EXHIBIT 2.2
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT ("AGREEMENT") is made as of February
14, 2005, by and among Technest Holdings, Inc., a Nevada corporation (the
"COMPANY") and Xxxxxxxx Technologies, Inc., a Florida corporation ("XXXXXXXX").
WHEREAS, Xxxxxxxx wishes to purchase from the Company, and the Company
wishes to sell to Xxxxxxxx, 412,650,577 shares (the "SHARES") of the Company's
Common Stock, $.001 par per share (the "COMMON STOCK"), representing fifty-one
percent (51%) of the issued and outstanding capital stock of the Company;
WHEREAS, on the Closing Date (as defined below), the Company intends to
enter into a Securities Purchase Agreement, pursuant to which the Company
intends to raise up to $5,000,000 through the sale of Series B Preferred Stock
(the "PREFERRED STOCK"), $.001 par value per share, of the Company, Series C
Preferred Stock, $.001 par value per share, of the Company ("SERIES C PREFERRED
STOCK" and together with the Series B Preferred Stock, the "PREFERRED STOCK")
and Warrants to purchase Company Common Stock (the "TECHNEST SPA") to certain
investors (the "INVESTORS");
WHEREAS, the holders of the Series B Preferred Stock shall be
convertible into a number of shares of Xxxxxxxx Common Stock (determined
pursuant to SECTION 3 below); and
WHEREAS, on the Closing Date, the Company intends to acquire all of the
capital stock of Genex Technologies, Inc., a Maryland corporation ("GENEX")
pursuant to the terms of an Agreement and Plan of Merger of even date herewith
(the "GENEX MERGER AGREEMENT");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, the parties hereby agree as follows:
SECTION 1. AUTHORIZATION OF ISSUANCE OF THE SHARES. Subject to the
terms and conditions of this Agreement, the Company has authorized the issuance
of the Shares.
SECTION 2. AGREEMENT TO SELL AND PURCHASE THE SHARES. At the Closing
(as defined in SECTION 3), the Company will issue and sell to Xxxxxxxx, the
Shares, for the aggregate purchase price of $12,000,000 (the "PURCHASE PRICE"),
and Xxxxxxxx agrees to purchase the Shares from the Company at the Purchase
Price to be paid in the form of approximately 18,502,097 shares (the "XXXXXXXX
SHARES") of common stock, $.0001 par value per share, of Xxxxxxxx ("XXXXXXXX
COMMON STOCK"), as more fully described in SECTIONS 3 AND 4 below.
SECTION 3. DELIVERY OF THE SHARES AT THE CLOSING. The completion of the
purchase and sale of the Shares (the "CLOSING") shall occur simultaneously with
the execution hereof (the "CLOSING DATE"). At the Closing, the Company shall
issue or cause to be issued and delivered to Xxxxxxxx one or more certificates
representing the Shares, registered in the name of Xxxxxxxx, and Xxxxxxxx shall
issue or cause to be issued and delivered to the Company 10,168,764 shares of
Xxxxxxxx Common Stock, representing a portion of the Purchase Price equal to
$7,000,000 (the "XXXXXXXX CLOSING SHARES") and shall reserve for issuance in
accordance with SECTION 4 below, 8,333,333 shares of Xxxxxxxx Common Stock.
SECTION 4. ISSUANCE OF ADDITIONAL XXXXXXXX SHARES. The number of Series
B Conversion Shares shall be determined and fixed (subject to adjustment for
stock splits, considerations, stock dividends and the like) upon the earlier to
occur of (a) the first anniversary following the Closing Date (as defined in the
Technest SPA) and (b) the date which is the first Trading Day (as defined below)
after the date on which Xxxxxxxx Common Stock reaches an average Closing Bid
Price of $2.50 or more for a period of five consecutive Trading Days (the
"DETERMINATION DATE"). Effective on and as of the Determination Date, Xxxxxxxx
shall be obligated to issue to the holders of Series B Preferred Stock, upon due
submission of such stock for conversion, a number of shares of Xxxxxxxx Common
Stock for each share of Series B Preferred Stock then outstanding determined by
dividing the quotient of (A) 5,000,000 divided by the lower of (x) $0.60 and (y)
the Market Price by (B) 1,149,425. For purposes of this Agreement (a) "MARKET
PRICE" shall mean the average Closing Bid Price during the 20 Trading Days prior
to the Determination Date, (b) "CLOSING BID PRICE" shall mean the per share
closing bid price of the Xxxxxxxx Common Stock as reported by Bloomberg L.P.,
and (c) "TRADING DAY" shall mean any day during which the Nasdaq National
Market, the Nasdaq Small Cap Market, the American Stock Exchange, the Over the
Counter Bulletin Board or the New York Stock Exchange, which ever is at the time
the principal trading exchange for the Xxxxxxxx Common Stock shall be open for
business.
SECTION 5. CONDITIONS TO CLOSING.
5.1 CONDITIONS OF XXXXXXXX'X OBLIGATIONS. The obligations of Xxxxxxxx
hereunder are subject to the fulfillment to the reasonable satisfaction of
Xxxxxxxx, 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 at any time prior to or on the Closing Date before or by
any court or governmental body seeking to restrain or prohibit, or 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 Xxxxxxxx, 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
2
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 Xxxxxxxx
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 Xxxxxxxx shall have reasonably
requested.
(d) COMPANY REGISTRATION RIGHTS AGREEMENT. The Company and
Xxxxxxxx shall have executed and delivered the Registration Rights Agreement in
substantially the form of EXHIBIT A hereto (the "TECHNEST REGISTRATION RIGHTS
AGREEMENT").
(e) OFFICERS AND DIRECTORS. The Company shall have received
the resignation of the existing officers of the Company and the directors shall
have appointed Xxxxxx Xxxxxx as a director of the Company.
(f) ACQUISITION DOCUMENTS. Simultaneously herewith, the
Company and/or one of its subsidiaries shall consummate the acquisition of Genex
substantially in accordance with the Genex Merger Agreement, and such other
agreements, documents and instruments necessary to complete the transactions
contemplated by the Merger Agreement.
(g) TECHNEST SPA. Simultaneously herewith, the Company and the
Investors shall have executed and delivered the Technest SPA in substantially
the form of EXHIBIT C hereto.
(h) 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 Xxxxxxxx, and Xxxxxxxx shall
have received all such counterpart originals or certified or other copies of
such documents as they may reasonably request.
(i) THE SHARES. Technest shall have issued the Shares.
5.2 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 COVENANTS. The representations and
warranties of Xxxxxxxx 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 Xxxxxxxx hereunder at or prior to the Closing Date shall have been
duly performed or satisfied.
(b) SALE OF XXXXXXXX CLOSING SHARES. Xxxxxxxx shall have
issued the Xxxxxxxx Closing Shares.
(c) INCORPORATION OF CONDITIONS. The conditions of SECTIONS
5.1(a), (b), (d) (g) and (h) shall have been fulfilled.
3
SECTION 6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
The Company hereby represents and warrants to, and covenants with, the
Purchasers as follows:
6.1 ORGANIZATION AND QUALIFICATION. Except as set forth on SCHEDULE
6.1, 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 6.4.
6.2 AUTHORIZED CAPITAL STOCK. The authorized capital stock of the
Company consists of
(i) 495,000,000 shares of Common Stock of which 29,408,900 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, 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
6.2 hereto. Except as set forth on SCHEDULE 6.2 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.
6.3 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
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.
4
6.4 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).
6.5 GOOD STANDING OF SUBSIDIARIES. Except as set forth on SCHEDULE 6.5,
the Company has no subsidiaries and has not acquired, sold, divested or
liquidated any subsidiary or line of business.
6.6 NO DEFAULTS. Except as disclosed in SCHEDULE 6.6, the 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
6.7 NO ACTIONS.
Except as disclosed in the Information Documents (as defined
in SECTION 6.16) or SCHEDULE 6.7 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.
6.8 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.
6.9 NO MATERIAL CHANGE. Except as disclosed in SCHEDULE 6.9, 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
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 124.325
shares of Series A Preferred Stock to various persons in connection with the
settlement of claims and 1,149,425 units, each consisting of one share of Series
B Preferred Stock, one share of Series C Preferred Stock and a warrant to
purchase 211.18 shares of the Company's Common Stock, issued or to be issued in
accordance with the Technest SPA) 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.
6
6.10 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.
6.11 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.
6.12 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.
7
6.13 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.
6.14 [RESERVED]
6.15 REPORTING COMPANY; LISTED SECURITIES. Except as set forth on
SCHEDULE 6.15, 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").
6.16 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 6.16, 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
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.
8
6.17 RELATED PARTY TRANSACTIONS. Except as disclosed on SCHEDULE 6.17
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.
6.18 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.
SECTION 7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF XXXXXXXX.
7.1 Xxxxxxxx represents and warrants to, and covenants with, the
Company that: (i) Xxxxxxxx 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 Shares, 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 Shares, including,
without limitation, the information contained in the Information Documents; (ii)
it acknowledges that the offering of the Shares pursuant to this Agreement has
not been reviewed by the Commission or any state regulatory authority; (iii)
Xxxxxxxx is acquiring the Shares, for its own account for investment only and
with no present intention of distributing any of such Shares (or any component
thereof) or any arrangement or understanding with any other persons regarding
the distribution of such Shares (or any component thereof); (iv) Xxxxxxxx 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 Shares (or any component thereof) except in compliance with the
Shares Act, rules and regulations promulgated under the Shares Act and any
applicable state securities or blue sky laws; (v) Xxxxxxxx has, in connection
with its decision to purchase the number of Shares 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) Xxxxxxxx
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 Xxxxxxxx; and (vii) Xxxxxxxx is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Shares Act.
7.2 Xxxxxxxx hereby covenants with the Company not to make any sale of
the Shares without satisfying the prospectus delivery requirements under the
Shares Act, if any.
7.3 Xxxxxxxx further represents and warrants to, and covenants with,
the Company that (i) Xxxxxxxx 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) Xxxxxxxx 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 Xxxxxxxx and the
consummation by Xxxxxxxx of the transactions contemplated by this Agreement will
not violate any provision of the organizational documents of Xxxxxxxx or
9
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 Xxxxxxxx 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 Xxxxxxxx, (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 Xxxxxxxx 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 Xxxxxxxx
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 Xxxxxxxx from entering into or engaging in any of the transactions
contemplated by this Agreement.
7.4 Xxxxxxxx recognizes that an investment in the Shares is speculative
and involves a high degree of risk, including a risk of total loss of Xxxxxxxx'x
investment.
7.5 All of the information provided to the Company or its agents or
representatives concerning Xxxxxxxx'x suitability to invest in the Company and
the representations and warranties contained herein, are complete, true and
correct as of the date hereof. Xxxxxxxx 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.
7.6 The address set forth in the signature page hereto is Xxxxxxxx'x
true and correct domicile.
7.7 Xxxxxxxx understands and agrees that each certificate or other
document evidencing any of the Shares shall be endorsed with the legend in
substantially the form set forth below as well as any other legends required by
applicable law, and Xxxxxxxx covenants that Xxxxxxxx shall not transfer the
Shares 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.
10
SECTION 8. 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
Xxxxxxxx herein and in any certificates or documents delivered pursuant hereto
or in connection therewith shall survive following the delivery to Xxxxxxxx of
the Shares being purchased and the payment therefor.
SECTION 9. RIGHT OF FIRST REFUSAL.
9.1 The Company hereby grants to Xxxxxxxx a right to require the
Company to sell to Xxxxxxxx its PRO RATA Share of any New Securities (as defined
in SECTION 9.2) that the Company may, from time to time, propose to sell or
issue. Xxxxxxxx'x Pro Rata Share of any New Securities shall be such number of
New Securities such that Xxxxxxxx owns after the purchase of such New Security
no less than fifty-one percent (51%) of the issued and outstanding shares of
Common Stock or other voting securities of the Company on a fully diluted basis.
9.2 "NEW SECURITIES" shall mean any voting securities of the Company,
whether now authorized or not, and rights, options, or warrants to purchase such
voting securities or any securities (including notes or other indebtedness)
convertible into or exchangeable or exercisable for voting securities (including
without limitation, shares of common stock when issued upon conversion or
exercise of currently outstanding convertible securities and warrants);
PROVIDED, HOWEVER, that the number or amount of Equity Securities convertible
for, exchangeable into or exercisable to Common Stock shall be determined by
reference to the amount of Common Stock issuable pursuant thereto. Payment for
any such Equity Securities may be made with each or shares of Xxxxxxxx Common
Stock valued at the then fair market value of such shares.
9.3 In the event that the Company proposes to issue New Securities, at
least 30 days before such issuance, it shall give to Xxxxxxxx written notice of
its intention, describing in such notice the type of New Securities, the price,
and the terms upon which the Company proposes to issue such New Securities (the
"OFFER NOTICE"). Xxxxxxxx shall have 20 days from the date of its receipt of any
such Offer Notice to agree to purchase all or a part of its PRO RATA share of
such New Securities for the price and upon the terms specified in the Offer
Notice (except that payment shall be in the form of Xxxxxxxx Stock) by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased. Any agreement by Xxxxxxxx to purchase New Securities shall be
binding on Xxxxxxxx. In the event that Xxxxxxxx has agreed to purchase or
otherwise acquire a portion of the New Securities proposed to be issued, the
Company shall designate by written notice to Xxxxxxxx a date for the closing of
the issuance and sale of such New Securities, such date to be the date of the
first sale of such New Securities to a third party, but not earlier than 5 days
following the expiration of the foregoing 20 day period.
9.4 The Company shall have 90 days after said 20 day period to sell the
New Securities to one or more third parties at a price and upon the terms
specified in the Offer Notice, and, in the event that Xxxxxxxx has not
subscribed for all of the New Securities, Xxxxxxxx shall not be obligated to
consummate such purchase or acquisition unless and until any New Securities
available for issuance or sale to one or more third parties have actually been
issued in accordance with the terms set forth in the Offer Notice, in which
event a closing with respect to both the purchase by Xxxxxxxx and such third
party or parties shall occur simultaneously. In the event the Company has not so
sold the New Securities within said 90 day period, the Company shall not
thereafter issue or sell any New Securities without first offering such New
Securities to Xxxxxxxx in the manner provided above.
11
9.5 The right of first refusal set forth in this Section 2 may be
assigned, subject to applicable securities laws, in whole or in part to a
partner, subsidiary, stockholder or Affiliate of Xxxxxxxx. For purposes of this
Agreement, an "AFFILIATE" of any person shall mean any person or entity that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such person.
9.6 The Company's obligations under this Section 9 shall be deemed
fully satisfied if after all closings have been completed with respect to any
New Securities, Xxxxxxxx shall have had a full 20-day notice period and an
opportunity at a closing to purchase on the terms set forth in the Offer Notice
either (A) at least its pro rata portion of New Securities which such Xxxxxxxx
shall be entitled to purchase or (B) such lesser amount of such New Securities
as Xxxxxxxx specified in its notice of acceptance of the Offer Notice.
SECTION 10. INDEMNIFICATION.
10.1 INDEMNIFICATION BY THE COMPANY. The Company hereby agrees to
indemnify, defend and hold Xxxxxxxx harmless from and against the amount of any
actual damage, loss, cost or expense (including reasonable attorneys' fees and
settlement costs) to Xxxxxxxx ("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.
c. The amount of any Loss shall be the amount of cash
reimbursement or set-off that, when received by Xxxxxxxx, shall place
Xxxxxxxx in the same financial position it or they would have been in
if such Loss has not occurred.
10.2 INDEMNIFICATION BY XXXXXXXX. Xxxxxxxx hereby agrees to indemnify,
defend and hold the Company harmless from and against the amount of any Loss to
the Company occasioned or caused by, resulting from or arising out of:
(a) Any failure by Xxxxxxxx to perform, abide by or fulfill,
in all material respects, any of the agreements, covenants or obligations set
forth in this Agreement, or entered into in connection with, this Agreement to
be so performed or fulfilled by Xxxxxxxx.
(b) Any material inaccuracy in or breach of any of the
representations or warranties of Xxxxxxxx set forth in this Agreement, or any
certificate or schedule or other writing furnished by Xxxxxxxx pursuant hereto.
12
(c) The amount of any Loss shall be the amount of cash
reimbursement or set-off that, when received by the Company incurring such loss,
shall place the Company in the same financial position the Company would have
been in if such Loss has not occurred.
10.3 NOTICE OF CLAIM. The Xxxxxxxx or the Company ("CLAIMANT"), as the
case may be, shall give prompt written notice ("NOTICE OF CLAIM") to Company or
Xxxxxxxx as appropriate ("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
solely 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 11. 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 the Company, to:
Technest Holdings, Inc.
00 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Fax: 000-000-0000
Attn:
13
or to such other person at such other person at such other address as the
Company shall designate to Xxxxxxxx in writing; and
if to Xxxxxxxx, to:
Xxxxxxxx Technologies, Inc.
00 Xxxxx Xxxxxx Xxxxx
Xxxxxxxxxx, XX 00000
Fax:
Attention: Xxxxxx X. 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 address or addresses as Xxxxxxxx shall
designate in writing to the Company.
SECTION 12. 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 the Shares.
SECTION 13. 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 14. 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 15. 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 16. 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 17. 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, arrangements 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 LEFT BLANK]
15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives shown below:
XXXXXXXX TECHNOLOGIES, INC.
By:_________________________________
Name:
Title:
TECHNEST HOLDINGS, INC.
By:_________________________________
Name:
Title:
16
