer provided for herein or under applicable federal and state securities
laws.
(b) The
Company’s capitalization table attached hereto as Schedule
1
is true
and complete as of the Issue Date.
3.2 Notice
of Certain Events.
If the
Company proposes at any time (a) to declare any dividend or distribution upon
the outstanding shares of the same class and series as the Shares, whether
in
cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for subscription or sale pro rata to the holders of
the
outstanding shares of the same class and series as the Shares any additional
shares of any class or series of the Company's stock; (c) to effect any
reclassification, reorganization or recapitalization of any of its stock; or
(d)
to effect an Acquisition or to liquidate, dissolve or wind up; then, in
connection with each such event, the Company shall give Holder: (1) at least
10
days prior written notice of the date on which a record will be taken for such
dividend, distribution, or subscription rights (and specifying the date on
which
the holders of shares of the same class and series as the Shares will be
entitled thereto) or for determining rights to vote, if any, in respect of
the
matters referred to in (c) and (d) above; and (2) in the case of the matters
referred to in (c) and (d) above at least 10 days prior written notice of the
date when the same will take place (and specifying the date on which the holders
of shares of the same class and series as the Shares will be entitled to
exchange their shares for the securities or other property deliverable upon
the
occurrence of such event).
3.3 Registration
Under Securities Act of 1933, as amended.
The
Company agrees that the Shares shall have certain incidental, or “Piggyback,”
and S-3 registration rights pursuant to and as set forth in the Registration
Rights Agreement between the Company and Holder.
3.4 No
Shareholder Rights.
Except
as provided in this Warrant, Holder will not have any rights as a shareholder
of
the Company until the exercise of this Warrant.
3.5 Certain
Information.
The
Company agrees to provide Holder at any time and from time to time with such
information as Holder may reasonably request for purposes of Holder’s compliance
with regulatory, accounting and reporting requirements applicable to
Holder.
ARTICLE
4. REPRESENTATIONS,
WARRANTIES OF THE HOLDER.
The
Holder represents and warrants to the Company as follows:
4.1 Purchase
for Own Account.
This
Warrant and the securities to be acquired upon exercise of this Warrant by
Holder will be acquired for investment for Holder’s account, not as a nominee or
agent, and not with a view to the public resale or distribution within the
meaning of the Act. Holder also represents that it has not been formed for
the
specific purpose of acquiring this Warrant or the Shares.
4.2 Disclosure
of Information.
Holder
has received or has had full access to all the information it considers
necessary or appropriate to make an informed investment decision with respect
to
the acquisition of this Warrant and its underlying securities. Holder further
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of this Warrant and its
underlying securities and to obtain additional information (to the extent the
Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify any information furnished to Holder
or to
which Holder has access.
4.3 Investment
Experience.
Holder
understands that the purchase of this Warrant and its underlying securities
involves substantial risk. Holder has experience as an investor in securities
of
companies in the development stage and acknowledges that Holder can bear the
economic risk of such Holder’s investment in this Warrant and its underlying
securities and has such knowledge and experience in financial or business
matters that Holder is capable of evaluating the merits and risks of its
investment in this Warrant and its underlying securities and/or has a
preexisting personal or business relationship with the Company and certain
of
its officers, directors or controlling persons of a nature and duration that
enables Holder to be aware of the character, business acumen and financial
circumstances of such persons.
4.4 Accredited
Investor Status.
Holder
is an “accredited investor” within the meaning of Regulation D promulgated under
the Act.
4.5 The
Act.
Holder
understands that this Warrant and the Shares issuable upon exercise or
conversion hereof have not been registered under the Act in reliance upon a
specific exemption therefrom, which exemption depends upon, among other things,
the bona fide nature of the Holder’s investment intent as expressed herein.
Holder understands that this Warrant and the Shares issued upon any exercise
or
conversion hereof must be held indefinitely unless subsequently registered
under
the 1933 Act and qualified under applicable state securities laws, or unless
exemption from such registration and qualification are otherwise available.
ARTICLE
5. MISCELLANEOUS.
5.1 Term.
This
Warrant is exercisable in whole or in part at any time and from time to time
on
or before the Expiration Date.
5.2 Legends. This
Warrant and the Shares (and the securities issuable, directly or indirectly,
upon conversion of the Shares, if any) shall be imprinted with a legend in
substantially the following form:
THIS
WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE
ACT, OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE
PROVISIONS OF ARTICLE 5 OF THAT CERTAIN WARRANT TO PURCHASE STOCK ISSUED BY
THE
COMPANY TO SILICON VALLEY BANK DATED AS OF AUGUST 4, 2006 MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION
OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT
FROM
REGISTRATION.
5.3 Compliance
with Securities Laws on Transfer.
This
Warrant and the Shares issuable upon exercise of this Warrant (and the
securities issuable, directly or indirectly, upon conversion of the Shares,
if
any) may not be transferred or assigned in whole or in part without compliance
with applicable federal and state securities laws by the transferor and the
transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company, as reasonably requested by the Company). The Company shall not require
Holder to provide an opinion of counsel if the transfer is to SVB Financial
Group (Holder's parent company) or any other affiliate of Holder, provided
that
any such transferee is an “accredited investor” as defined in Regulation D
promulgated under the Act.
5.4 Transfer
Procedure.
After
receipt by Silicon Valley Bank (“Bank”) of the executed Warrant, Bank will
transfer all of this Warrant to SVB Financial Group, Holder's parent company,
by
execution of an Assignment substantially in the form of Appendix 2. Subject
to
the provisions of Article 5.3 and upon providing the Company with written
notice, SVB Financial Group and any subsequent Holder may transfer all or part
of this Warrant or the Shares issuable upon exercise of this Warrant (or the
Shares issuable directly or indirectly, upon conversion of the Shares, if any)
to any transferee, provided, however, in connection with any such transfer,
SVB
Financial Group or any subsequent Holder will give the Company notice of the
portion of the Warrant being transferred with the name, address and taxpayer
identification number of the transferee and Holder will surrender this Warrant
to the Company for reissuance to the transferee(s) (and Holder if applicable).
The Company may refuse to transfer this Warrant or the Shares to any person
who
directly competes with the Company.
5.5 Notices.
All
notices and other communications from the Company to the Holder, or vice versa,
shall be deemed delivered and effective when given personally or mailed by
first-class registered or certified mail, postage prepaid, at such address
as
may have been furnished to the Company or Holder, as the case may (or on the
first business day after transmission by facsimile) be, in writing by the
Company or such holder from time to time. All notices to Holder shall be
addressed as follows until the Company receives notice of a change of address
in
connection with a transfer or otherwise:
SVB
Financial Group
Attn:
Treasury Department
0000
Xxxxxx Xxxxx, XX 000
Xxxxx
Xxxxx, XX 00000
Telephone:
000-000-0000
Facsimile:
000-000-0000
Notice
to
the Company shall be addressed as follows until Holder receives notice of a
change in address:
Technest
Holdings, Inc.
Chief
Financial Officer
Xxx
XxXxxxxx Xxxxxx, 0xx
Xxxxx
Xxxxxx,
Xxxxxxxxxxxxx 00000
Telephone:
(000) 000-0000
Facsimile:
(000) 000-0000
5.6 Waiver.
This
Warrant and any term hereof may be changed, waived, discharged or terminated
only by an instrument in writing signed by the party against which enforcement
of such change, waiver, discharge or termination is sought.
5.7 Attorney’s
Fees.
In the
event of any dispute between the parties concerning the terms and provisions
of
this Warrant, the party prevailing in such dispute shall be entitled to collect
from the other party all costs incurred in such dispute, including reasonable
attorneys’ fees.
5.8 Automatic
Conversion upon Expiration.
In the
event that, upon the Expiration Date, the fair market value of one Share (or
other security issuable upon the exercise hereof) as determined in accordance
with Article 1.3 above is greater than the Warrant Price in effect on such
date,
then this Warrant shall automatically be deemed on and as of such date to be
converted pursuant to Article 1.2 above as to all Shares (or such other
securities) for which it shall not previously have been exercised or converted,
and the Company shall promptly deliver a certificate representing the Shares
(or
such other securities) issued upon such conversion to Holder.
5.9
Counterparts.
This
Warrant may be executed in counterparts, all of which together shall constitute
one and the same agreement.
5.10 Governing
Law.
This
Warrant shall be governed by and construed in accordance with the laws of the
Commonwealth of Massachusetts, without giving effect to its principles regarding
conflicts of law.
|
“COMPANY”
TECHNEST
HOLDINGS, INC.
By:
/s/
Xxxx
Xxxxxxx
Name:
Xxxx
Xxxxxxx
Title:
Chief
Financial
Officer
|
|
“HOLDER”
SILICON
VALLEY BANK
By:
/s/
Xxxxxxx
Xxxxxxx
Name:
Xxxxxxx
Xxxxxxx
Title:
Senior
Vice
President
|
APPENDIX
1
NOTICE
OF EXERCISE
1.
Holder
elects to purchase ___________ shares of the Common/Series ______ Preferred
[strike one] Stock of __________________ pursuant to the terms of the attached
Warrant, and tenders payment of the purchase price of the shares in
full.
[or]
1.
Holder
elects to convert the attached Warrant into Shares/cash [strike one] in the
manner specified in the Warrant. This conversion is exercised for
_____________________ of the Shares covered by the Warrant.
[Strike
paragraph that does not apply.]
2.
Please
issue a certificate or certificates representing the shares in the name
specified below:
___________________________________________
Holders
Name
___________________________________________
___________________________________________
(Address)
3.
By
its
execution below and for the benefit of the Company, Holder hereby restates
each
of the representations and warranties in Article 4 of the Warrant as the date
hereof.
HOLDER:
______________________________
By:____________________________
Name:__________________________
Title:___________________________
(Date):__________________________
APPENDIX
2
ASSIGNMENT
For
value received, Silicon Valley Bank hereby sells, assigns and transfers
unto
| Name: | SVB Financial Group | |
| Address: | 0000 Xxxxxx Xxxxx (HA-200) | |
| Tax ID: |
Xxxxx Xxxxx, XX 00000
00-0000000
|
that
certain Warrant to Purchase Stock issued
by Technest Holdings, Inc. (the “Company”), on ______________________ (the
“Warrant”) together with all rights, title and interest
therein.
SILICON
VALLEY BANK
By:___________________________________
Name:_________________________________
Title:__________________________________
Date:
________________________________
By
its
execution below, and for the benefit of the Company, SVB Financial Group makes
each of the representations and warranties set forth in Article 4 of the Warrant
as of the date hereof and agrees to be bound by all of the terms and conditions
set forth in the Warrant as the “Holder” thereof.
SVB
FINANCIAL GROUP
By:___________________________________
Name:
Xxxxxxxx Xxxxx
Title: Treasurer
