EXHIBIT 2.1
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (this "AGREEMENT"), is made as of
the 14th day of February, 2005, by and between Technest Holdings, Inc. (the
"COMPANY"), a Nevada corporation and a majority owned subsidiary of Xxxxxxxx
Technologies, Inc., a Florida corporation ("XXXXXXXX"), and each purchaser whose
name and address is set forth on the signature page hereof (each a "PURCHASER"
and collectively, the "PURCHASERS").
WHEREAS, the Company intends to raise up to $5,000,000 through the sale
of 1,149,425 units consisting of one share of the Series B Preferred Stock,
$.001 par value per share ("SERIES B PREFERRED STOCK"), of the Company, a
warrant in the form of EXHIBIT A to this Agreement (the "WARRANT") to purchase
two hundred eleven and eighteen hundredths (211.18) shares of the Common Stock ,
$.001 par value per share ("COMMON STOCK"), of the Company, and one share of the
Series C Preferred Stock, $.001 par value per share (the "SERIES C PREFERRED
STOCK"), of the Company; and
WHEREAS, each unit will be priced at $4.35;
WHEREAS, on or before the Closing Date (as defined below) Xxxxxxxx will
reserve for subsequent contribution to the Company for the purpose of meeting
the Company's obligation pursuant to the conversion rights of the holders of the
Series B Preferred Stock, 8,333,333 shares of common stock, par value $.0001 per
share ("XXXXXXXX COMPANY STOCK"), of Xxxxxxxx to the Company pursuant to the
terms of a Securities Purchase Agreement between the Company and Xxxxxxxx (the
"CONTRIBUTION AGREEMENT"); and
WHEREAS, the Company intends to use the proceeds of the sale of the
Securities (as defined below) to acquire all of the capital stock of Genex
Technologies, Inc., a Maryland corporation ("GENEX");
WHEREAS, the holders of a majority of each class of the Company's
capital stock have approved a 211.18 for 1 reverse split of the Common Stock of
the Company which will be effected after the Closing (as defined in SECTION 3);
and
WHEREAS, on or about February 8, 2005 and in contemplation of the
transactions contemplated by this Agreement, the Company issued 124.325 shares
of its Series A Preferred Stock, $.001 par value per share ("SERIES A PREFERRED
STOCK") to various persons having claims against the Company in full
satisfaction of such claims;
NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement and intending to be legally bound hereby, the Company and each
Purchaser agrees as follows:
SECTION 1. AUTHORIZATION OF SALE OF THE SECURITIES. Subject to the
terms and conditions of this Agreement, the Company has authorized the sale of
up to 1,149,425 shares of Series B Preferred Stock, five year Warrants, to
purchase up to 242,735,571 shares of Common Stock for an exercise price of
$.030779429 per share, and up to 1,149,425 shares of Series C Preferred Stock,
convertible into 242,735,571 shares of the Company's Common Stock. The Series B
Preferred Stock, the Warrants and the Series C Preferred Stock being hereinafter
collectively referred to as the "SECURITIES". The Securities will be sold in
units ("UNITS") consisting of one (1) share of Series B Preferred Stock, a
Warrant to purchase one (1) share of Common Stock and one (1) shares of Series C
Preferred Stock, for a price of $4.35 per unit.
SECTION 2. AGREEMENT TO SELL AND PURCHASE THE SECURITIES. At the
Closing (as defined in SECTION 3), the Company will sell the Securities to the
Purchasers, and each Purchaser will buy the number of Units set forth opposite
its name on the signature page hereof from the Company, upon the terms and
conditions hereinafter set forth, at the purchase price set forth on the
signature page hereof.
SECTION 3. DELIVERY OF THE SECURITIES AT THE CLOSING. The completion of
the purchase and sale of the Securities (the "CLOSING") shall occur
simultaneously with the execution hereof (the "CLOSING DATE"). At the Closing,
the Company will issue, or cause to be issued, to each Purchaser one or more
certificates representing shares of Series B Preferred Stock, Warrants, and
shares of Series C Preferred Stock registered in the name of the Purchaser, or
in such nominee name(s) as designated by the Purchaser in writing. The name(s)
in which the certificates are to be registered are set forth in the Stock
Certificate Questionnaire attached hereto as APPENDIX I.
SECTION 4. CONDITIONS TO CLOSING.
4.1 CONDITIONS OF PURCHASERS' OBLIGATIONS. The obligations of each
Purchaser hereunder are subject to the fulfillment to the reasonable
satisfaction of such Purchaser, prior to or at the Closing, of each of the
following conditions:
(a) NO OPPOSITION. No suit, action or proceeding shall be
pending or threatened against the Company at any time prior to or on the Closing
Date before or by any court or governmental body seeking to restrain or
prohibit, or seeking damages or other relief in connection with, the execution
and delivery of this Agreement or the consummation of the transactions
contemplated hereby or which might materially and adversely affect the business
or properties or condition, financial or other, or results of operations of the
Company.
(b) CONSENTS OF THIRD PARTIES. There shall have been received
by the Company, in form and substance reasonably satisfactory to each Purchaser,
all consents, approvals, amendments or modifications necessary or desirable to
consummate the transactions contemplated by this Agreement and each other
agreement entered in connection with this transaction.
(c) REPRESENTATIONS AND COVENANTS. The representations and
warranties of the Company contained in this Agreement or otherwise made in
writing by it or on its behalf pursuant hereto or otherwise made in connection
with the transactions contemplated hereby shall be true and correct at and as of
the Closing Date with the same force and effect as though made on and as of such
date; each and all of the covenants, agreements and conditions to be performed
or satisfied by the Company hereunder at or prior to the Closing Date shall have
been duly performed or satisfied; and the Company shall have furnished each
Purchaser with such certificates and other documents evidencing the truth of
such representations and warranties and the performance and satisfaction of such
covenants, agreements and conditions as such Purchaser shall have reasonably
requested.
2
(d) COMPANY REGISTRATION RIGHTS AGREEMENT. The Company and
each Purchaser shall have executed and delivered the Technest Registration
Rights Agreement in substantially the form of EXHIBIT B hereto (the "TECHNEST
REGISTRATION RIGHTS AGREEMENT").
(e) XXXXXXXX REGISTRATION RIGHTS AGREEMENT. Xxxxxxxx and each
Purchaser shall have executed and delivered the Xxxxxxxx Registration Rights
Agreement in substantially the form of EXHIBIT C hereto.
(f) SECURITIES. The Company shall have issued the Warrants,
the Series B Preferred Stock and the Series C Preferred Stock.
(g) CONTRIBUTION AGREEMENT. The Company and Xxxxxxxx shall
have executed and delivered the Securities Purchase Agreement in substantially
the form of EXHIBIT D hereto.
(h) OFFICERS AND DIRECTORS. The Company shall have received
the resignation of the existing officers of the Company, and Xxxxxx Xxxxxx shall
have been elected or appointed to the board of directors of the Company.
(i) ACQUISITION DOCUMENTS. Simultaneously herewith, the
Company and/or one of its subsidiaries shall consummate the acquisition of Genex
substantially in accordance with the Agreement and Plan of Merger, attached as
EXHIBIT E hereto (the "MERGER AGREEMENT"), and such other agreements, documents
and instruments necessary to complete the transactions contemplated by the
Merger Agreement.
(j) REVERSE SPLIT. A majority of each class of the Company's
capital stock shall have approved a 211.18 for 1 reverse split of the Common
Stock of the Company which will be effected after the Closing.
(k) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchasers, and the
Purchasers shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
4.2 CONDITIONS OF THE COMPANY'S OBLIGATIONS. The obligations of the
Company hereunder are subject to the fulfillment to the reasonable satisfaction
of the Company prior to or at the Closing of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each Purchaser contained in this Agreement or otherwise made in
writing by it or on its behalf pursuant hereto or otherwise made in connection
with the transactions contemplated hereby shall be true and correct at and as of
the Closing Date with the same force and effect as though made on and as of such
date; each of the covenants, agreements and conditions to be performed or
satisfied by each Purchaser hereunder at or prior to the Closing Date shall have
been duly performed or satisfied; and each Purchaser shall have delivered to the
Company a certificate executed by such Purchaser or an officer of the Purchaser,
certifying to the satisfaction of the conditions specified in this SECTION
4.2(a).
3
(b) PAYMENT OF PURCHASE PRICE. Each Purchaser shall pay the
purchase price for the number of Units set forth on the signature pages hereto.
(c) CERTIFICATES OF DESIGNATION. The Certificates of
Designation of the Company setting forth the rights, privileges and preferences
of the Series B Preferred Stock, in substantially the form of EXHIBIT F hereto
and the Series C Preferred Stock, in substantially the form of EXHIBIT G hereto,
shall have been filed with the Secretary of State of the State of Nevada and
shall have become effective.
(d) INCORPORATION OF CONDITIONS. The conditions of SECTIONS
4.1(a), (b), (g), (i), (j) and (k) shall have been fulfilled.
SECTION 5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
The Company hereby represents and warrants to, and covenants with, the
Purchasers as follows:
5.1 ORGANIZATION AND QUALIFICATION. Except as disclosed in SCHEDULE
5.1, the Company is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation; and the Company is
duly qualified to do business as a foreign corporation and is good standing in
each other jurisdiction in which qualification is required, except where the
failure to be so qualified would not have a Material Adverse Effect, as defined
in SECTION 5.4.
5.2 AUTHORIZED CAPITAL STOCK. The authorized capital stock of the
Company consists of
(i) 495,000,000 shares of Common Stock of which 442,059,477
are issued and outstanding; and
(ii) 5,000,000 shares of Preferred Stock, $.001 par value per
share, of which 150 shares have been designated Series A Convertible
Preferred Stock, 124.325 of which are issued and outstanding, 1,149,425
have been designated Series B Preferred Stock, none of which are issued
and outstanding, and 1,149,425 have been designated Series C Preferred
Stock, none of which are issued and outstanding.
All subscriptions, warrants, options, convertible securities, and other rights
(contingent or other) to purchase or otherwise acquire equity securities of the
Company issued and outstanding on the Closing Date, are as set forth on SCHEDULE
5.2 hereto. Except as set forth on SCHEDULE 5.2 or as disclosed in the
Information Documents filed prior to the date of this Agreement, no Common Stock
nor any subscription, warrant, option, convertible security, or other right
(contingent or other) to purchase or otherwise acquire equity securities of the
Company is outstanding on the Closing Date. The issued and outstanding shares of
the Company's capital stock have been duly authorized and validly issued, are
fully paid and nonassessable, have been issued in compliance with all applicable
U.S. federal and state securities laws, and were not issued in violation of or
subject to any preemptive rights or other rights to subscribe for or purchase
securities.
5.3 ISSUANCE, SALE AND DELIVERY OF THE SHARES OF SERIES B PREFERRED
STOCK, WARRANTS, AND SHARES OF SERIES C PREFERRED SOCK. The shares of Series B
Preferred Stock, Warrants, and shares of Series C Preferred Stock being
purchased and the shares of Common Stock to be issued upon conversion of the
Series C Preferred Stock and exercise of the Warrants hereunder have been duly
4
authorized and, when issued, delivered and paid for in the manner set forth in
this Agreement, will be validly issued, fully paid and nonassessable. No
preemptive rights or other rights of any stockholder of the Company to subscribe
for or purchase exist with respect to the issuance and sale of the shares of
Series B Preferred Stock, Warrants, and shares of Series C Preferred Stock by
the Company pursuant to this Agreement. No further approval or authority of the
stockholders or the Board of Directors of the Company will be required for the
issuance and sale of the shares of Series B Preferred Stock, Warrants, and
shares of Series C Preferred Stock and the shares of Common Stock to be issued
upon conversion of the Series C Preferred Stock and exercise of the Warrants to
be sold by the Company as contemplated herein. The Company's issuance of the
shares of Series B Preferred Stock, Warrants, and shares of Series C Preferred
Stock and the shares of Common Stock to be issued upon conversion of the Series
C Preferred Stock and exercise of the Warrants shall be in compliance with all
applicable U.S. securities laws.
5.4 DUE EXECUTION, DELIVERY AND PERFORMANCE OF THE AGREEMENTS. The
Company has full legal right, corporate power and authority to enter into this
Agreement and perform the transactions contemplated hereby. This Agreement has
been duly authorized, executed and delivered by the Company. The execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions herein contemplated hereby will not violate
any provision of the organizational documents of the Company. The execution,
delivery and performance of this Agreement by the Company and the consummation
by the Company of the transactions herein contemplated will not result in the
creation of any lien, charge, security interest or encumbrance upon any assets
of the Company pursuant to the terms or provisions of, or conflict with, result
in the breach or violation of, or constitute, either by itself or upon notice or
the passage of time or both, a default under any material agreement, mortgage,
deed of trust, lease, franchise, license, indenture, permit or other instrument
to which the Company is a party or by which the Company or any of its properties
may be bound or affected and in each case which individually or in the aggregate
would have a material adverse effect on the condition (financial or otherwise),
properties, business, prospects, or results of operations of the Company, taken
as a whole (a "MATERIAL ADVERSE EFFECT"), or any statute or any authorization,
judgment, decree, order, rule or regulation of any court or any regulatory body,
administrative agency or other governmental body applicable to the Company or
any of its respective properties. No consent, approval, authorization or other
order of any court, regulatory body, administrative agency or other governmental
body is required for the execution and delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement, except for
compliance with all U.S. federal and state securities laws applicable to the
offering and sale of the Securities. Upon its execution and delivery, and
assuming the valid execution thereof by each Purchaser, this Agreement will
constitute a valid and binding obligation of the Company, enforceable against
the Company in accordance with its 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).
5
5.5 GOOD STANDING OF SUBSIDIARIES. Except as set forth on SCHEDULE 5.5,
the Company has no subsidiaries and has not acquired, sold, divested or
liquidated any subsidiary or line of business.
5.6 NO DEFAULTS. Except as disclosed in SCHEDULE 5.6, he Company is not
in violation of or default under any provision of its Articles of Incorporation
or bylaws, or other organizational documents. The Company, and to the best of
the Company's knowledge, each other party thereto, is not in material breach of
or default with respect to any provision of any agreement, judgment, decree,
order, mortgage, deed of trust, lease, franchise, license, indenture, permit or
other instrument to which the Company is a party or by which the Company or any
of its properties are bound; and there does not exist any state of facts which,
with notice or lapse of time or both, would constitute an event of default as
defined in such documents on the part of the Company, and to the best of the
Company's knowledge, on the part of each other party thereto, except for such
breaches and defaults which individually or in the aggregate would not have a
Material Adverse Effect.
5.7 NO ACTIONS.
Except as disclosed in the Information Documents (as defined
in SECTION 5.16) or SCHEDULE 5.7 to this Agreement, there are no legal or
governmental actions, suits or proceedings pending or, to the best of the
Company's knowledge, threatened to which the Company or any of its subsidiaries
is or may be a party or of which property owned or leased by the Company or any
of its subsidiaries is or may be subject (except for threatened litigation which
individually or in the aggregate would not have a Material Adverse Effect); and
no labor disturbance by the employees of the Company or any of its subsidiaries
exists, or, to the best of the Company's knowledge, is imminent. Neither the
Company nor any of its subsidiaries is a party to or subject to the provisions
of any injunction, judgment, decree or order of any court, regulatory body,
administrative agency or other governmental body.
5.8 PROPERTIES. The Company has, as of the applicable dates referred to
therein, good and marketable title to all the properties and assets reflected as
owned by it in the financial statements included in the Information Documents,
subject to no lien, mortgage, pledge, charge or encumbrance of any kind except
(i) those, if any, reflected in such financial statements, or (ii) those which
are not material in amount and do not adversely affect the use made and
currently proposed to be made of such property by the Company or such
subsidiary. The Company and its subsidiaries hold their leased properties under
valid and binding leases. The Company and its subsidiaries own or lease all such
properties as are necessary to their operations as now conducted.
5.9 NO MATERIAL CHANGE. Except as disclosed in SCHEDULE 5.9, since the
date of the most recent audited balance sheet included in the Information
Documents and except in connection with the transactions contemplated by the
Merger Agreement or as disclosed in the Information Documents (i) the Company
has not incurred any material liabilities or obligations, indirect or
contingent, or entered into any material verbal or written agreement or other
transaction which is not in the ordinary course of business or which could
reasonably be expected to result in a material reduction in the future earnings
6
of the Company or its subsidiaries; (ii) the Company and its subsidiaries have
not sustained any material loss or interference with their businesses or
properties from fire, flood, windstorm, accident or other calamity, whether or
not covered by insurance; (iii) the Company has not paid or declared any
dividends or other distributions with respect to its capital stock, and the
Company is not in default in the payment of principal or interest on any
outstanding debt obligations, if any; (iv) there has not been any material
change in the capital stock of the Company (other than the issuance of
412,650,577 shares of Common Stock to Xxxxxxxx pursuant to the Contribution
Agreement, the issuance of 124.325 shares of Series A Preferred Stock to various
persons in connection with the settlement of claims, and the issuance of 750,000
shares of Common Stock as compensation to consultants) or indebtedness material
to the Company or any of its subsidiaries (other than in the ordinary course of
business); and (v) there has not been a material adverse change in the condition
(financial or otherwise), properties, business or results of operations of the
Company or any of its subsidiaries.
5.10 INTELLECTUAL PROPERTY.
(a) The Company owns or has the right to use all Intellectual
Property Rights (as defined below) used by the Company for the conduct of its
business, which Intellectual Property Rights are the only Intellectual Property
Rights necessary or required for the conduct of its business.
(b) The Company is not in default of its obligations to pay
royalties or other amounts to other persons by reason of the ownership or use of
any Intellectual Property Rights used by the Company for the conduct of its
business.
(c) To the Company's knowledge, no Intellectual Property Right
owned by the Company violates or will violate any license or infringes or will
infringe any Intellectual Property Rights of another. To the Company's
knowledge, no Intellectual Property Right, product or service marketed, sold or
licensed (as licensor or as licensee) by the Company, violates or will violate
any license or infringes or will infringe any Intellectual Property Rights of
another, nor has the Company received any notice that any of the Intellectual
Property Rights used by the Company for the conduct of their respective
businesses, conflicts or will conflict with the rights of others.
(d) There are no claims pending or, to the Company's
knowledge, threatened with respect to any Intellectual Property Rights necessary
or required for the conduct of the business of the Company as currently
conducted, nor, to the best of the Company's knowledge, does there exist any
basis therefor.
As used herein, the term "INTELLECTUAL PROPERTY RIGHTS" means all patents,
trademarks, service marks, trade names, copyrights, inventions, trade secrets,
know-how, proprietary processes and formulae, applications for patents,
trademarks, service marks and copyrights, and other intellectual property
rights.
5.11 COMPLIANCE. The Company has not been advised, and has no reason to
believe, that the Company is not conducting business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which it is
conducting business, except where failure to be so in compliance would not have
a Material Adverse Effect.
7
5.12 TAXES. The Company has filed all U.S. federal and state tax
returns required to be filed by it, and the Company has paid all taxes shown to
be due by such returns as well as all other taxes, assessments and governmental
charges which have become due or payable, including, without limitation, all
taxes which the Company is obligated to withhold from amounts owing to
employees, creditors and third parties. The Company has established adequate
reserves for all taxes accrued but not yet payable. No audit, action, suit,
proceeding, claim, examination, deficiency or assessment is currently pending
or, to the best of the Company's knowledge, threatened against the Company.
There is no material tax lien (other than for current taxes not yet due and
payable), whether imposed by U.S. or any other taxing authority, outstanding
against the assets, properties or business of the Company.
5.13 INTEGRATION, ETC. The Company has not in the past nor will it
hereafter take any action to sell, offer for sale or solicit offers to buy any
securities of the Company which would bring the offer, issuance or sale of the
Securities, as contemplated by this Agreement, within the provisions of Section
5 of the Securities Act of 1933, as amended (the "SECURITIES ACT"). Neither the
Company nor any of its Affiliates (as defined in Rule 501(b) of Regulation D
under the Securities Act) has directly, or through any agent, (i) sold, offered
for sale, solicited offers to buy or otherwise negotiated in respect of, any
"security" (as defined in the Securities Act) which is or could be integrated
with the sale of the Securities in a manner that would require the registration
under the Securities Act of the Securities or (ii) engaged in any form of
general solicitation or general advertising (as those terms are used in
Regulation D under the Securities Act) in connection with the offering of the
Securities or in any manner involving a public offering within the meaning of
Section 4(2) of the Act.
5.14 INSURANCE. The Company maintains insurance of the types and in the
amounts that the Company reasonably believe is adequate for the respective
businesses, including, but not limited to, insurance against theft, damage,
destruction, acts of vandalism and all other risks customarily insured against
by similarly situated companies, all of which insurance is in full force and
effect.
5.15 REPORTING COMPANY; LISTED SECURITIES. Except as set forth on
SCHEDULE 5.15, the Company has filed all reports required to be filed by
Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), during the twelve (12) months preceding the Closing Date and
has been subject to such filing requirements for such twelve (12) month period.
The Company's Common Stock is quoted on the Over the Counter Bulletin Board
("OTCBB").
5.16 ADDITIONAL INFORMATION. The Company has made available to the
Purchasers a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by the Company with the
Securities and Exchange Commission (the "COMMISSION"), under the Exchange Act
since January 1, 2004 (as such documents have since the time of their filing
been amended, the "INFORMATION DOCUMENTS"), which, except as set forth on
SCHEDULE 5.16, are all the documents (other than preliminary material) that the
Company was required to file with the Commission since such date. As of their
respective dates, the Information Documents and any forms, reports and other
documents filed by the Company during the period commencing on the date of this
Agreement and ending on the last date on which the Company is required to
maintain the effectiveness of the registration statement referred to in the
8
Technest Registration Rights Agreement, complied, or will comply, in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and the rules and regulations of the Commission
thereunder applicable to the Information Documents or such other forms, reports
or other documents, and none of the Information Documents contained, or will
contain at the time they are filed, any untrue statement of a material fact or
omitted, or will omit at the time they are filed, to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the Information Documents comply
as to form in all material respects with applicable accounting requirements and
with the published rules and regulations of the Commission with respect thereto,
have been prepared in accordance with GAAP applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by the rules and regulations of
the Commission) and fairly present (subject, in the case of the unaudited
statements, to normal, recurring audit adjustments, which were not individually
or in the aggregate material) in all material respects the financial position of
the Company as at the dates thereof and the results of its operations and cash
flows for the periods then ended.
5.17 RELATED PARTY TRANSACTIONS. Except as disclosed in SCHEDULE 5.17
and in the Information Documents, no transaction has occurred between or among
the Company and its affiliates, officers, directors or any affiliate of such
officers or director that with the passage of time will be required to be
disclosed pursuant to Section 13, 14 or 15(d) of the Exchange Act.
5.18 FULL DISCLOSURE. To the Company's knowledge, neither this
Agreement (including the disclosure schedules hereto) nor any certificate or
other information or document furnished or to be furnished by the Company in
writing contains or will contain any untrue statement by the Company of a
material fact or omit to state a material fact necessary to be stated to make
the statements by the Company contained herein not false or misleading.
5.19 ADDITIONAL AGREEMENTS OF THE COMPANY.
(a) ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. (i) For
each Unit a Purchaser continues to hold on the first anniversary of the Closing
Date (the "RESET DATE"), the Company shall issue to such Purchaser, within ten
(10) days after the determination of the Combined Market Price, a stock
certificate, registered in the name of the Purchaser, representing a number of
shares of Common Stock (the "RESET SHARES") calculated in accordance with the
following formula:
(UNITS HELD ON RESET DATE) X [(ADJUSTMENT PRICE) - COMBINED MARKET PRICE)]
--------------------------------------------------------------------------
THNS MARKET PRICE
"ADJUSTMENT PRICE" shall mean $6.525 (subject to appropriate adjustment
in the event of any stock dividend, stock split, combination or other
similar recapitalization affecting such shares)
9
"COMBINED MARKET PRICE" shall mean the THNS Market Price added to the
MRKL Market Price.
"MRKL MARKET PRICE" shall mean the average of the closing bid prices of
the Xxxxxxxx Company Stock during the period beginning ten (10) Trading
Days prior to the Reset Date and ending ten (10) Trading Days after the
Reset Date as reported by the OTC Bulletin Board or any similar
organization or agency of national recognition succeeding to its
functions of reporting prices for the Xxxxxxxx Company Stock.
"THNS MARKET PRICE" shall mean the average of the closing bid prices of
the Common Stock during the period beginning ten (10) Trading Days
prior to the Reset Date and ending ten (10) Trading Days after the
Reset Date as reported by the OTC Bulletin Board or any similar
organization or agency of national recognition succeeding to its
functions of reporting prices for the Common Stock.
(b) If the number calculated in accordance with the foregoing
formula is zero or a negative number, no Reset Shares shall be issuable
hereunder and the Purchaser shall not be obligated to transfer any shares of
Common Stock to the Company.
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH PURCHASER.
Each Purchaser hereby, for itself and for no other Purchaser, represents and
warrants to the Company as follows:
6.1 Each Purchaser represents and warrants to, and covenants with, the
Company that: (i) the Purchaser is knowledgeable, sophisticated and experienced
in making, and is qualified to make, decisions with respect to investments in
securities representing an investment decision like that involved in the
purchase of the Securities, including investments in securities issued by the
Company, and has requested, received, reviewed and understood all information it
deems relevant in making an informed decision to purchase the Securities,
including, without limitation, the information contained in the Information
Documents; (ii) it acknowledges that the offering of the Securities pursuant to
this Agreement has not been reviewed by the Commission or any state regulatory
authority; (iii) the Purchaser is acquiring the number of Securities set forth
in the signature page hereto, for its own account for investment only and with
no present intention of distributing any of such Securities (or any component
thereof) or any arrangement or understanding with any other persons regarding
the distribution of such Securities (or any component thereof); (iv) the
Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Securities (or any component thereof)
except in compliance with the Securities Act, rules and regulations promulgated
under the Securities Act and any applicable state securities or blue sky laws;
(v) the Purchaser has, in connection with its decision to purchase the number of
Securities set forth on the signature page hereof, not relied upon any
representations or other information (whether oral or written) other than as set
forth in the Information Documents and the representations and warranties of the
Company contained herein; (vi) the Purchaser has had an opportunity to discuss
this investment with representatives of the Company and ask questions of them
and such questions have been answered to the full satisfaction of the Purchaser;
and (vii) the Purchaser is an "accredited investor" within the meaning of Rule
501 of Regulation D promulgated under the Securities Act.
10
6.2 The Purchaser hereby covenants with the Company not to make any
sale of the shares of Series B Preferred Stock, Warrants, and shares of Series C
Preferred Stock and the shares of Common Stock to be issued upon conversion of
the Series C Preferred Stock and exercise of the Warrants or the Xxxxxxxx Shares
without satisfying the prospectus delivery requirements under the Securities
Act, if any.
6.3 Each Purchaser further represents and warrants to, and covenants
with, the Company that (i) the Purchaser has full right, power, authority and
capacity to enter into this Agreement and to consummate the transactions
contemplated hereby and has taken all necessary action to authorize the
execution, delivery and performance of this Agreement, (ii) the Purchaser is
duly organized, validly existing and in good standing under the laws of its
jurisdiction of organization, (iii) the execution, delivery and performance of
this Agreement by Purchaser and the consummation by the Purchaser of the
transactions contemplated by this Agreement will not violate any provision of
the organizational documents of Purchaser or conflict with, result in the breach
or violation of, or constitute, either by itself or upon notice or the passage
of time or both, a default under any material agreement, mortgage, deed of
trust, lease, franchise, license, indenture, permit or other instrument to which
the Purchaser is a party or, any statute or any authorization, judgment, decree,
order, rule or regulation of any court or any regulatory body, administrative
agency or other governmental body applicable to the Purchaser, (iv) no consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body is required on the part of the
Purchaser for the execution and delivery of this Agreement or the consummation
of the transactions contemplated by this Agreement, and (v) upon the execution
and delivery of this Agreement, this Agreement shall constitute a valid and
binding obligation of the Purchaser enforceable in accordance with its 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) and (vi) there is not in effect any order
enjoining or restraining the Purchaser from entering into or engaging in any of
the transactions contemplated by this Agreement.
6.4 Each Purchaser recognizes that an investment in the Securities is
SPECULATIVE and involves a HIGH DEGREE OF RISK, including a risk of total loss
of the Purchaser's investment.
6.5 All of the information provided to the Company or its agents or
representatives concerning the Purchaser's suitability to invest in the Company
and the representations and warranties contained herein, are complete, true and
correct as of the date hereof. Each Purchaser understands that the Company is
relying on the statements contained herein to establish an exemption from
registration under U.S. federal and state securities laws.
6.6 The address set forth in the signature page hereto is the
Purchaser's true and correct domicile.
11
6.7 Each Purchaser understands and agrees that each certificate or
other document evidencing any of the shares of Series B Preferred Stock,
Warrants, and shares of Series C Preferred Stock shall be endorsed with the
legend in substantially the form set forth below as well as any other legends
required by applicable law, and the Purchaser covenants that the Purchaser shall
not transfer shares of Series B Preferred Stock, Warrants, and shares of Series
C Preferred Stock 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.
6.8 Each Purchaser acknowledges that certain additional shareholders of
the Company have rights to be included in the Company's next subsequent
registration statement filed by the Company with the Securities and Exchange
Commission on a piggyback basis, including the shares of Common Stock to be
issued upon conversion of the Company's Series A Convertible Preferred Stock.
SECTION 7. SURVIVAL OF REPRESENTATIVES, WARRANTIES AND AGREEMENTS.
Notwithstanding any investigation made by any party to this Agreement, all
covenants, agreements, representations and warranties made by the Company and
the Purchaser herein and in any certificates or documents delivered pursuant
hereto or in connection therewith shall survive following the delivery to the
Purchaser of the Securities being purchased and the payment therefor.
SECTION 8. INDEMNIFICATION.
8.1 INDEMNIFICATION BY THE COMPANY. The Company hereby agrees to
indemnify, defend and hold each Purchaser harmless from and against the amount
of any actual damage, loss, cost or expense (including reasonable attorneys'
fees and settlement costs) to such Purchaser ("LOSS") occasioned or caused by,
resulting from or arising out of:
a. Any failure by the Company to perform, abide by or fulfill,
in all material respects, any of the agreements, covenants or
obligations set forth in or entered into, in connection with this
Agreement to be so performed or fulfilled by the Company.
b. Any material inaccuracy in or breach of any of the
representations or warranties of the Company set fort in this
Agreement, or any certificate or schedule or other writing furnished
pursuant hereto.
12
c. The amount of any Loss shall be the amount of cash
reimbursement or set-off that, when received by the Purchaser, shall
place the Purchaser in the same financial position it would have been
in if such Loss has not occurred.
8.2 NOTICE OF CLAIM. The Purchasers ("CLAIMANT"), as the case may be,
shall give prompt written notice ("NOTICE OF CLAIM") to Company ("INDEMNIFYING
PARTY") of any claim (actual or threatened) or other event which in the judgment
of Claimant might result or has resulted in a Loss by Claimant hereunder, and
Indemnifying Party shall assume the defense of such claim or any litigation
resulting therefrom; PROVIDED THAT counsel for Indemnifying Party, who shall
conduct the defense of such claim (actual, threatened or asserted) or
litigation, shall be reasonably satisfactory to the Claimant, and Claimant may
participate in such defense at its expense, and PROVIDED, FURTHER, that the
omission by Claimant to give a Notice of Claim as provided herein shall not
relieve Indemnifying Party of its obligations hereunder except to the extent
that (i) the omission results in a failure of actual notice to Indemnifying
Party and (ii) Indemnifying Party is damaged as a result of the failure to give
a Notice of Claim. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Claimant, consent to the
entry of any judgment or decree or enter into any settlement which does not, in
each case, include as an unconditional term thereof the giving by the Claimant
or plaintiff to Claimant of a release from all liability in respect to such
claim or litigation, and no Indemnifying Party shall have liability with respect
to any payment made by a Claimant in connection with the settlement,
satisfaction or compromise of any claim unless the Indemnifying Party shall have
approved thereof in advance in writing. If the Claimant shall not have received
notice that the Indemnifying Party shall assume the defense of such claim within
twenty (20) days after the Notice of Claim is given to the Indemnifying Party of
the existence of such claim, the Claimant shall be free to proceed with the
defense of such claim. Each Notice of Claim shall be accompanied (or followed as
promptly as is reasonably practicable after the amount of such Loss becomes
determinable) by a certificate signed by the President of Claimant, or the
Claimant if the Claimant is a natural person, and setting forth in reasonable
detail the calculation of the amount of such Loss in accordance with the
provisions hereof, and accompanied by copies of all relevant documents and
records. No Loss shall be considered to have occurred with respect to any
payment made by any Claimant in settlement, satisfaction or compromise of any
claim unless the Indemnifying Party shall have approved thereof in advance and
in writing.
SECTION 9. BROKER'S FEE. Except as otherwise agreed to between the
Purchasers and the Company, the Purchaser acknowledges that the Company intends
to pay to Greenfield Capital Partners LLC a fee in respect of the sale of the
Securities to the Purchasers. Each of the parties hereto hereby represents that,
on the basis of any actions and agreements by it, there are no other brokers or
finders entitled to compensation from the other party in connection with the
sale of Securities` to the Purchasers.
SECTION 10. 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:
13
if to the Company, to:
Technest Holdings, Inc.
00 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxxxx Xxxxxx
with a copy to:
Xxxxx Xxxx LLP
000 Xxxxxxx Xxxxxxxxx,
Xxxxxx, XX 00000
Fax: 000-000-0000
Attn: Xxxxx Xxxxxxxx, Esq.
or to such other person at such other place as the Company shall designate to
the Purchaser in writing; and
if a Purchaser, at such Purchaser's address as set forth at the end of this
Agreement, or at such other address or addresses as may have been furnished to
the Company in writing.
SECTION 11. CHANGES. Any provision in this Agreement may be waived,
modified or amended pursuant to an instrument in writing, signed by the Company
and the holders of a majority of each Security issued pursuant to this
Agreement.
SECTION 12. HEADINGS. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
SECTION 13. SEVERABILITY. In case any provision contained in this
Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
SECTION 14. 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 agrees that all proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement shall be
commenced exclusively in the New York Courts. Each party hereto hereby
irrevocably submits to the exclusive jurisdiction of the New York Courts 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 proceeding, any claim that it is not
personally subject to the jurisdiction of any such New York Court, or that such
proceeding has been commenced in an improper or inconvenient forum. 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.
14
SECTION 15. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original, but both of which,
when taken together, shall constitute but one instrument, and shall become
effective when one or more counterparts have been signed by each party hereto
and delivered to the other party.
SECTION 16. ENTIRE AGREEMENT. This Agreement (including the attachments
hereto) contains the entire agreement of the parties with respect to the subject
matter hereof and supersedes and is in full substitution for any and all prior
oral or written agreements and understandings between them related to such
subject matter, and no party hereto shall be liable or bound to the other party
hereto in any manner with respect to such subject matter by any representations,
indemnities, covenants or agreements except as specifically set forth herein.
[REMAINDER OF PAGE INTENTIONALLY DELETED]
15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives shown below:
____________________________________
[Name of Purchaser]
By:_________________________________
Name:
Title:
Address: ________________________
________________________
________________________
Telephone: ________________________
Facsimile: ________________________
Date: ________________________
Number of Price Per Aggregate
Units Share in Price in
________ U.S. DOLLARS U.S. DOLLARS
------------ ------------
$4.35
Accepted and Agreed to by:
TECHNEST HOLDINGS, INC.
By: ______________________________
Name: ______________________________
Title: ____________________________
Date: ______________________________
16
APPENDIX I
TECHNEST HOLDINGS, INC.
STOCK CERTIFICATE AND WARRANT QUESTIONNAIRE
Pursuant to Section 3 of the Agreement, please provide us with the following
information:
1. The exact name that your Securities are to be registered in (this is
the name that will appear on your stock certificate(s) and warrants).
You may use a nominee name if appropriate:
___________________________________
2. The relationship between the Purchaser of the Securities and the
Registered Holder listed in response to item 1 above:
___________________________________
3. The mailing address of the Registered Holder listed in response to item
1 above:
___________________________________
___________________________________
___________________________________
4. The Social Security Number or Tax Identification Number of the
Registered Holder listed in response to item 1 above:
___________________________________
