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EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
by and among
FINANCIAL INTRANET, INC.
TECHNEST.COM, INC.
and
THE STOCKHOLDERS OF TECHNEST.COM, INC.
March 21, 2001
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AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement"), dated as
of March 21, 2001 (the "Agreement Date"), is by and among Financial Intranet,
Inc., a Nevada corporation (the "Company"), Technest.com, Inc., a Delaware
corporation ("Technest"), and severally, by the holders of all of the capital
stock of Technest (each, a "Stockholder" and collectively, the "Stockholders").
RECITALS
WHEREAS, the Company desires to acquire all of the outstanding shares
of stock of Technest from the Stockholders in an exchange, as defined in Section
92A.050 of Nevada Revised Statues, for a number of shares (the "Exchange
Shares") of unissued common stock of the Company, $0.001 par value per share
("Common Stock") which, on the Second Closing Date (defined in Section 1.1) and
after giving effect to its issuance, will equal ninety percent (90%) of the
total number of shares of Common Stock determined on a fully-diluted basis, upon
the terms and subject to the conditions set forth in this Agreement;
WHEREAS, the Stockholders wish to exchange all of the outstanding stock
of Technest for the Exchange Shares, upon the terms and subject to the
conditions set forth in this Agreement;
WHEREAS, the respective Boards of Directors of each of the Company and
Technest have approved this Agreement and the Exchange upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, the parties, by executing this Agreement, intend to adopt a
plan of reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code"), and to cause the Exchange (defined in
Section 1.2) to qualify as a reorganization under the provisions of Section
368(a) of the Code;
WHEREAS, the Company does not have a sufficient number of shares of
Common Stock authorized and available for issuance to complete the Exchange;
however, (i) the Company currently has 350,000,000 shares of authorized,
unissued and unreserved Common Stock available for the Exchange and upon the
effectiveness of the 1-for-35 reverse split of its authorized and issued and
outstanding shares of Common Stock in accordance with the provisions of
paragraph 1 of Section 78.207 of Chapter 78 of the Nevada Revised Statutes
("Nevada General Corporation Law"), which the Board of Directors of the Company
has unanimously approved, the Company will have 10,000,000 shares of authorized,
unissued and unreserved Common Stock available for the Exchange (the "Initial
Exchange Shares"), and (ii) promptly upon the issuance of the Initial Exchange
Shares, the Company is willing to use its best efforts to cause its stockholders
to approve an increase in the number of its authorized shares of Common Stock so
that it will have an adequate number of such shares available to issue to the
Stockholders to complete the Exchange (such shares made available for issuance
in order to complete the Exchange are hereinafter referred to as "the Subsequent
Exchange Shares");
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TABLE OF CONTENTS
PAGE
ARTICLE I. CLOSING; THE EXCHANGE; THE EXCHANGE PROCEDURES........................................2
1.1 Closing...................................................................................2
1.2 The Exchange and the Exchange Procedures..................................................2
ARTICLE II. EXCHANGE OF CERTIFICATES..............................................................2
2.1 Exchange Shares Certificates..............................................................2
2.2 Transfers.................................................................................3
2.3 Fractional Shares.........................................................................3
2.4 Lost, Stolen or Destroyed Certificates....................................................3
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF TECHNEST............................................3
3.1 Organization, Good Standing and Qualification, Subsidiaries...............................3
3.2 Capital Structure.........................................................................4
3.3 Corporate Authority and Approval..........................................................5
3.4 Government Filings; No Violations.........................................................5
3.5 Financial Statements......................................................................6
3.6 Absence of Certain Changes................................................................6
3.7 Litigation and Liabilities................................................................7
3.8 Employee Benefits.........................................................................7
3.9 Compliance with Laws......................................................................9
3.10 Environmental Matters.....................................................................9
3.11 Accounting and Tax Matters...............................................................10
3.12 Taxes....................................................................................10
3.13 Labor Matters............................................................................11
3.14 Brokers and Finders......................................................................11
3.15 Takeover Statutes; Charter and Bylaw Provisions..........................................11
3.16 Tangible Personal Property...............................................................11
3.17 Accounts Receivable......................................................................12
3.18 Trademarks, Tradenames, etc..............................................................12
3.19 Patents, etc.............................................................................12
3.20 Trade Secrets............................................................................12
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3.21 Use of Name..............................................................................13
3.22 Employment Contracts.....................................................................13
3.23 Insurance................................................................................13
3.24 Other Agreements.........................................................................13
3.25 Material Interests.......................................................................14
3.26 Agreements with Stockholders.............................................................14
3.27 Banks....................................................................................14
3.28 Assets...................................................................................14
3.29 Title to Property........................................................................14
3.30 Wrigley and Significant Investees........................................................14
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................15
4.1 Organization, Good Standing and Qualification............................................15
4.2 Capital Structure........................................................................15
4.3 Corporate Authority and Approval.........................................................15
4.4 Government Filings; No Violations........................................................16
4.5 Reports; Financial Statements............................................................17
4.6 Absence of Certain Changes...............................................................17
4.7 Litigation and Liabilities...............................................................18
4.8 Employee Benefits........................................................................18
4.9 Compliance with Laws.....................................................................20
4.10 Environmental Matters....................................................................20
4.11 Accounting and Tax Matters...............................................................21
4.12 Taxes....................................................................................21
4.13 Labor Matters............................................................................21
4.14 Brokers and Finders......................................................................21
4.15 Takeover Statutes; Charter and Bylaw Provisions..........................................22
4.16 Tangible Personal Property...............................................................22
4.17 Accounts Receivable......................................................................22
4.18 Trademarks, Tradenames, etc..............................................................22
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TABLE OF CONTENTS
(continued)
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4.19 Patents, etc.............................................................................23
4.20 Trade Secrets............................................................................23
4.21 Use of Name..............................................................................23
4.22 Employment Contracts.....................................................................23
4.23 Insurance................................................................................24
4.24 Other Agreements.........................................................................24
4.25 Material Interests.......................................................................24
4.26 Agreements with Shareholders.............................................................25
4.27 Banks....................................................................................25
4.28 Title to Property........................................................................25
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS...................................25
5.1 Owner of the Shares......................................................................25
5.2 Accredited Investor......................................................................25
5.3 Review of SEC Filings....................................................................25
5.4 Opportunity for Investigation............................................................26
5.5 Restricted Securities....................................................................26
5.6 Stockholder's Intent.....................................................................26
5.7 Enforceability...........................................................................26
5.8 Not an "Interested Stockholder"..........................................................26
5.9 Certificates.............................................................................26
ARTICLE VI. COVENANTS............................................................................27
6.1 Interim Operations.......................................................................27
6.2 Acquisition Proposals....................................................................28
6.3 Post-Closing Matters.....................................................................30
6.4 Access; Consultation.....................................................................30
6.5 Other Actions; Notification..............................................................31
6.6 Publicity................................................................................32
6.7 Benefits.................................................................................32
6.8 Expenses.................................................................................32
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TABLE OF CONTENTS
(continued)
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6.9 Indemnification of Officers and Directors................................................33
6.10 Post-Exchange Indemnification............................................................33
6.11 Conversion of Technest Preferred Shares..................................................33
6.12 Increase of Authorized Shares; Reverse Split.............................................33
6.13 Delivery of Exhibits and Schedules.......................................................33
ARTICLE VII. CONDITIONS...........................................................................33
7.1 Conditions to Each Party's Obligation to Effect the Exchange.............................33
7.2 Condition to Obligations of Company......................................................34
7.3 Conditions to Obligation of Technest.....................................................35
7.4 Conditions to the Obligations of the Stockholders........................................36
ARTICLE VIII. TERMINATION..........................................................................37
8.1 Termination by Mutual Consent............................................................37
8.2 Termination by Either Company or Technest................................................37
8.3 Termination by the Company...............................................................37
8.4 Termination by Technest..................................................................38
8.5 Effect of Termination and Abandonment....................................................38
ARTICLE IX. INDEMNIFICATION AND SURVIVAL.........................................................38
9.1 Survival; Right to Indemnification Not Affected by Knowledge.............................38
9.2 Indemnification and Payment of Damages by the Company....................................39
9.3 Pledge of Collateral for Indemnity.......................................................39
9.4 Indemnification and Payment of Damages by Technest.......................................40
9.5 Procedure for Indemnification - Third Party Claims.......................................40
9.6 Procedure for Indemnification - Other Claims.............................................41
ARTICLE X. MISCELLANEOUS AND GENERAL............................................................41
10.1 Modification or Amendment................................................................41
10.2 Waiver...................................................................................41
10.3 Counterparts.............................................................................42
10.4 Governing Law and Venue; Waiver of Jury Trial............................................42
10.5 Notices..................................................................................42
10.6 Entire Agreement.........................................................................43
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(continued)
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10.7 No Third Party Beneficiaries.............................................................43
10.8 Obligations of the Company...............................................................44
10.9 Severability.............................................................................44
10.10 Interpretation...........................................................................44
10.11 Assignment...............................................................................44
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WHEREAS, the Company, Technest and the Stockholders desire to make
certain representations, warranties, covenants and agreements in connection with
this Agreement; and
WHEREAS, upon the First Closing (defined in Section 1.1), Technest will
be a wholly-owned subsidiary of the Company and both Technest and the Company
will be subject to the Investment Company Act of 1940.
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained in this
Agreement, the parties agree as follows:
ARTICLE I.
Closing; The Exchange; The Exchange Procedures
1.1 Closing. The closing of the Exchange and the other
transactions contemplated hereby shall be made in two closings at such place as
the parties may mutually agree. The first closing of the Exchange (the "First
Closing") shall take place upon the issuance of the Initial Exchange Shares (the
"First Closing Date") and the second closing (the "Second Closing") shall take
place upon the issuance of the Subsequent Exchange Shares and the fulfillment by
each party of their respective obligations hereunder (the "Second Closing
Date").
1.2 The Exchange and the Exchange Procedures. At the First
Closing: (i) each Stockholder shall assign, transfer and deliver to the Company
each share of Technest common stock, par value $0.0001 per share (each a
"Technest Share" and collectively the "Technest Shares") owned by that
Stockholder, in exchange for that Stockholder's pro rata number of Exchange
Shares and, simultaneously, (ii) the Company shall issue and deliver to each
Stockholder, in exchange for the Technest Shares delivered by that Stockholder,
that Stockholder's pro rata number of Initial Exchange Shares. Promptly upon the
issuance of the Initial Exchange Shares, the Company shall use its best efforts
to cause its stockholders to authorize an increase in its authorized shares of
Common Stock to 500,000,000 shares of which 23,450,000 shall be the Subsequent
Exchange Shares and, upon such increase in its authorized shares of Common
Stock, the Company shall at the Second Closing issue and deliver to each
Stockholder, in exchange for the Technest Shares already delivered by that
Stockholder in the First Closing, that Stockholder's pro rata number of the
Subsequent Exchange Shares. This exchange during the First and Second Closing of
Exchange Shares for all of the issued and outstanding Technest Shares is
referred to in this Agreement as the "Exchange."
ARTICLE II.
Exchange of Certificates
2.1 Exchange Shares Certificates. At the First Closing, the
Stockholders will deliver certificates for all of the issued and outstanding
Technest Shares to the Company,
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duly endorsed for transfer, and the Company shall deliver to the Stockholders,
certificates for the Initial Exchange Shares, duly registered in the name of
each Stockholder or that Stockholder's nominee, as the Stockholder shall specify
by written instructions to the Company. At the Second Closing, the Company shall
deliver to the Stockholders certificates for the Subsequent Exchange Shares,
duly registered in the name of each Stockholder or that Stockholder's nominee,
as the Stockholder shall specify by written instructions to the Company.
2.2 Transfers. After the First Closing Date, there shall be no
transfers, other than to the Company as contemplated therein, on the stock
transfer books of Technest of Technest Shares that were outstanding immediately
prior to the First Closing Date.
2.3 Fractional Shares. Notwithstanding any other provision of this
Agreement, no fractional shares of Exchange Shares will be issued to any holder
of Technest Shares. Any holder of Technest Shares entitled to receive a
fractional share of an Exchange Share but for this Section 2.3 shall have the
total number of Exchange Shares they are to receive in the Exchange rounded to
the nearest whole number of shares.
2.4 Lost, Stolen or Destroyed Certificates. In the event any
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the Person claiming such Certificate to be lost,
stolen or destroyed and the posting by such Person of a bond in the form
customarily required by Company as indemnity against any claim that may be made
against it with respect to such Certificate, the Company will issue the Exchange
Shares, stock, cash, dividends and other distributions in respect thereof
issuable or payable in exchange for such lost, stolen or destroyed Certificate
pursuant to Section 1.2 in each case, without interest.
For the purposes of this Agreement, the term "Person" means any
individual, corporation (including not-for-profit), general or limited
partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity (as defined in Section 3.4) or
other entity of any kind or nature.
ARTICLE III.
Representations and Warranties of Technest
Technest hereby represents and warrants to Company that:
3.1 Organization, Good Standing and Qualification, Subsidiaries.
Each of Technest and Wrigley Finance Company ("Wrigley") is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite corporate or similar power and authority to own
and operate its properties and assets and to carry on its business as presently
conducted and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification, except where
the failure to be so qualified or in good standing is not, when taken together
with all other such failures, reasonably likely to have a Material Adverse
Effect (as defined below) on it. Technest has made available to the Company a
complete and correct copy of its and Wrigley's certificate
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of incorporation and bylaws, each as amended to date. Such certificates of
incorporation and bylaws are in full force and effect. Technest has one
Subsidiary, Wrigley, 90% of the outstanding shares of capital stock of which are
owned by Technest, and which has not yet commenced operations. Each of
Technest's Significant Investees (defined below) is duly organized, validly
existing and in good standing under the laws of the state of its formation, and
has all requisite corporate or similar power and authority to own and operate
its properties and assets and to carry on its business as presently conducted,
and is qualified to do business and is in good standing as a foreign corporation
in each jurisdiction where the ownership or operation of its properties or
conduct of its business requires such qualification, except where the failure to
be so qualified or in good standing is not, when taken together with all other
such failures, reasonably likely to have a Material Adverse Effect on it.
The term "Subsidiary" means any entity, whether incorporated or
unincorporated, of which at least a majority of the securities or ownership
interests having, by their terms, ordinary voting power to elect at least a
majority of the Board of Directors or other persons performing similar functions
is directly or indirectly owned by such party.
The term "Significant Investees" means, collectively, the Subsidiaries
and any entity in which Technest has either an equity interest of 20% or more or
a cash investment of $1,500,000 or more.
The term "Material Adverse Effect" means, with respect to any Person, a
material adverse effect on the financial condition, assets and liabilities
(taken together) or business of such Person and its Subsidiaries, taken as a
whole; provided, however, that Material Adverse Effect shall exclude any effect
resulting from or related to changes or developments involving (1) a prospective
change arising out of any proposed or adopted legislation, or any other proposal
or enactment by any governmental, regulatory or administrative authority, (2)
general conditions applicable to the economy of the United States, including
changes in interest rates, (3) conditions or effects resulting from the
announcement of the existence or terms of this Agreement or (4) conditions
affecting the technology industry, in each case taken as a whole.
3.2 Capital Structure. The authorized capital stock of Technest
consists of 500,000,000 Technest Shares, of which 70,850,000 Technest Shares
were issued and outstanding and no Technest Shares were held in treasury as of
the close of business on the Agreement Date; and 50,000,000 shares of Preferred
Stock, par value $0.0001 per share (the "Technest Preferred Shares"), of which
14,875,000 Technest Preferred Shares were outstanding as of the close of
business on the Agreement Date. Before the First Closing Date, all of the
outstanding Technest Preferred Shares will be converted into Technest Shares.
All of the outstanding Technest Shares have been duly authorized and are validly
issued, fully paid and nonassessable. Other than (i) Technest Shares subject to
issuance as set forth below and (ii) as set forth on Schedule 3.2, Technest has
no Technest Shares, Technest Preferred Shares or other shares of capital stock
reserved for or otherwise subject to issuance, as of the Agreement Date. Each of
the outstanding shares of capital stock of each of Wrigley and the Significant
Investees identified on Schedule 3.2 as being owned by Technest is duly
authorized, validly issued, fully paid and nonassessable and owned by Technest,
free and clear of only lien, pledge, security interest, claim or other
encumbrance.
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Except as set forth on Schedule 3.2, as of the Agreement Date, there are no
preemptive or other outstanding rights, options, warrants, conversion rights,
stock appreciation rights, redemption rights, repurchase rights, agreements,
arrangements or commitments to issue or sell any shares of capital stock or
other securities of Technest or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a right to subscribe
for or acquire, any securities of Technest, and no securities or obligations
evidencing such rights are authorized, issued or outstanding. Except as set
forth on Schedule 3.2, as of the Agreement Date, Technest does not have
outstanding any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or convertible into or exercisable for securities
having the right to vote) with the shareholders of Technest on any matter. On
the First Closing Date, the Technest Shares then issued and outstanding will
constitute all of Technest's issued and outstanding capital stock as
contemplated in the definition of "Exchange" set forth in Section 92A.050 of
Nevada Revised Statues.
3.3 Corporate Authority and Approval. Technest has all requisite
corporate power and authority and has taken all corporate action necessary in
order to execute, deliver and perform its obligations under this Agreement. This
Agreement has been duly executed and delivered by Technest and is a valid and
binding agreement of Technest enforceable against Technest in accordance with
its terms, subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general applicability relating to
or affecting creditors' rights and to general equity principles (the "Bankruptcy
and Equity Exception"). The Board of Directors of Technest has unanimously
approved this Agreement and the other transactions contemplated by this
Agreement.
3.4 Government Filings; No Violations.
(a) No notices, reports or other filings are required to
be made by Technest with, nor are any consents, registrations, approvals,
permits or authorizations required to be obtained by Technest from, any
governmental or regulatory authority, court, agency, commission, body or other
governmental entity ("Governmental Entity"), in connection with the execution
and delivery of this Agreement by Technest and the consummation by Technest of
the transactions contemplated by this Agreement, except those that the failure
to make or obtain are not, individually or in the aggregate, reasonably likely
to have a Material Adverse Effect on Technest or prevent, materially delay or
materially impair the ability of Technest to consummate the transactions
contemplated by this Agreement.
(b) The execution, delivery and performance of this
Agreement by Technest do not, and the consummation by Technest of the other
transactions contemplated by this Agreement will not, constitute or result in
(A) a breach or violation of, or a default under, the certificate of
incorporation or bylaws of Technest, (B) a breach or violation of, or a default
under, the acceleration of any obligations or the creation of a lien, pledge,
security interest or other encumbrance on the assets of Technest (with or
without notice, lapse of time or both) pursuant to, any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation
("Contracts") binding upon it or any Law (as defined in Section 3.9) or
governmental or non-governmental permit or license to which it is subject or (C)
any change in the rights or obligations of any party under any Contracts to
which Technest is a party,
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except, in the case of clauses (B) or (C) above, for any breach, violation,
default, acceleration, creation or change that, individually or in the
aggregate, is not reasonably likely to have a Material Adverse Effect on
Technest or prevent, materially delay or materially impair the ability of
Technest to consummate the transactions contemplated by this Agreement. Schedule
3.4(b) sets forth a correct and complete list of Contracts of Technest pursuant
to which consents or waivers are or may be required prior to consummation of the
transactions contemplated by this Agreement other than those where the failure
to obtain such consents or waivers is not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on Technest or prevent or
materially impair its ability to consummate the transactions contemplated by
this Agreement.
3.5 Financial Statements. Technest has delivered to the Company
the following unaudited financial statements of Technest and its Significant
Investees (the "Technest Financial Statements"): (i) a balance sheet as of
December 31, 2000 (the "Financial Statements Date"), (ii) a statement of income
since March 1, 2000, Technest's date of inception, to the period then ended,
(iii) a change in stockholders' equity since March 1, 2000, to the period then
ended and (iv) a statement of cash flows since March 1, 2000, to the period then
ended. The Technest Financial Statements fairly present the financial condition
and the results of operations, changes in stockholders' equity and cash flow of
Technest for as at that date and for the period referred to therein (subject to
notes and normal year-end audit adjustments that will not be material in amount
or effect), in each case in accordance with U.S. generally accepted accounting
principles ("GAAP") consistently applied during the periods involved, except as
may be noted therein. No financial statements of any other Person other than
Technest are required by GAAP to be included in the Technest Financial
Statements.
3.6 Absence of Certain Changes. Except as disclosed in the
Technest Financial Statements or on Schedule 3.6, since December 31, 2000,
Technest, Wrigley and Technest's Significant Investees have conducted their
respective businesses only in, and have not engaged in any material transaction
other than according to, the ordinary and usual course of such businesses and
there has not been: (i) any change in the financial condition, liabilities and
assets (taken together), prospects, business or results of operations of
Technest, Wrigley or the Significant Investees, except those changes that are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on it; (ii) any damage, destruction or other casualty loss with
respect to any asset or property owned, leased or otherwise used by each of them
respectively, whether or not covered by insurance, which damage, destruction or
loss is reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on it; (iii) any declaration, setting aside or payment of any
dividend or other distribution in respect of its capital stock, except publicly
announced regular quarterly cash dividends on its common stock and dividends in
capital stock of any of them or (iv) any change by it in accounting principles,
practices or methods, except as required by GAAP. Except as disclosed in the
Technest Financial Statements or on Schedule 3.6, since December 31, 2000, there
has not been any increase in the salary, wage, bonus, grants, awards, benefits
or other compensation payable or that could become payable by the Technest or
any of its Significant Investees to their respective directors, officers or key
employees or any amendment of any of their respective Compensation and Benefit
Plans, other than increases or amendments in the normal and usual course of its
business (which
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may include normal periodic performance reviews and related compensation and
benefit increases and the provision of new individual compensation and benefits
for promoted or newly hired officers and employees on terms consistent with past
practice).
3.7 Litigation and Liabilities. Except as disclosed on Schedule
3.7, there are no (i) civil, criminal or administrative actions, suits, claims,
hearings, investigations or proceedings pending or, to the actual knowledge of
its executive officers, threatened against Technest or any of its Affiliates (as
defined in Rule 12b-2 under the Securities Exchange Act of 1934, or any
successor law, and the rules and regulations issued pursuant thereto (the
"Exchange Act")) or (ii) obligations or liabilities, whether or not accrued,
contingent or otherwise and whether or not required to be disclosed, including
those relating to matters involving any Environmental Law (as defined in Section
3.10), or any other facts or circumstances, in either such case, of which its
executive officers have actual knowledge and that are reasonably likely to
result in any claims against or obligations or liabilities of Technest or any of
its Affiliates, except for those that are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on Technest or prevent,
materially delay or materially impair its ability to consummate the transactions
contemplated by this Agreement.
3.8 Employee Benefits.
(a) Except as disclosed on Schedule 3.8(a), none of
Technest nor any ERISA Affiliate (as defined below) maintains, is a party to,
participates in or has any liability or contingent liability with respect to any
employee benefit plan (within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), or any bonus,
deferred compensation, pension, retirement, profit-sharing, thrift, savings,
employee stock ownership, stock bonus, stock purchase, restricted stock, stock
option, employment, consulting, termination, severance, compensation, medical,
health or fringe benefit plan, or other plan, program, agreement, policy or
arrangement for any agents, consultants, employees, directors, former employees
or former directors of Technest and or any ERISA Affiliate which does not
constitute an employee benefit plan (which employee benefit plans and other
plans, programs, agreements policies and arrangements are collectively referred
to as the "Compensation and Benefit Plans"). A true and correct copy of each
Compensation and Benefit Plan and, to the extent applicable, copies of the most
recent annual report, actuarial report, accountant's opinion of the plan's
financial statements, summary plan description and Internal Revenue Service
determination letter with respect to any Compensation and Benefit Plans and any
trust agreements or insurance contracts forming a part of such Compensation and
Benefit Plans has been made available by Technest to Company prior to the
Agreement Date. In the case of any Compensation and Benefit Plan which is not in
written form, Technest has made available to Company an accurate description of
such Compensation and Benefit Plan as in effect on the Agreement Date. For
purposes of this Agreement, the term "ERISA Affiliate" means any corporation or
trade or business which, together with Technest, is a member of a controlled
group of Persons or a group of trades or businesses under common control with
Technest within the meaning of Sections 414(b), (c), (m) or (o) of the Code.
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(b) All Compensation and Benefit Plans are in substantial
compliance with all requirements of applicable law, including the Code and
ERISA, and no event has occurred which will or could cause any such Compensation
and Benefit Plan to fail to comply with such requirements and no notice has been
issued by any governmental authority questioning or challenging such compliance.
There have been no acts or omissions by Technest or any ERISA Affiliate which
have given rise to or may give rise to fines, penalties, taxes or related
charges under Section 502 of ERISA or Chapters 43, 47, 68 or 100 of the Code for
which Technest or ERISA Affiliate may be liable. Each of the Compensation and
Benefit Plans that is an "employee pension benefit plan" within the meaning of
Section 3(2) of ERISA, other than a multiemployer plan (as defined in Section
3(37) of ERISA (each a "Pension Plan"), and that is intended to be qualified
under Section 401(a) of the Code has received a favorable determination letter
from the Internal Revenue Service (the "IRS") which covers all changes in law
for which the remedial amendment period (within the meaning of Section 401(b) of
the Code and applicable regulations) has expired and none of Technest nor any of
its ERISA Affiliates is aware of any circumstances likely to result in
revocation of any such favorable determination letter. There is no pending or,
to the knowledge of Technest's executive officers, threatened material
litigation relating to its Compensation and Benefit Plans (other than routine
claims for benefits). Neither Technest nor any of the ERISA Affiliates has
engaged in a transaction with respect to any of the Compensation and Benefit
Plans that, assuming the taxable period of such transaction expired as of the
Agreement Date, would subject it or any of the ERISA Affiliates to a material
tax or penalty imposed by either Section 4975 of the Code or Section 502 of
ERISA.
(c) As of the Agreement Date, no liability under Title IV
of ERISA (other than the payment of prospective premium amounts to the Pension
Benefit Guaranty Corporation in the normal course) has been or is expected to be
incurred by Technest or any ERISA Affiliate with respect to any Compensation and
Benefit Plan. No notice of a "reportable event," within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not been waived,
has been required to be filed for any Pension Plans within the 12-month period
ending on the Agreement Date or will be required to be filed in connection with
the transactions contemplated by this Agreement.
(d) All contributions required to be made under the terms
of any of the Compensation and Benefit Plans as of the Agreement Date have been
timely made or have been reflected on the Technest Financial Statements. None of
the Pension Plans has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of ERISA.
Neither Technest nor any ERISA Affiliate has provided, or is required to
provide, security pursuant to Section 401(a)(29) of the Code, Title IV or ERISA.
(e) Under each of the Pension Plans as of the last day of
the most recent plan year ended prior to the Agreement Date, the actuarially
determined present value of all "benefit liabilities," within the meaning of
Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in such Pension Plan's most recent actuarial valuation),
did not exceed the then current value of the assets of such Pension Plan, and
there has been no material change in the financial condition of such Pension
Plan since the last day of the most recent plan year.
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(f) None of Technest nor any ERISA Affiliate have any
obligations for post-termination health and life benefits under any of the
Compensation and Benefit Plans, except as set forth in the Technest Financial
Statements or as required by applicable law.
(g) The consummation of the Exchange and the other
transactions contemplated by this Agreement will not (x) entitle any employees
or directors of Technest or any employees of any of Technest's ERISA Affiliates
to severance pay, directly or indirectly, upon termination of employment or
otherwise, (y) accelerate the time of payment or vesting or trigger any payment
of compensation or benefits under, increase the amount payable or trigger any
other material obligation pursuant to, any of the Compensation and Benefit Plans
or (z) result in any breach or violation of, or a default under, any of the
Compensation and Benefit Plans.
(h) None of the Compensation and Benefit Plans is a
multiemployer plan and none of Technest or any of the ERISA Affiliates have
contributed or been obligated to contribute to a multiemployer plan at any time
since March 1, 2000.
3.9 Compliance with Laws. Except as disclosed on Schedule 3.9, the
businesses of Technest have not been, and are not being, conducted in violation
of any law, statute, ordinance, regulation, judgment, order, decree, injunction,
arbitration award, license, authorization, opinion, agency requirement or permit
of any Governmental Entity or common law (collectively, "Laws"), except for
violations or possible violations that are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on Technest or
prevent, materially delay or materially impair its ability to consummate the
transactions contemplated by this Agreement. Except as disclosed on Schedule
3.9, no investigation or review by any Governmental Entity with respect to
Technest is pending or, to the actual knowledge of its executive officers,
threatened, nor has any Governmental Entity indicated an intention to conduct
the same, except for those the outcome of which are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on it or prevent,
materially delay or materially impair its ability to consummate the transactions
contemplated by this Agreement. To the actual knowledge of its executive
officers, no material change is required in Technest's processes, properties or
procedures in connection with any such Laws, and it has not received any notice
or communication of any material noncompliance with any such Laws that has not
been cured as of the Agreement Date, except for such changes and noncompliance
that are not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on it or prevent, materially delay or materially impair
its ability to consummate the transactions contemplated by this Agreement.
Technest has all permits, licenses, franchises, variances, exemptions, orders
and other governmental authorizations, consents and approvals (collectively,
"Permits"), necessary to conduct its business as presently conducted, except for
those the absence of which are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on it or prevent, materially delay or
materially impair its ability to consummate the transactions contemplated by
this Agreement.
3.10 Environmental Matters. Except as disclosed in Schedule 3.10,
and except for such matters that, alone or in the aggregate, are not reasonably
likely to have a Material Adverse Effect on Technest: (i) Technest has complied
with all applicable Environmental
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Laws; (ii) the properties currently owned or operated by Technest (including
soils, groundwater, surface water, buildings or other structures) are not
contaminated with any Hazardous Substances; (iii) the properties formerly owned
or operated by Technest were not contaminated with Hazardous Substances during
the period of ownership or operation by it; (iv) Technest is not subject to
liability for any Hazardous Substance disposal or contamination on any third
party property; (v) Technest has not been associated with any release or threat
of release of any Hazardous Substance; (vi) Technest has not received any
notice, demand, letter, claim or request for information alleging that it may be
in violation of or liable under any Environmental Law; (vii) Technest is not
subject to any orders, decrees, injunctions or other arrangements with any
Governmental Entity and it is not subject to any indemnity or other agreement
with any third party relating to liability under any Environmental Law or
relating to Hazardous Substances; and (viii) there are no circumstances or
conditions involving Technest that could reasonably be expected to result in any
claims, liability, investigations, costs or restrictions on the ownership, use
or transfer of any of its properties pursuant to any Environmental Law.
The term "Environmental Law" means any Law relating to: (A) the
protection, investigation or restoration of the environment, health, safety, or
natural resources; (B) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance; or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property or notifications to government agencies or the public in connection
with any Hazardous Substance.
The term "Hazardous Substance" means any substance that is listed,
classified or regulated pursuant to any Environmental Law, including any
petroleum product or by-product, asbestos-containing material, lead-containing
paint or plumbing, polychlorinated biphenyls, electromagnetic fields, microwave
transmission, radioactive materials or radon.
3.11 Accounting and Tax Matters. As of the Agreement Date, Technest
has not taken or agreed to take any action, and its executive officers do not
have any actual knowledge of any fact or circumstance, that would prevent the
Exchange and the other transactions contemplated by this Agreement from
qualifying as a "reorganization" within the meaning of Section 368(a) of the
Code.
3.12 Taxes. Technest has prepared in good faith and duly and timely
filed (taking into account any extension of time within which to file) all Tax
Returns required to be filed by it at or before the First Closing Date and all
such filed Tax Returns are complete and accurate in all material respects.
Technest, as of the First Closing Date, (x) will have paid all Taxes that it is
required to pay prior to the First Closing Date and (y) will have withheld all
federal, state and local income taxes and other Taxes required to be withheld
from amounts owing to any employee, creditor or third party, except for such
amounts that, alone or in the aggregate, are not reasonably likely to have a
Material Adverse Effect on it. As of the Agreement Date, there are not pending
or threatened in writing, any audits, examinations, investigations or other
proceedings in respect of Taxes or Tax matters. There are not, to the actual
knowledge of its executive officers, any unresolved questions, claims or
outstanding proposed or assessed deficiencies concerning Technest Tax liability
that are reasonably likely to have a Material Adverse Effect on it. Technest
does not have any liability with respect to
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income, franchise or similar Taxes in excess of the amounts accrued in respect
thereof that are reflected in the Technest Financial Statements, except such
excess liabilities as are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on it. Technest has not executed any
waiver of any statute of limitations on, or extended the period for the
assessment or collection of, any Tax. No payments to be made to any of
Technest's officers and employees, as a result of the consummation of the
Exchange, will be subject to the deduction limitations under Section 280G of the
Code.
The term "Tax" (including, with correlative meaning, the terms "Taxes,"
and "Taxable") includes all federal, state, local and foreign income, profits,
franchise, gross receipts, environmental, customs duty, capital stock,
severance, stamp, payroll, sales, employment, unemployment, disability, use,
property, withholding, excise, production, value added, occupancy and other
taxes, duties or assessments of any nature whatsoever, together with all
interest, penalties and additions imposed with respect to such amounts and any
interest in respect of such penalties and additions. The term "Tax Return"
includes all federal, state, local and foreign returns and reports (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be supplied to a Tax authority relating to Taxes.
3.13 Labor Matters. Technest is not the subject of any material
proceeding asserting that it has committed an unfair labor practice or is
seeking to compel it to bargain with any labor union or labor organization nor
is there pending or, to the knowledge of its executive officers, threatened, nor
has there been for the past five years, any labor strike, dispute, walkout, work
stoppage, slow-down or lockout involving Technest, except in each case as is
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on it.
3.14 Brokers and Finders. Neither Technest nor any of its officers,
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the Exchange or the other transactions contemplated in this Agreement.
3.15 Takeover Statutes; Charter and Bylaw Provisions. No
anti-takeover provision contained in Technest's certificate of incorporation or
its bylaws is, or at the First Closing Date will be, applicable to the Exchange
or the other transactions contemplated by this Agreement.
3.16 Tangible Personal Property. Schedule 3.16 is a complete and
accurate schedule describing, and specifying the location of, all machinery,
equipment, furniture, supplies, tools, drawings and all other tangible personal
property and all motor vehicles owned by, in the possession of, or used by
Technest in connection with its business. The property listed in Schedule 3.16
constitutes all such tangible personal property used or necessary for the
conduct by Technest of its business as now conducted. Except as stated in
Schedule 3.16 or otherwise disclosed in this Agreement, no personal property
used by Technest in connection with its business is held under or subject to any
lease, security agreement, conditional sales contract or other title retention
or security arrangement or is located other than in the possession of a
Technest.
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3.17 Accounts Receivable. Schedule 3.17 to this Agreement is a
complete and accurate schedule of the accounts receivable of Technest as of
February 28, 2001 as reflected in the balance sheet as of that date included in
the financial statements, together with an accurate aging of these accounts.
These accounts receivable, and all accounts receivable of Technest created after
that date, arose from valid sales in the ordinary course of business. These
accounts have been collected in full since that date, or are collectible at
their full amounts less the reserve for doubtful accounts and trade discounts
shown on that balance sheet.
3.18 Trademarks, Tradenames, etc. Schedule 3.18 to this Agreement
is a schedule of all trade names, trademarks, service marks, and copyrights and
their registrations, owned by Technest or in which it has any rights or
licenses, together with a brief description of each. Technest has not infringed,
or is not now infringing on any trade name, trademark, service mark or copyright
belonging to any other person, firm, or corporation. Except as set forth in
Schedule 3.18, Technest is not a party to any license, agreement, or
arrangement, whether as licensor, licensee or otherwise, with respect to any
trademarks, service marks, trade names or applications for them, or any
copyrights. Technest owns, or holds adequate licenses or other rights to use,
all trademarks, service marks, trade names and copyrights necessary for the
business as now conducted by it (including without limitation those listed in
Schedule 3.18), and their use in such business does not, and will not, conflict
with, infringe on, or otherwise violate any rights of others.
3.19 Patents, etc. Schedule 3.19 to this Agreement is a complete
schedule of all patents, inventions, industrial models, processes, designs and
applications for patents owned by Technest or in which it has any rights,
licenses, or immunities. The patents and applications for patents listed in
Schedule 3.19 are valid and in full force and effect and are not subject to any
taxes, maintenance fees, or actions falling due within 90 days after the First
Closing Date. Except as set forth in Schedule 3.19, there have not been any
interference actions or other judicial, arbitration, or other adversary
proceedings concerning the patents or applications for patents listed in
Schedule 3.19. Each patent application is awaiting action by its respective
patent office except as otherwise indicated in Schedule 3.19. The manufacture,
use, or sale of the inventions, models, designs, and systems covered by the
patents and applications for patents listed in Schedule 3.19 do not violate or
infringe on any patent or any proprietary or personal right of any person, firm,
or corporation; and Technest has not infringed, and is not now infringing on any
patent or other right belonging to any person, firm, or corporation. Except as
set forth in Schedule 3.19, Technest is not a party to any license, agreement,
or arrangement, whether as licensee, licensor or otherwise, with respect to any
patent, application for patent, invention, design, model, process, trade secret
or formula. Technest has the right and authority to use the inventions, trade
secrets, processes, models, designs, and formulas listed on Schedule 3.19 and
their use in such business does not, and will not, conflict with, infringe on,
or violate any patent or other rights of others.
3.20 Trade Secrets. Technest is the sole owner of each of its trade
secrets, free and clear of any liens, encumbrances, restrictions, or legal or
equitable claims of others, except as specifically stated in Schedule 3.20.
Technest has taken reasonable security measures to protect the secrecy,
confidentiality and value of its trade secrets; any of its employees and any
other persons who, either alone or in concert with others, developed, invented,
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discovered, derived, programmed or designed these secrets, or who have knowledge
of or access to information relating to them, have been put on notice and if
appropriate, have entered into agreements that these secrets are proprietary to
Technest and not to be divulged or misused.
The trade secrets of Technest have not been used, divulged, or
appropriated for the benefit of any past or present employees or other persons,
or to the detriment of Technest, Wrigley or a Significant Investee.
3.21 Use of Name. Technest has not granted or will not grant to any
other person, firm, corporation, entity or business other than a Subsidiary the
right to use the words "Technest.com, Inc.", Technest, Inc. or "Technest" as a
trademark, trade name, corporate or firm name. The Stockholders do not
individually own any rights in any of those words as used as a trademark or in a
trade name, as distinguished from their personal names.
3.22 Employment Contracts. Except as set forth on Schedule 3.22,
Technest has no employment contracts (the "Employment Contracts") or collective
bargaining agreements or pension, bonus, profit-sharing, stock option or other
agreements or arrangements providing for employee remuneration or benefits to
which Technest is bound; all these contracts and arrangements are in full force
and effect and, to the best of their knowledge and belief, except as disclosed
on Schedule 3.22 comply in all respects with all applicable laws and regulations
including the Employee Retirement Income Security Act of 1974 ("ERISA") and
Section 401 or other applicable provisions of the Internal Revenue Code, and
neither Technest, Wrigley, or any Significant Investee, nor any other party is
in default under them. There have been no claims of defaults and there are no
facts or conditions which, if continued or on notice, will result in a default
under these contracts or arrangements. There is no pending or, to the best
knowledge of Technest, threatened labor dispute, strike or work stoppage
affecting the business of Technest or any Significant Investee.
3.23 Insurance. Technest has maintained and now maintains (i)
insurance on all assets and business of a type customarily insured, covering
property damage and loss of income by fire or other casualty, and (ii) adequate
insurance protection against all liabilities, claims and risks. Schedule 3.23 to
this Agreement is a complete list accurately describing all insurance policies
held by Technest concerning its businesses and properties and the lives of any
officer or director of Technest. All these policies are in the respective
principal amounts set forth in Schedule 3.23.
3.24 Other Agreements. Technest is not a party to, nor is its
property bound by, any representative or agency agreement, any requirements
agreement, any agreement not entered into in the ordinary course of business,
any indenture, mortgage, deed of trust, lease, or any agreement that is unusual
in nature, duration, or amount (including, without limitation, any agreement
requiring the performance by it of any obligation for a period of time extending
beyond one year from the First Closing Date or calling for consideration of more
than $100,000) or any agreement that is in the ordinary course of business, any
portion of which is executory on the date hereof, and that calls for an
aggregate consideration of more than $100,000, except the agreements listed in
Schedule 3.24 or in any other exhibit hereto and copies of which have been
furnished or made available to the Company (collectively, the "Technest
Agreements") and except for purchase orders and sales orders entered into in the
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ordinary course of the business of Technest that are for purchases or sales
amounting to $100,000 or less. Each of the Technest Agreements is in full force
and effect and constitutes a binding obligation of Technest and each of the
other parties thereto, enforceable in accordance with its terms, subject to the
Bankruptcy and Equity Exception. There is no default or event that with notice
or lapse of time, or both, would constitute a default by any party to any of
these agreements. Technest has not received notice or has no reason to believe
that any party to any of these agreements intends to cancel or terminate any of
these agreements or to exercise or not exercise any options under any of these
agreements. Technest is not a party to, nor its property is not bound by, any
agreement that is materially adverse to the business, properties or financial
condition of Technest.
3.25 Material Interests. Except as set forth on Schedule 3.25, no
Stockholder owning more than 1% of the issued and outstanding Technest Shares or
Technest Preferred Shares, and neither any officer or director or any employee
of Technest, Wrigley or any Significant Investee, nor any spouse or child of any
of them or any trust or corporation in which any of them has a beneficial
interest, has any direct or indirect interest in any competitor, supplier or
customer of Technest, Wrigley or any Significant Investee or in any person from
whom or to whom Technest, Wrigley or any Significant Investee leases any real or
personal property, or in any other person with whom Technest, Wrigley or any
Significant Investee is doing business.
3.26 Agreements with Stockholders. There are no material
agreements, promissory notes, indentures, mortgages, deeds of trust, leases or
other obligations or contracts between Technest and one or more Stockholders
except the agreements listed in Schedule 3.26 or in any other exhibit hereto and
copies of which have been furnished to the Company.
3.27 Banks. Schedule 3.27 is a complete and accurate list of names
and addresses of all banks or other financial institutions in which Technest has
an account, deposit or safe-deposit box, with the names of all persons
authorized to draw on these accounts or deposits or to have access to these
boxes.
3.28 No Interested Stockholders. None of the Stockholders is an
"interested stockholder," as the term "interested stockholder" is defined in
Section 78.423 of the Nevada General Corporation Law.
3.29 Title to Property. Each of Technest and the Significant
Investees has good and merchantable title to its assets, tangible and
intangible, real and personal, subject only to such encumbrances that are
disclosed on the schedules to this Agreement, and the same constitute all the
assets and interests in assets that are used or useful in its business.
3.30 Wrigley and Significant Investees. To Technest's knowledge,
the representations set forth in sections 3.1, 3.4, 3.6, 3.7, 3.8, 3.9, 3.10,
3.11, 3.12, 3.13, 3.20, and 3.23 are true and correct in all respects as if made
by Wrigley and each Significant Investee with respect to their respective
assets, businesses and operations.
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ARTICLE IV.
Representations and Warranties of the Company
The Company hereby represents and warrants to Technest and each
Stockholder that:
4.1 Organization, Good Standing and Qualification. Each of the
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of its respective jurisdiction of
organization and has all requisite corporate or similar power and authority to
own and operate its properties and assets and to carry on its business as
presently conducted and is qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification, except where
the failure to be so qualified or in good standing is not, when taken together
with all other such failures, reasonably likely to have a Material Adverse
Effect on it. The Company has made available to Technest and each Stockholder a
complete and correct copy of its certificate of incorporation and bylaws, each
as amended to date. Such certificates of incorporation and bylaws are in full
force and effect. All of the Subsidiaries of Company, as of the Agreement Date,
are disclosed on Schedule 4.1. As of the First Closing Date, the Subsidiaries of
Company shall be as disclosed on Schedule 4.1.
4.2 Capital Structure. The authorized capital stock of Company
consists of 500,000,000 shares of Common Stock, par value $.001 per share (the
"Company Shares"), of which 85,163,416 shares were issued and outstanding and no
shares were held in treasury as of the close of business on the Agreement Date.
All of the outstanding Company Shares have been duly authorized and are validly
issued, fully paid and nonassessable. Except as disclosed on Schedule 4.2, as of
the Agreement Date, the Company has no Company Shares reserved for or subject to
issuance. Each of the outstanding shares of capital stock of each of Company's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable
and owned by Company or a direct or indirect wholly-owned subsidiary of Company,
free and clear of any lien, pledge, security interest, claim or other
encumbrance. Except as set forth above or as disclosed on Schedule 4.2, as of
the Agreement Date there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements or commitments to issue or to sell
any shares of capital stock or other securities of the Company or any of its
Subsidiaries or any securities or obligations convertible or exchangeable into
or exercisable for, or giving any Person a right to subscribe for or acquire,
any securities of the Company or any of its Subsidiaries, and no securities or
obligation evidencing such rights are authorized, issued or outstanding. Except
as disclosed on Schedule 4.2, the Company does not have outstanding any bonds,
debentures, notes or other obligations the holders of which have the right to
vote (or convertible into or exercisable for securities having the right to
vote) with the stockholders of the Company on any matter. No Company Shares are
held by a Subsidiary of the Company.
4.3 Corporate Authority and Approval. The Company has all
requisite corporate power and authority and has taken all corporate action
necessary in order to execute, deliver and perform its obligations under this
Agreement. The Company's execution, delivery and
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performance of this Agreement, including, without limitation, the Company's
issuance and delivery of the Exchange Shares in the Exchange, do not require the
approval of the holders of Company Shares or Company Preferred Shares. This
Agreement has been duly executed and delivered by the Company and is a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms, subject to the Bankruptcy and Equity Exception. The Board of
Directors of the Company has unanimously approved (i) this Agreement, (ii) the
1-for-35 reverse split of the Company's authorized and issued and outstanding
shares, in accordance with Nevada General Corporation Law Section 78.207 and
(iii) the amendment to the Company's Restated Articles of Incorporation
increasing the number of authorized shares of Common Stock to permit the Company
to issue the Subsequent Exchange Shares, and has recommended the same for
approval by the Company's stockholders. The Exchange Shares, when issued
pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
4.4 Government Filings; No Violations.
(a) Except for filings under the Exchange Act, no
notices, reports or other filings are required to be made by the Company with,
nor are any consents, registrations, approvals, permits or authorizations
required to be obtained by the Company from, any Governmental Entity, in
connection with the execution and delivery of this Agreement by it and the other
transactions contemplated by this Agreement, except those that the failure to
make or obtain are not, individually or in the aggregate, reasonably likely to
have a Material Adverse Effect on the Company or prevent, materially delay or
materially impair its ability to consummate the transactions contemplated by
this Agreement.
(b) The execution, delivery and performance of this
Agreement by the Company do not, and the consummation by it of the Exchange and
the other transactions contemplated by this Agreement will not, constitute or
result in (A) a breach or violation of, or a default under, its certificate of
incorporation or bylaws or the comparable governing instruments of any of its
Subsidiaries, (B) a breach or violation of, or a default under, the acceleration
of any obligations or the creation of a lien, pledge, security interest or other
encumbrance on its assets or the assets of any of its Subsidiaries (with or
without notice, lapse of time or both) pursuant to, any Contract binding upon it
or any of its Subsidiaries or any Law or governmental or non-governmental permit
or license to which it or any of its Subsidiaries is subject or (C) any change
in the rights or obligations of any party under any Contracts to which it or its
Subsidiaries are a party, except, in the case of clauses (B) or (C) above, for
any breach, violation, default, acceleration, creation or change that,
individually or in the aggregate, is not reasonably likely to have a Material
Adverse Effect on it or prevent, materially delay or materially impair its
ability to consummate the transactions contemplated by this Agreement. Schedule
4.4(b) sets forth a correct and complete list of Contracts of the Company and
its Subsidiaries pursuant to which consents or waivers are or may be required
prior to consummation of the transactions contemplated by this Agreement other
than those where the failure to obtain such consents or waivers is not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on the Company or prevent or materially impair its ability to consummate
the transactions contemplated by this Agreement.
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4.5 Reports; Financial Statements. The Company is a reporting
company under the Exchange Act and the Company Shares are registered under
Section 12(g) of the Exchange Act. The Company has made available to Technest,
through electronic filings on EDGAR, each registration statement, report, proxy
statement or information statement prepared by it since December 31, 1998,
including its Annual Report on Form 10-KSB for the years ended December 31, 1998
and December 31, 1999 and its Quarterly Reports on Form 10-QSB for the quarters
ended since December 31, 1999, in the form (including exhibits, annexes and any
amendments thereto) filed with the Securities and Exchange Commission (the
"SEC") (collectively, including any such registration statements, reports, proxy
statements or information statements filed subsequent to the Agreement Date, its
"Reports"). Since December 31, 1998, the Company has made all filings required
to be made by the Securities Act of 1933, or any successor law, and the rules
and regulations issued pursuant thereto (the "Securities Act"), and the Exchange
Act. As of their respective dates, the Reports complied as to form with all
applicable requirements and did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances in which they
were made, not misleading. The financial statements and any supporting schedules
of the Company and its Subsidiaries included or incorporated by reference in the
Reports present fairly the consolidated financial position of the Company and
its Subsidiaries as of the dates indicated and the consolidated results of their
operations for the periods specified (subject, in the case of unaudited
statements, to notes and normal year-end audit adjustments that will not be
material in amount or effect), in each case in accordance with GAAP consistently
applied during the periods involved, except as may be noted therein. To the
knowledge of the Company, except as disclosed on Schedule 4.5, as of the
Agreement Date, no Person or group beneficially owns 5% or more of the
outstanding voting securities of the Company. As used in this Section 4.5, the
terms "beneficially owns" and "group" shall have the meanings ascribed to such
terms under Rule 13d-3 and Rule 13d-5 under the Exchange Act.
4.6 Absence of Certain Changes. Except as disclosed in its Reports
filed prior to the Agreement Date or on Schedule 4.6, since December 31, 2000,
the Company and its Subsidiaries have conducted their respective businesses only
in, and have not engaged in any material transaction other than according to,
the ordinary and usual course of such businesses and there has not been: (i) any
change in the financial condition, liabilities and assets (taken together),
prospects, business or results of operations of the Company and its
Subsidiaries, except those changes that are not, individually or in the
aggregate, reasonably likely to have a Material Adverse Effect on it; (ii) any
damage, destruction or other casualty loss with respect to any asset or property
owned, leased or otherwise used by the Company or any of its Subsidiaries,
whether or not covered by insurance, which damage, destruction or loss is
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on it; (iii) any declaration, setting aside or payment of any dividend or
other distribution in respect of its capital stock, except publicly announced
regular quarterly cash dividends on its common stock and dividends in capital
stock of Company; or (iv) any change by it in accounting principles, practices
or methods, except as required by GAAP. Except as disclosed in its Reports filed
prior to the Agreement Date or on Schedule 4.6, since December 31, 2000, there
has not been any increase in the salary, wage, bonus, grants, awards, benefits
or other compensation payable or that could become payable by the
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Company or any of its Subsidiaries to directors, officers or key employees or
any amendment of any of its Compensation and Benefit Plans, other than increases
or amendments in the normal and usual course of its business (which may include
normal periodic performance reviews and related compensation and benefit
increases and the provision of new individual compensation and benefits for
promoted or newly hired officers and employees on terms consistent with past
practice).
4.7 Litigation and Liabilities. Except as disclosed in the
Company's Reports filed prior to the Agreement Date, there are no (i) civil,
criminal or administrative actions, suits, claims, hearings, investigations or
proceedings pending or, to the actual knowledge of its executive officers,
threatened against the Company or any of its Affiliates (as defined in Rule
12b-2 under the Exchange Act) or (ii) obligations or liabilities, whether or not
accrued, contingent or otherwise and whether or not required to be disclosed,
including those relating to matters involving any Environmental Law, or any
other facts or circumstances, in either such case, of which its executive
officers have actual knowledge and that are reasonably likely to result in any
claims against or obligations or liabilities of the Company or any of its
Affiliates, except for those that are not, individually or in the aggregate,
reasonably likely to have a Material Adverse Effect on the Company or prevent,
materially delay or materially impair its ability to consummate the transactions
contemplated by this Agreement.
4.8 Employee Benefits.
(a) Except as disclosed on Schedule 4.8(a), none of the
Company nor any ERISA Affiliate (as defined below) maintains, is a party to,
participates in or has any liability or contingent liability with respect to any
employee benefit plan (within the meaning of Section 3(3) of ERISA), or any
Compensation and Benefit Plan. A true and correct copy of each Compensation and
Benefit Plan and, to the extent applicable, copies of the most recent annual
report, actuarial report, accountant's opinion of the plan's financial
statements, summary plan description and Internal Revenue Service determination
letter with respect to any Compensation and Benefit Plans and any trust
agreements or insurance contracts forming a part of such Compensation and
Benefit Plans has been made available by the Company to Technest and the
Stockholders prior to the Agreement Date. In the case of any Compensation and
Benefit Plan which is not in written form, the Company has made available to
Technest and the Stockholders an accurate description of such Compensation and
Benefit Plan as in effect on the Agreement Date.
(b) All Compensation and Benefit Plans are in substantial
compliance with all requirements of applicable law, including the Code and
ERISA, and no event has occurred which will or could cause any such Compensation
and Benefit Plan to fail to comply with such requirements and no notice has been
issued by any governmental authority questioning or challenging such compliance.
There have been no acts or omissions by the Company or any ERISA Affiliate which
have given rise to or may give rise to fines, penalties, taxes or related
charges under Section 502 of ERISA or Chapters 43, 47, 68 or 100 of the Code for
which the Company or ERISA Affiliate may be liable. Each of the Compensation and
Benefit Plans that is a Pension Plan and that is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter from
the IRS which covers all changes in law for which the remedial amendment period
(within the
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meaning of Section 401(b) of the Code and applicable regulations) has expired
and none of the Company nor any of its ERISA Affiliates is aware of any
circumstances likely to result in revocation of any such favorable determination
letter. There is no pending or, to the knowledge of the Company's executive
officers, threatened material litigation relating to its Compensation and
Benefit Plans (other than routine claims for benefits). Neither the Company nor
any of the ERISA Affiliates has engaged in a transaction with respect to any of
the Compensation and Benefit Plans that, assuming the taxable period of such
transaction expired as of the Agreement Date, would subject it or any of the
ERISA Affiliates to a material tax or penalty imposed by either Section 4975 of
the Code or Section 502 of ERISA.
(c) As of the Agreement Date, no liability under Title IV
of ERISA (other than the payment of prospective premium amounts to the Pension
Benefit Guaranty Corporation in the normal course) has been or is expected to be
incurred by the Company or any ERISA Affiliate with respect to any Compensation
and Benefit Plan. No notice of a "reportable event," within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Pension Plans within the 12-month
period ending on the Agreement Date or will be required to be filed in
connection with the transactions contemplated by this Agreement.
(d) All contributions required to be made under the terms
of any of the Compensation and Benefit Plans as of the Agreement Date have been
timely made or have been reflected on the most recent consolidated balance sheet
filed or incorporated by reference in the Company's Reports filed prior to the
Agreement Date. None of the Pension Plans has an "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of the
Code or Section 302 of ERISA. Neither the Company nor any ERISA Affiliate has
provided, or is required to provide, security pursuant to Section 401(a)(29) of
the Code, Title IV or ERISA.
(e) Under each of the Pension Plans as of the last day of
the most recent plan year ended prior to the Agreement Date, the actuarially
determined present value of all "benefit liabilities," within the meaning of
Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in such Pension Plan's most recent actuarial valuation),
did not exceed the then current value of the assets of such Pension Plan, and
there has been no material change in the financial condition of such Pension
Plan since the last day of the most recent plan year.
(f) None of the Company nor any ERISA Affiliate have any
obligations for post-termination health and life benefits under any of the
Compensation and Benefit Plans, except as disclosed in the Company's Reports
filed prior to the Agreement Date or as required by applicable law.
(g) The consummation of the Exchange and the other
transactions contemplated by this Agreement will not (x) entitle any employees
or directors of the Company or any employees of any of the Company's ERISA
Affiliates to severance pay, directly or indirectly, upon termination of
employment or otherwise, (y) accelerate the time of payment or vesting or
trigger any payment of compensation or benefits under, increase the amount
payable or trigger any other material obligation pursuant to, any of the
Compensation
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and Benefit Plans or (z) result in any breach or violation of, or a default
under, any of the Compensation and Benefit Plans.
(h) None of the Compensation and Benefit Plans is a
multiemployer plan and none of the Company or any of the ERISA Affiliates have
contributed or been obligated to contribute to a multiemployer plan at any time
since December 31, 1997.
4.9 Compliance with Laws. Except as disclosed in the Company's
Reports filed prior to the Agreement Date or on Schedule 4.9, the businesses of
the Company and its Subsidiaries have not been, and are not being, conducted in
violation of any Laws, except for violations or possible violations that are
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on the Company or prevent, materially delay or materially impair
its ability to consummate the transactions contemplated by this Agreement.
Except as disclosed in the Company's Reports filed prior to the Agreement Date
or on Schedule 4.9, no investigation or review by any Governmental Entity with
respect to the Company or any of its Subsidiaries is pending or, to the actual
knowledge of its executive officers, threatened, nor has any Governmental Entity
indicated an intention to conduct the same, except for those the outcome of
which are not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on it or prevent, materially delay or materially impair
its ability to consummate the transactions contemplated by this Agreement. To
the actual knowledge of its executive officers, no material change is required
in the Company's, or any of its Subsidiaries', processes, properties or
procedures in connection with any such Laws, and it has not received any notice
or communication of any material noncompliance with any such Laws that has not
been cured as of the Agreement Date, except for such changes and noncompliance
that are not, individually or in the aggregate, reasonably likely to have a
Material Adverse Effect on it or prevent, materially delay or materially impair
its ability to consummate the transactions contemplated by this Agreement. Each
of the Company and its Subsidiaries has all Permits necessary to conduct their
business as presently conducted, except for those the absence of which are not,
individually or in the aggregate, reasonably likely to have a Material Adverse
Effect on it or prevent, materially delay or materially impair its ability to
consummate the transactions contemplated by this Agreement.
4.10 Environmental Matters. Except as disclosed in the Company's
Reports filed prior to the Agreement Date or on Schedule 4.10, and except for
such matters that, alone or in the aggregate, are not reasonably likely to have
a Material Adverse Effect on the Company: (i) each of the Company and its
Subsidiaries has complied with all applicable Environmental Laws; (ii) the
properties currently owned or operated by the Company or any of its Subsidiaries
(including soils, groundwater, surface water, buildings or other structures) are
not contaminated with any Hazardous Substances; (iii) the properties formerly
owned or operated by the Company or any of its Subsidiaries were not
contaminated with Hazardous Substances during the period of ownership or
operation by it or any of its Subsidiaries; (iv) neither the Company nor any of
its Subsidiaries is subject to liability for any Hazardous Substance disposal or
contamination on any third party property; (v) neither the Company nor any
Subsidiary has been associated with any release or threat of release of any
Hazardous Substance; (vi) neither the Company nor any Subsidiary has received
any notice, demand, letter, claim or request for information alleging that it or
any of its Subsidiaries may be in
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violation of or liable under any Environmental Law; (vii) neither the Company
nor any of its Subsidiaries is subject to any orders, decrees, injunctions or
other arrangements with any Governmental Entity or is subject to any indemnity
or other agreement with any third party relating to liability under any
Environmental Law or relating to Hazardous Substances; and (viii) there are no
circumstances or conditions involving the Company or any of its Subsidiaries
that could reasonably be expected to result in any claims, liability,
investigations, costs or restrictions on the ownership, use or transfer of any
of its properties pursuant to any Environmental Law.
4.11 Accounting and Tax Matters. As of the Agreement Date, neither
the Company nor any of its Subsidiaries has taken or agreed to take any action,
nor do its executive officers have any actual knowledge of any fact or
circumstance, that would prevent the Exchange and the other transactions
contemplated by this Agreement from qualifying as a "reorganization" within the
meaning of Section 368(a) of the Code.
4.12 Taxes. The Company has prepared in good faith and duly and
timely filed (taking into account any extension of time within which to file)
all Tax Returns required to be filed by it at or before the First Closing Date
and all such filed Tax Returns are complete and accurate in all material
respects. The Company, as of the First Closing Date, (x) will have paid all
Taxes that it is required to pay prior to the First Closing Date and (y) will
have withheld all federal, state and local income taxes and other Taxes required
to be withheld from amounts owing to any employee, creditor or third party,
except for such amounts that, alone or in the aggregate, are not reasonably
likely to have a Material Adverse Effect on it. As of the Agreement Date, there
are not pending or threatened in writing, any audits, examinations,
investigations or other proceedings in respect of Taxes or Tax matters. There
are not, to the actual knowledge of its executive officers, any unresolved
questions, claims or outstanding proposed or assessed deficiencies concerning
the Company's Tax liability that are reasonably likely to have a Material
Adverse Effect on it. The Company does not have any liability with respect to
income, franchise or similar Taxes in excess of the amounts accrued in respect
thereof that are reflected in the Company's Financial Statements, except such
excess liabilities as are not, individually or in the aggregate, reasonably
likely to have a Material Adverse Effect on it. The Company has not executed any
waiver of any statute of limitations on, or extended the period for the
assessment or collection of, any Tax. No payments to be made to any of the
Company's officers and employees, as a result of the consummation of the
Exchange, will be subject to the deduction limitations under Section 280G of the
Code.
4.13 Labor Matters. The Company is not the subject of any material
proceeding asserting that it has committed an unfair labor practice or is
seeking to compel it to bargain with any labor union or labor organization nor
is there pending or, to the knowledge of its executive officers, threatened, nor
has there been for the past five years, any labor strike, dispute, walkout, work
stoppage, slow-down or lockout involved the Company, except in each case as is
not, individually or in the aggregate, reasonably likely to have a Material
Adverse Effect on it.
4.14 Brokers and Finders. Neither the Company nor any of its
officers, directors or employees has employed any broker or finder or incurred
any liability for any brokerage
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fees, commissions or finders' fees in connection with the Exchange or the other
transactions contemplated in this Agreement; provided, however, that the Company
has agreed to pay Greenfield Capital Partners LLC an advisory fee for its
services to the Company in connection with the Exchange, in the amount of
$200,000, payable in shares of the Company's common stock, the amount of which
shall be determined by dividing $200,000 by the closing price of the Company's
common stock on the trading day that the reverse split under the Nevada General
Corporation Law Section 78.207 becomes effective.
4.15 Takeover Statutes; Charter and Bylaw Provisions. No
anti-takeover provision contained in the Company's or any Subsidiary's
certificate of incorporation or its bylaws is, or at the First Closing Date will
be, applicable to the Exchange or the other transactions contemplated by this
Agreement.
4.16 Tangible Personal Property. Schedule 4.16 is a complete and
accurate schedule describing, and specifying the location of, all machinery,
equipment, furniture, supplies, tools, drawings and all other tangible personal
property and all motor vehicles owned by, in the possession of, or used by the
Company and all Subsidiaries in connection with its business. The property
listed in Schedule 4.16 constitutes all such tangible personal property used or
necessary for the conduct by the Company and its Subsidiaries of its and their
business as now conducted. Except as stated in Schedule 4.16, no personal
property used by the Company or any Subsidiary of the Company in connection with
its business is held under or subject to any lease, security agreement,
conditional sales contract or other title retention or security arrangement or
is located other than in the possession of the Company or a Subsidiary of the
Company.
4.17 Accounts Receivable. Schedule 4.17 to this Agreement is a
complete and accurate schedule of the accounts receivable of the Company and
each Subsidiary as of January 31, 2001 as reflected in the balance sheet as of
that date included in the financial statements, together with an accurate aging
of these accounts. These accounts receivable, and all accounts receivable of the
Company and each Subsidiary created after that date, arose from valid sales in
the ordinary course of business. These accounts have been collected in full
since that date, or are collectible at their full amounts less the reserve for
doubtful accounts and trade discounts shown on that balance sheet.
4.18 Trademarks, Tradenames, etc. Schedule 4.18 to this Agreement
is a schedule of all trade names, trademarks, service marks, and copyrights and
their registrations, owned by the Company or any Subsidiary or in which it has
any rights or licenses, together with a brief description of each. Neither the
Company nor any Subsidiary has infringed, and is not now infringing on any trade
name, trademark, service mark or copyright belonging to any other person, firm,
or corporation. Except as set forth in Schedule 4.18, neither the Company nor
any Subsidiary is a party to any license, agreement, or arrangement, whether as
licensor, licensee or otherwise, with respect to any trademarks, service marks,
trade names or applications for them, or any copyrights. The Company owns, or
holds adequate licenses or other rights to use, all trademarks, service marks,
trade names and copyrights necessary for the business as now conducted by it or
any Subsidiary (including without limitation those listed in Schedule 4.16), and
their use in such business does not, and will not, conflict with, infringe on,
or otherwise violate any rights of others.
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4.19 Patents, etc. Schedule 4.19 to this Agreement is a complete
schedule of all patents, inventions, industrial models, processes, designs and
applications for patents owned by the Company or any Subsidiary or in which the
Company or any Subsidiary has any rights, licenses, or immunities. The patents
and applications for patents listed in Schedule 4.19 are valid and in full force
and effect and are not subject to any taxes, maintenance fees, or actions
falling due within 90 days after the First Closing Date . Except as set forth in
Schedule 4.19, there have not been any interference actions or other judicial,
arbitration, or other adversary proceedings concerning the patents or
applications for patents listed in Schedule 4.19. Each patent application is
awaiting action by its respective patent office except as otherwise indicated in
Schedule 4.19. The manufacture, use, or sale of the inventions, models, designs,
and systems covered by the patents and applications for patents listed in
Schedule 4.19 do not violate or infringe on any patent or any proprietary or
personal right of any person, firm, or corporation; and neither the Company nor
any Subsidiary has infringed, or is now infringing on any patent or other right
belonging to any person, firm, or corporation. Except as set forth in Schedule
4.19, neither the Company nor any Subsidiary is a party to any license,
agreement, or arrangement, whether as licensee, licensor or otherwise, with
respect to any patent, application for patent, invention, design, model,
process, trade secret or formula. The Company and each Subsidiary have the right
and authority to use the inventions, trade secrets, processes, models, designs,
and formulas listed on Schedule 4.19 and their use in such business does not,
and will not, conflict with, infringe on, or violate any patent or other rights
of others.
4.20 Trade Secrets. The Company is the sole owner of each of its
trade secrets, free and clear of any liens, encumbrances, restrictions, or legal
or equitable claims of others, except as specifically stated in Schedule 4.20.
The Company and each Subsidiary have taken reasonable security measures to
protect the secrecy, confidentiality and value of its trade secrets; any of its
employees and any other persons who, either alone or in concert with others,
developed, invented, discovered, derived, programmed or designed these secrets,
or who have knowledge of or access to information relating to them, have been
put on notice and, if appropriate, have entered into agreements that these
secrets are proprietary to the Company and not to be divulged or misused.
The trade secrets of the Company have not been used, divulged, or
appropriated for the benefit of any past or present employees or other persons,
or to the detriment of the Company or any Subsidiary.
4.21 Use of Name. Neither the Company nor any Subsidiary has
granted or will grant to any other person, firm, corporation, entity or business
other than a Subsidiary the right to use the words "Financial Intranet" as a
trademark, trade name, corporate or firm name.
4.22 Employment Contracts. Schedule 4.22 to this Agreement is a
complete and accurate list of all employment contracts (the "Employment
Contracts") and collective bargaining agreements and all pension, bonus,
profit-sharing, stock option or other agreements or arrangements providing for
employee remuneration or benefits to which the Company or any Subsidiary is
bound and that are not publicly available on Edgar; all Employment Contracts and
arrangements are in full force and effect and, to the best of their
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knowledge and belief, except disclosed on Schedule 4.22 comply in all respects
with all applicable laws and regulations including the Employee Retirement
Income Security Act of 1974 ("ERISA") and Section 401 or other applicable
provisions of the Internal Revenue Code, and neither the Company, any Subsidiary
nor any other party is in default under them. There have been no claims of
defaults and there are no facts or conditions which, if continued or on notice,
will result in a default under these contracts or arrangements. There is no
pending or, to the best knowledge of the Company, threatened labor dispute,
strike or work stoppage affecting the business of the Company or any Subsidiary.
4.23 Insurance. The Company and each Subsidiary have maintained and
now maintain (i) insurance on all assets and business of a type customarily
insured, covering property damage and loss of income by fire or other casualty,
and (ii) adequate insurance protection against all liabilities, claims and
risks. Schedule 4.23 to this Agreement is a complete list accurately describing
all insurance policies held by the Company and each Subsidiary concerning its
businesses and properties and the lives of Shareholders and any officer or
director of the Company or any Subsidiary. All these policies are in the
respective principal amounts set forth in Schedule 4.23.
4.24 Other Agreements. Neither the Company nor any Subsidiary is a
party to, nor is the property of any of them bound by, any representative or
agency agreement, any requirements agreement, any agreement not entered into in
the ordinary course of business, any indenture, mortgage, deed of trust, lease,
or any agreement that is unusual in nature, duration, or amount (including,
without limitation, any agreement requiring the performance by the Company or a
Subsidiary of any obligation for a period of time extending beyond one year from
the First Closing Date or calling for consideration of more than $100,000) or
any agreement that is in the ordinary course of business, any portion of which
is executory on the date hereof, and that calls for an aggregate consideration
of more than $100,000, except the agreements listed in Schedule 4.24 or in any
other exhibit hereto and copies of which have been furnished or made available
to Technest (collectively, "Company Agreements") and except for purchase orders
and sales orders entered into in the ordinary course of the business of the
Company that are for purchases or sales amounting to $100,000 or less. Each of
the Company Agreements is in full force and effect and constitutes a binding
obligation of the Company and each of the other parties thereto, enforceable in
accordance with its terms, subject to the Bankruptcy and Equity Exception. There
is no default or event that with notice or lapse of time, or both, would
constitute a default by any party to any of these agreements. Neither the
Company nor any Subsidiary has received notice or has reason to believe that any
party to any of these agreements intends to cancel or terminate any of these
agreements or to exercise or not exercise any options under any of these
agreements. Neither the Company nor any Subsidiary is a party to, and neither
the Company, any Subsidiary nor its or their property is bound by, any agreement
that is materially adverse to the business, properties or financial condition of
the Company or any Subsidiary.
4.25 Material Interests. No shareholder of the Company owning more
than 1% of its outstanding Common Stock, and neither any officer or director or
any employee of the Company or any Subsidiary, nor any spouse or child of any of
them or any trust or corporation in which any of them has a beneficial interest
has any direct or indirect interest in any competitor, supplier or customer of
the Company or any Subsidiary or in any person
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from whom or to whom the Company or any Subsidiary leases any real or personal
property, or in any other person with whom the Company or any Subsidiary is
doing business.
4.26 Agreements with Shareholders. There are no material
agreements, promissory notes, indentures, mortgages, deeds of trust, leases or
other obligations or contracts between the Company and one or more of its
shareholders owning 1% or more of its outstanding Common Stock, except the
agreements listed in Schedule 4.26 or publicly available on EDGAR or in any
other exhibit hereto and copies of which have been furnished to Technest.
4.27 Banks. Schedule 4.27 is a complete and accurate list of names
and addresses of all banks or other financial institutions in which the Company
or any Subsidiary has an account, deposit or safe-deposit box, with the names of
all persons authorized to draw on these accounts or deposits or to have access
to these boxes.
4.28 Title to Property. The Company and each Subsidiary has good
and merchantable title to its respective assets, tangible and intangible, real
and personal, subject only to such Encumbrances that are disclosed on the
schedules to this Agreement, and the same constitute all the assets and
interests in assets that are used or useful in its business.
ARTICLE V.
Representations and Warranties of the Stockholders
Each Stockholder severally (and not jointly with Technest or any other
Stockholder) represents and warrants to the Company, solely with respect to that
Stockholder, that:
5.1 Owner of the Shares. The Stockholder is the registered holder
and the beneficial owner of the Technest Shares set forth opposite the
Stockholder's name on Schedule 5.1, all of which the Stockholder is transferring
to the Company in the Exchange; in the aggregate, on the First Closing Date,
such Technest Shares will constitute all of the issued and outstanding shares of
capital stock of Technest. With respect to those shares: (i) the Stockholder is
the registered holder and beneficial owner of those shares and no other Person
has any legal or beneficial interest therein; (ii) the Stockholder has the legal
power to transfer those shares to the Company, and no other Person is required
to consent thereto; and (iii) at the Closing, the Stockholder will convey title
to those shares to the Company, free and clear of any Encumbrances.
5.2 Accredited Investor. The Stockholder is an "accredited
investor" (as such term is defined in Rule 501 of Regulation D promulgated under
the Securities Act), and has such knowledge and experience in financial business
matters that the Stockholder is capable of evaluating the merits and risks of
the Exchange. The Stockholder's residence or, if other than a natural person,
its principal office, is located in the jurisdiction indicated in the address of
such Stockholder opposite its name on the signature page hereof.
5.3 Review of SEC Filings. The Stockholder has had the opportunity
to review the Company's Reports.
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5.4 Opportunity for Investigation. The Company has given the
Stockholder the opportunity to meet with the Company's directors and executive
officers for the purpose of asking questions and receiving answers concerning
the terms and conditions of the Exchange, and to obtain any additional
information that the Company may possess or can acquire without unreasonable
effort or expense that is necessary to verify the accuracy of any information
that the Company has furnished the Stockholder in connection with the Exchange.
5.5 Restricted Securities. The Stockholder understands and
acknowledges that the Exchange Shares being issued to the Stockholder in the
Exchange are "restricted securities," (as such terms is defined in Securities
and Exchange Commission ("SEC") Rule 144(a)(3)) that the certificate or
certificates evidencing those shares will bear a legend, substantially in the
form set forth below, indicating that those shares are restricted securities,
and that those shares may not be transferred except pursuant to an effective
registration statement under the Securities Act or an available exemption from
such registration.
The legend referred to above will be substantially as follows:
"These securities have been issued pursuant to an exemption under the
Securities Act of 1933 and are restricted securities, and neither such
securities nor any interest therein may be offered, sold, pledged,
hypothecated, made the subject of a gift or otherwise transferred, for
value or otherwise, without the written approval of counsel for the
issuer making specific reference to this certificate. The transfer
agents of the issuer have been instructed to register transfers of the
shares evidenced by this certificate only in accordance with the
foregoing instructions."
5.6 Stockholder's Intent. The Stockholder is acquiring the
Exchange Shares being issued to the Stockholder in the Exchange for the
Stockholder's own account, for investment purposes, and not with a view towards
their distribution.
5.7 Enforceability. This Agreement is the Stockholder's valid and
binding obligation, enforceable against the Stockholder in accordance with it
terms.
5.8 Not an "Interested Stockholder". The Stockholder is not an
interested stockholder of the Company, as the term "interested stockholder" is
defined in Section 78.423 of the Nevada General Corporation Law.
5.9 Certificates. The Stockholder has furnished, or prior to the
First Closing Date will furnish, the Company with a copy of the front and back
of each Certificate representing the Technest Shares owned by the Stockholder.
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ARTICLE VI.
Covenants
6.1 Interim Operations.
(a) Each of the Company and Technest covenants and agrees
as to itself and its Subsidiaries that, after the Agreement Date and prior to
the First Closing Date (except as otherwise expressly contemplated by this
Agreement or required by applicable Law):
(i) The business of it and its Subsidiaries
shall be conducted in the ordinary and usual course and, to the extent
consistent therewith, it and its Subsidiaries shall use their reasonable best
efforts to preserve its business organization intact and maintain its existing
relations and goodwill with customers, suppliers, regulators, distributors,
creditors, lessors, employees and business associates;
(ii) It shall not: (A) amend its certificate of
incorporation or bylaws; (B) split, combine, subdivide or reclassify its
outstanding shares of capital stock; (C) declare, set aside or pay any dividend
payable in cash, stock or property in respect of any capital stock; or (D)
repurchase, redeem or otherwise acquire or permit any of its Subsidiaries to
purchase or otherwise acquire, any shares of its capital stock or any securities
convertible into or exchangeable or exercisable for any shares of its capital
stock;
(iii) Neither it nor any of its Subsidiaries shall
take any action that would prevent the Exchange from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code or that would
cause any of its representations and warranties in this Agreement to become
untrue in any material respect;
(iv) Neither it nor any of its ERISA Affiliates
shall: (A) accelerate, amend or change the period of exercisability of or
terminate, establish, adopt, enter into, make any new grants or awards of
stock-based compensation or other benefits under any Compensation and Benefit
Plans; (B) amend or otherwise modify any Compensation and Benefit Plans; or (C)
increase the salary, wage, bonus or other compensation of any directors,
officers or key employees, in the case of (A), (B) and (C), except (x) for
grants or awards to directors, officers and employees of it or its Subsidiaries
under existing Compensation and Benefit Plans in such amounts and on such terms
as are consistent with past practice, (y) in the normal and usual course of its
business (which may include normal periodic performance reviews and related
compensation and benefit increases and the provision of individual Compensation
and Benefit Plans consistent with past practice for promoted or newly hired
officers and employees on terms consistent with past practice); provided, that
it shall not take such action unless it shall have provided the other party with
prior reasonable notice, or (z) for actions necessary to satisfy existing
contractual obligations under Compensation and Benefit Plans existing as of the
Agreement Date;
(v) Neither it nor any of its Subsidiaries shall
incur, repay or retire prior to maturity or refinance any indebtedness for
borrowed money or guarantee any such
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indebtedness or issue, sell, repurchase or redeem prior to maturity any debt
securities or warrants or rights to acquire any debt securities or guarantee any
debt securities of others;
(vi) Neither it nor any of its Subsidiaries shall
make any capital expenditures;
(vii) Neither it nor any of its Subsidiaries shall
issue, deliver, sell, pledge or encumber shares of any class of its capital
stock or any securities convertible or exchangeable into, or any rights,
warrants or options to acquire, any such shares except (i) Company Shares or
Technest Shares issued pursuant to options and other awards outstanding on the
Agreement Date under the Company Stock Plans or the Technest Stock Plans, awards
of options and other awards granted hereafter under the Company Stock Plans or
the Technest Stock Plans in accordance with this Agreement and Company Shares or
Technest Shares issuable pursuant to such awards, and (ii) bona fide sales by
the Company of its common stock pursuant to existing commitments, in an amount,
in the aggregate, not to exceed 10,000,000 shares (determined prior to the
reverse split of the Company Shares contemplated by this Agreement);
(viii) Neither it nor any of its Subsidiaries shall
authorize, propose or announce an intention to authorize or propose, or enter
into an agreement with respect to, any Exchange, consolidation or business
combination (other than the Exchange), or any purchase, sale, lease, license or
other acquisition or disposition of any business or of a material amount of
assets or securities except for transactions entered into in the normal and
usual course of its business;
(ix) Neither the Company nor Technest shall make
any material change in its accounting policies or procedures, other than any
such change that is required by GAAP;
(x) Neither the Company nor Technest shall
release, assign, settle or compromise any material claims or litigation or make
any material tax election or settle or compromise any material federal, state,
local or foreign tax liability; and
(xi) Neither it nor any of its Subsidiaries shall
authorize or enter into any agreement to do any of the foregoing.
(b) Company and Technest agree that any written approval
obtained under this Section 6.1 must be signed by the Chief Executive Officer or
Chief Financial Officer of the respective party.
6.2 Acquisition Proposals.
(a) The Company agrees that neither it nor any of its
Subsidiaries, nor any of the officers and directors of it or its Subsidiaries,
shall, and that it shall direct and use its best efforts to cause it and its
Subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) (the
Company, its Subsidiaries and their officers, directors, employees, agents and
representatives being the "Company Representatives") not to, directly or
indirectly, initiate, solicit,
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encourage or otherwise facilitate any inquiries or the making of any proposal or
offer with respect to a merger, reorganization, share exchange, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving it, or any purchase or sale of the consolidated assets
(including without limitation stock of Subsidiaries) of it or any of its
Subsidiaries (any such proposal or offer being referred to as an "Acquisition
Proposal"). The Company further agrees that neither it nor any of its
Subsidiaries nor any of the officers and directors of it or its Subsidiaries
shall, and that it shall direct and use its best efforts to cause Company
Representatives not to, directly or indirectly, have any discussion with or
provide any confidential information or data to any Person relating to or in
contemplation of an Acquisition Proposal or engage in any negotiations
concerning an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal; provided, however, that
nothing contained in this Agreement shall prevent either the Company or its
Board of Directors from: (A) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal; (B) engaging in any
discussions or negotiations with or providing any information to, any Person in
response to an unsolicited bona fide written Acquisition Proposal by any such
Person; or (C) recommending such an unsolicited bona fide written Acquisition
Proposal to the shareholders of the Company if and only to the extent that, with
respect to the actions referred to in clauses (A) or (B): (i) the Board of
Directors of the Company concludes in good faith (after consultation with its
outside legal counsel and its financial advisor) that such Acquisition Proposal
is reasonably capable of being completed, taking into account all legal,
financial, regulatory and other aspects of the proposal and the Person making
the proposal, and would, if consummated, result in a transaction more favorable
to the Company's shareholders from a financial point of view than the
transaction contemplated by this Agreement (any such more favorable Acquisition
Proposal being referred to as a "Superior Proposal"), (ii) the Board of
Directors of the Company determines in good faith after consultation with
outside legal counsel that such action is necessary for the Board of Directors
to comply with its fiduciary duty to the Company's shareholders under applicable
law and (iii) prior to providing any information or data to any Person in
connection with an Acquisition Proposal by any such Person, the Board of
Directors of the Company shall receive from such Person an executed
confidentiality agreement on terms reasonably satisfactory to Technest;
provided, that such confidentiality agreement shall contain terms that allow the
Company to comply with its obligations under this Section 6.2.
(b) The Company agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal. The
Company agrees that it will take the necessary steps to promptly inform each
Company Representative of the obligations undertaken in Section 6.2(a). The
Company agrees that it will notify Technest immediately if any such inquiries,
proposals or offers are received by, any such information is requested from, or
any such discussions or negotiations are sought to be initiated or continued
with, any Company Representative indicating, in connection with such notice, the
name of such Person making such inquiry, proposal, offer or request and the
substance of any such inquiries, proposals or offers. The Company thereafter
shall keep Technest informed, on a current basis, of the status and terms of any
such inquiries, proposals or offers and the status of any such discussions or
negotiations. The Company also agrees that it will promptly request each Person
that has heretofore executed a confidentiality agreement in connection with its
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consideration of any Acquisition Proposal to return all confidential information
heretofore furnished to such Person by or on behalf of the Company or any of its
Subsidiaries.
6.3 Post-Closing Matters.
(a) The parties shall cooperate in preparing and/or
causing to be prepared the information and financial statements required by Form
8-K. As soon as practicable after the First Closing Date, but in no event later
than forty-five (45) days after the First Closing Date, Technest shall deliver
its audited financial statements as of and for the year ended December 31, 2000,
and such audit shall have been conducted by such accounting firm mutually
acceptable to the parties. Upon such delivery, Technest shall be deemed to have
remade the representations and warranties contained in Section 3.5, except that
references therein to the Technest Financial Statements shall be deemed to
include such audited financial statements.
(b) As soon as practicable after the First Closing Date,
the Company shall promptly prepare and file with the SEC (i) all SEC filings
necessary to publicly disclose the Exchange and (ii) an election under the
Investment Company Act of 1940 to be a "business development company," as such
term is defined in the Investment Company Act of 1940.
6.4 Access; Consultation.
(a) Upon reasonable notice, and except as may be
prohibited by applicable Law, Technest and Company each shall (and the Company
shall cause its Subsidiaries to) afford to the other and the employees, agents
and representatives (including any investment banker, attorney or accountant
retained by either party) of either party, as the case may be, reasonable
access, during normal business hours throughout the period prior to the Second
Closing Date, to its properties, books, Contracts and records and, during such
period, each shall (and the Company shall cause its Subsidiaries to) furnish
promptly to the other all information concerning its business, properties and
personnel as may reasonably be requested, provided that no investigation
pursuant to this Section 6.4 shall affect or be deemed to modify any
representation or warranty made by Technest, the Company or the Stockholders
under this Agreement, and provided, further, that the foregoing shall not
require Technest or the Company to permit any inspection, or to disclose any
information, that in the reasonable judgment of Technest or the Company, as the
case may be, would result in the disclosure of any trade secrets of third
parties or violate any of its obligations with respect to confidentiality if
Technest or the Company, as the case may be, shall have used all reasonable
efforts to obtain the consent of such third party to such inspection or
disclosure. All requests for information made pursuant to this Section 6.4 shall
be directed to an executive officer of Technest or the Company, as the case may
be, or such Person as may be designated by any such executive officer, as the
case may be.
(b) Subject to applicable Laws relating to the exchange
of information, from the Agreement Date to the First Closing Date, the Company
and Technest agree to consult with each other on a regular basis on a schedule
to be agreed with regard to their respective operations.
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(c) Upon reasonable notice, and except as may be
prohibited by applicable law, Technest will use reasonable efforts to cause its
Significant Investees to provide the Company with such non-confidential
information regarding their respective businesses, operations and future
prospects, as may be reasonably necessary for the Company to evaluate the risks
and merits of the Exchange.
6.5 Other Actions; Notification.
(a) The Company and Technest shall cooperate with each
other and use (and shall cause their respective Subsidiaries to use, and
Technest shall use reasonable efforts to cause its Significant Investees to
use,) their respective reasonable best efforts (i) to take or cause to be taken
all actions, and do or cause to be done all things, necessary, proper or
advisable on its part under this Agreement and the applicable Laws to consummate
and make effective the Exchange and the other transactions contemplated by this
Agreement as soon as practicable, including (A) obtaining opinions of their
respective accountants and attorneys referred to in ARTICLE VII below, if any,
(B) preparing and filing as promptly as practicable all documentation to effect
all necessary applications, notices, petitions, filings and other documents, and
(C) instituting court actions or other proceedings necessary to obtain the
approvals required to consummate the Exchange or the other transactions
contemplated by this Agreement or defending or otherwise opposing all court
actions or other proceedings instituted by a Governmental Entity or other Person
for purposes of preventing the consummation of the Exchange and the other
transactions contemplated by this Agreement and (ii) to obtain as promptly as
practicable all consents, registrations, approvals, permits and authorizations
necessary or advisable to be obtained from any third party and/or any
Governmental Entity in order to consummate the Exchange or any of the other
transactions contemplated by this Agreement; provided, however, that nothing in
this Section 6.4(b) shall require either party to agree to any divestitures or
hold separate or similar arrangements in order to obtain approval of the
transactions contemplated by this Agreement if such divestitures or arrangements
would reasonably be expected to have a Material Adverse Effect on the Company or
Technest, or a Material Adverse Effect on the expected benefits of the Exchange
to the Company or Technest. Subject to applicable laws relating to the exchange
of information, the Company and Technest shall have the right to review in
advance, and to the extent practicable each will consult the other on, all the
information relating to the Company or Technest, as the case may be, and any of
their respective Subsidiaries, that appear in any filing made with, or written
materials submitted to, any third party and/or any Governmental Entity in
connection with the Exchange and the other transactions contemplated by this
Agreement. In exercising the foregoing right, each of the Company and Technest
shall act reasonably and as promptly as practicable.
(b) The Company and Technest each shall, upon request by
the other, furnish the other with all information concerning itself, its
Subsidiaries, Significant Investees, directors, officers and shareholders and
such other matters as may be reasonably necessary or advisable in connection
with any Registration Statement or filing with the SEC made by the Company in
connection with the Exchange and the transactions contemplated by this
Agreement.
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(c) The Company and Technest each shall keep the other
apprised of the status of matters relating to completion of the transactions
contemplated by this Agreement, including promptly furnishing the other with
copies of notice or other communications received by the Company or Technest, as
the case may be, or any of its Subsidiaries or Significant Investees, from any
third party and/or any Governmental Entity with respect to the Exchange and the
other transactions contemplated by this Agreement. Each of the Company and
Technest shall give prompt notice to the other of any change that is reasonably
likely to result in a Material Adverse Effect on it or of any failure of any
conditions to the other party's obligations to effect the Exchange set forth in
ARTICLE VII.
6.6 Publicity. The initial press release with respect to the
Exchange shall be a joint, mutually agreed press release. Thereafter, Technest
and the Company shall consult with each other prior to issuing any press
releases or otherwise making public announcements with respect to the Exchange
and the other transactions contemplated by this Agreement and prior to making
any filings with any third party and/or any Governmental Entity (including any
securities exchange) with respect thereto, except as may be required by law or
by obligations pursuant to any listing agreement with or rules of any securities
exchange.
6.7 Benefits.
(a) Stock Options.
(i) At the First Closing Date, each outstanding
option or warrant to purchase Technest Shares (a "Technest Option"), whether
vested or unvested, shall be converted to an option or warrant (a "Substitute
Option") to acquire, on the same terms and conditions as were applicable under
such Technest Option, the same number of Company Shares as the holder of such
Technest Option would have been entitled to receive pursuant to the Exchange had
such holder exercised such Technest Option in full immediately prior to the
First Closing Date (rounded down to the nearest whole number), at an exercise
price per share (rounded to the nearest whole cent) equal to (y) the aggregate
exercise price for the Technest Shares otherwise purchasable pursuant to such
Technest Option divided by (z) the number of full Technest Shares deemed
purchasable pursuant to such Technest Option in accordance with the foregoing.
(ii) As promptly as practicable after the First
Closing Date, Technest shall deliver to the participants in Technest Stock Plans
appropriate notices setting forth such participants' rights pursuant to the
Substitute Options.
(b) Benefit Obligations. Subject to Section 6.7(a)(i),
the Company shall honor, pursuant to their terms, all employee benefit
obligations existing at the First Closing Date to current and former employees
under Technest Compensation and Benefit Plans.
6.8 Expenses. Whether or not the Exchange is consummated, all
costs and expenses incurred in connection with this Agreement and the Exchange
and the other transactions contemplated by this Agreement shall be paid by the
party incurring such expense.
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6.9 Indemnification of Officers and Directors. The Company agrees
that all rights to indemnification existing in favor of any of the present or
former officers or directors of Technest (the "Managers") as provided in
Technest's Certificate of Incorporation or Bylaws as in effect as of the
Agreement Date, and in any agreement between Technest and any Manager with
respect to matters occurring prior to the First Closing Date, shall survive the
Exchange and all obligations arising therefrom shall be assumed by the Company
on behalf of Technest. The Company further covenants not to amend or repeal any
provisions of the Certificate of Incorporation or Bylaws of Technest in any
manner which would adversely affect the indemnification or exculpatory
provisions contained therein. The provisions of this Section 6.9 are intended to
be for the benefit of, and shall be enforceable by, each indemnified party and
his or her heirs and representatives.
6.10 Post-Exchange Indemnification. If the Company or any of its
successors or assigns (i) shall consolidate with or merge into any other
corporation or entity and shall not be the continuing or surviving corporation
or entity of such consolidation or merger or (ii) shall transfer all or
substantially all of its properties and assets to Person, then and in each such
case, proper provisions shall be made so that the successors and assigns of the
Company shall assume all of the obligations set forth in Section 6.9.
6.11 Conversion of Technest Preferred Shares. Prior to the First
Closing Date, each Stockholder who is the holder of Technest Preferred Shares
shall convert those shares to Technest Shares.
6.12 Reverse Split; Increase of Authorized Shares. The Company
shall take the following actions with respect to the items listed below and
approved by the Company's Board of Directors prior to the date of this
Agreement: (i) prior to the First Closing, the Company shall implement the
1-for-35 reverse split of its authorized and issued and outstanding shares of
Common Stock in accordance with the provisions of Nevada General Corporation Law
Section 78.207, and (ii) after the First Closing, but prior to the Second
Closing Date, the Company shall cause to be submitted to its stockholders for
approval an amendment to the Company's Restated Articles of Incorporation
increasing the number of authorized shares so as to permit issuance of the
Subsequent Exchange Shares.
6.13 Delivery of Exhibits and Schedules. The Company and Technest
acknowledge that the Exhibits and Schedules contemplated under this Agreement
have not been completed, reviewed or agreed upon by any party as of the
execution date of this Agreement. The Company and Technest shall prepare and, at
least five business days prior to the First Closing Date, deliver to the other
such party's respective Schedules, and Technest will request its counsel to
prepare and deliver to the Company drafts of the Exhibits.
ARTICLE VII.
Conditions
7.1 Conditions to Each Party's Obligation to Effect the Exchange.
The respective obligation of each party to effect the Exchange is subject to the
satisfaction or waiver, if applicable, at or prior to the First Closing Date, of
each of the following conditions:
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(a) Exhibits and Schedules. The Exhibits and Schedules
shall have been delivered and accepted by the Company and Technest (such
acceptance to be in each party's sole and absolute discretion) in accordance
with Section 6.13;
(b) Each of the Company and Technest shall have completed
its respective continuing business, legal and accounting due diligence review,
shall be satisfied with the results of such review in its sole and absolute
discretion, and shall have notified the other that it has completed such review;
(c) Stockholder Approval. This Agreement shall have been
duly adopted by holders of all of the Technest Shares, and, if applicable,
Technest Preferred Shares, under applicable Law;
(d) Laws and Orders. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
Law (whether temporary, preliminary or permanent) that is in effect and
restrains, enjoins or otherwise prohibits consummation of the Exchange or the
other transactions contemplated by this Agreement (collectively, an "Order"),
and no Governmental Entity shall have instituted any proceeding or threatened to
institute any proceeding seeking any such Order;
(e) Blue Sky Approvals. The Company shall have received
all state securities and "blue sky" permits and approvals necessary to
consummate the transactions contemplated by this Agreement;
(f) Tax-Free Reorganization. The Exchange shall qualify
as a tax-free reorganization within the meaning of Section 368(a) of the Code;
and
7.2 Condition to Obligations of Company. The obligations of the
Company to effect the Exchange are also subject to the satisfaction or waiver by
the Company at or prior to the First Closing Date of the following conditions:
(a) Representations and Warranties of Technest. The
representations and warranties of Technest set forth in this Agreement (i) to
the extent qualified by Material Adverse Effect shall be true and correct and
(ii) to the extent not qualified by Material Adverse Effect shall be true and
correct (except that this clause (ii) shall be deemed satisfied so long as any
failures of such representations and warranties to be true and correct, taken
together, would not reasonably be expected to have a Material Adverse Effect on
Technest and would not reasonably be expected to have a material adverse effect
on the expected benefits of the Exchange to the Company), in the case of each of
(i) and (ii), as of the Agreement Date and (except to the extent such
representations and warranties speak as of an earlier date) as of the First
Closing Date as though made on and as of the First Closing Date;
(b) Performance of Obligations of Technest. Technest
shall have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the First Closing Date;
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(c) Officer's Certificate. Technest shall have delivered
to the Company a certificate signed on behalf of Technest by an executive
officer of Technest certifying to the matters set forth in (a) and (b) above;
(d) Representations and Warranties of Stockholders. The
representations and warranties of the Stockholders set forth in this Agreement
(i) to the extent qualified by Material Adverse Effect shall be true and correct
and (ii) to the extent not qualified by Material Adverse Effect shall be true
and correct (except that this clause (ii) shall be deemed satisfied so long as
any failures of such representations and warranties to be true and correct,
taken together, would not reasonably be expected to have a Material Adverse
Effect on Technest and would not reasonably be expected to have a material
adverse effect on the expected benefits of the Exchange to the Company), in the
case of each of (i) and (ii), as of the Agreement Date and (except to the extent
such representations and warranties speak as of an earlier date) as of the First
Closing Date as though made on and as of the First Closing Date;
(e) Stockholder's Certificate. Each Stockholder shall
have delivered to the Company a certificate signed by such Stockholder
certifying to the matters set forth in (d) above;
(f) Consents Under Agreements. Technest shall have
obtained the consent or approval of each Person whose consent or approval shall
be required in order to consummate the transactions contemplated by this
Agreement under any Contract to which Technest is a party, except those for
which the failure to obtain such consent or approval, individually or in the
aggregate, is not reasonably likely to have a Material Adverse Effect on
Technest or a material adverse effect on the expected benefits of the Exchange
to Company;
(g) Conversion of all Outstanding Securities. All of the
Technest Preferred Shares shall have been converted to Technest Shares, and
there shall not be any securities outstanding that are convertible into either
Technest Shares or Technest Preferred Shares; and
(h) Performance of Obligations of Stockholders. The
Stockholders shall have performed, in all material respects, their respective
obligations under this Agreement; and
(i) Legal Opinion. The Company shall have received the
opinion of legal counsel to Technest and the Stockholders, reasonably
satisfactory to the Company, as to such matters relating to Technest, the
Stockholders and the transactions contemplated by this Agreement as the Company
shall reasonably request.
7.3 Conditions to Obligation of Technest. The obligation of
Technest to effect the Exchange is also subject to the satisfaction or waiver by
Technest at or prior to the First Closing Date of the following conditions:
(a) Representations and Warranties. The representations
and warranties of the Company set forth in this Agreement (i) to the extent
qualified by Material Adverse Effect shall be true and correct, and (ii) to the
extent not qualified by Material Adverse Effect
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shall be true and correct (except that this clause (ii) shall be deemed
satisfied so long as any failures of such representations and warranties to be
true and correct, taken together, would not reasonably be expected to have a
Material Adverse Effect on Company), in the case of each of (i) and (ii), as of
the Agreement Date and (except to the extent such representations and warranties
speak as of an earlier date) as of the First Closing Date as though made on and
as of the First Closing Date;
(b) Performance of Obligations of the Company. The
Company shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the First Closing
Date;
(c) Officer's Certificate. The Company shall have
delivered to Technest a certificate signed on behalf of the Company by an
executive officer of the Company certifying to the matters set forth in (a) and
(b) above;
(d) Consents Under Agreements. The Company shall have
obtained the consent or approval of each Person whose consent or approval shall
be required in order to consummate the transactions contemplated by this
Agreement under any Contract to which the Company is a party, except those for
which the failure to obtain such consent or approval, individually or in the
aggregate, is not reasonably likely to have a Material Adverse Effect on the
Company or a material adverse effect on the expected benefits of the Exchange to
Technest;
(e) Performance of Obligations of Stockholders. The
Stockholders shall have performed, in all material respects, their respective
obligations under this Agreement; and
(f) Technest and the Stockholders shall have received the
opinion of the Company's legal counsel, reasonably satisfactory to Technest and
the Stockholders, as to such matters relating to the Company and the
transactions contemplated by this Agreement as Technest and the Stockholders
shall reasonably request.
7.4 Conditions to the Obligations of the Stockholders. The
obligation of the Stockholders to effect the Exchange is also subject to the
satisfaction or waiver by the Stockholders at or prior to the First Closing Date
of the following conditions:
(a) Conditions to Obligations of Technest. The Conditions
set forth in Section 7.3 of this Agreement.
(b) Company Pledge. The Company shall have executed and
delivered the Company Pledge and Security Agreement (defined in Section 9.3) to
the Stockholders.
(c) Technest Pledge. Technest shall have executed and
delivered the Technest Pledge and Security Agreement (defined in Section 9.3) to
the Stockholders.
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ARTICLE VIII.
Termination
8.1 Termination by Mutual Consent. This Agreement may be
terminated and the Exchange may be abandoned at any time prior to the First
Closing Date, whether before or after the approval by the Stockholders referred
to in Section 7.1(a), by mutual written consent of Technest and the Company,
through action of their respective Boards of Directors.
8.2 Termination by Either Company or Technest. This Agreement may
be terminated and the Exchange may be abandoned at any time prior to the First
Closing Date by action of the Board of Directors of either Company or Technest
if (i) the Exchange shall not have been consummated by April 1, 2001 (the
"Termination Date"), (ii) the adoption of this Agreement by the Stockholders
required by Section 7.1(a) shall not have occurred at a meeting duly convened
therefore or at any adjournment or postponement thereof, or (iii) any Order
permanently restraining, enjoining or otherwise prohibiting consummation of the
Exchange shall become final and non-appealable (whether before or after the
adoption or approval by the Stockholders); provided, that the right to terminate
this Agreement pursuant to clause (i) above shall not be available to any party
that has breached in any material respect its obligations under this Agreement
in any manner that shall have approximately contributed to the failure of the
Exchange to be consummated.
8.3 Termination by the Company. This Agreement may be terminated
and the Exchange may be abandoned at any time prior to the First Closing Date,
whether before or after the adoption of this Agreement by the Stockholders
referred to in Section 7.1(a), by action of the Board of Directors of the
Company:
(a) If (i) the Company shall not have breached any of the
terms of this Agreement in a manner resulting in failure of a condition set
forth in Section 7.1 or 7.3, (ii) the Board of Directors of the Company
determines in good faith after consultation with outside legal counsel that, in
order for the Board of Directors to comply with its fiduciary duty to its
stockholders under applicable Law, the Company must accept a Superior Proposal
unless Technest matches that Superior Proposal, (iii) the Board of Directors of
the Company approves entering into a binding written agreement concerning a
transaction that constitutes a Superior Proposal and the Company notifies
Technest in writing that the Company wishes to enter into such agreement, (iv)
Technest does not make, within ten (10) business days after receipt of the
Company's written notification of its desire to enter into a binding agreement
for a Superior Proposal, an offer that the Board of Directors of the Company
believes, in good faith after consultation with its financial advisors, is at
least as favorable, from a financial point of view, to the stockholders of the
Company as the Superior Proposal and (v) the Company enters into a binding
written agreement for a Superior Proposal at the same time that it terminates
this Agreement. The Company agrees to notify Technest promptly if its desire to
enter into a written agreement referred to in its notification shall change at
any time after giving such notification; or
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(b) At any time prior to the First Closing, upon the
determination by the Company (acting in its sole and absolute discretion) that
the conditions set forth in Section 7.1(a) or (b) shall not have been satisfied;
or
(c) If there has been a material breach by Technest or
any Stockholder of any representation, warranty, covenant or agreement contained
in this Agreement which (x) would result in a failure of a condition set forth
in Section 7.1 or 7.2 and (y) cannot be or is not cured prior to the Termination
Date.
8.4 Termination by Technest. This Agreement may be terminated and
the Exchange may be abandoned at any time prior to the First Closing Date,
before or after the approval by the Stockholders referred to in Section 7.1(a),
by action of the Board of Directors of Technest if:
(a) the Board of Directors of the Company shall have
withdrawn or adversely modified its approval or recommendation of this
Agreement, or failed to reconfirm its recommendation of this Agreement to the
Company's stockholders within 15 business days after a written request by
Technest to do so; or
(b) At any time prior to the First Closing, upon the
determination by Technest (acting in its sole and absolute discretion) that the
conditions set forth in Section 7.1(a) or (b) shall not have been satisfied; or
(c) there has been a material breach by the Company of
any representation, warranty, covenant or agreement contained in this Agreement
which (i) would result in a failure of a condition set forth in Section 7.1 or
7.3 and (ii) cannot be or is not cured prior to the Termination Date.
8.5 Effect of Termination and Abandonment. In the event of
termination of this Agreement and the abandonment of the Exchange in accordance
with the provisions of this ARTICLE VIII, this Agreement shall become void and
of no effect with no liability on the part of any party to this Agreement or of
any of its directors, officers, employees, agents, legal or financial advisors
or other representatives; provided, however, no such termination shall relieve
any party to this Agreement from any liability for damages resulting from any
breach of this Agreement.
ARTICLE IX.
Indemnification and Survival
9.1 Survival; Right to Indemnification Not Affected by Knowledge.
All representations, warranties, covenants and obligations in this Agreement,
and any certificate or document delivered pursuant to this Agreement, shall
survive the closing until the third anniversary of the First Closing Date. The
right to indemnification, payment of Damages (as defined below) or other remedy
based on such representations, warranties, covenants and obligations will not be
affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the First Closing Date, with respect
to the
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accuracy or inaccuracy of or compliance with, any such representation, warranty,
covenant or obligation. The waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants
and obligations.
9.2 Indemnification and Payment of Damages by the Company. The
Company hereby indemnifies each of the Stockholders and their respective
representatives, stockholders, members, partners, controlling persons and
affiliates (collectively, the "Indemnified Persons") for, and will pay to the
Indemnified Persons the amount of, any losses, liabilities, claims, damages
(including incidental and consequential damages), expenses (including costs of
investigation and defense and reasonable attorneys' fees) or diminutions of
value which, in the aggregate, add up to an amount in excess of $25,000, whether
or not involving a third-party claim (collectively, "Damages"), arising,
directly or indirectly, from or in connection with any of the following matters,
provided the Company receives written notice of the same on or before the third
anniversary of the First Closing Date:
(a) any breach of any representation or warranty made by
the Company in this Agreement or any other certificate or document delivered by
the Company pursuant to this Agreement;
(b) any breach of any representation or warranty made by
the Company in this Agreement as if such representation or warranty were made on
and as of the Second Closing Date;
(c) any breach by the Company of any covenant or
obligation of the Company in this Agreement; or
(d) any claim by any Person who was, is or becomes (i) a
stockholder of the Company or (ii) the holder of any right, option or warrant to
acquire any Company Shares or other securities issued or to be issued by the
Company, that the Exchange was not fair to the stockholders of the Company or
any class thereof; or
(e) any litigation or other proceeding to which the
Company or any Subsidiary is a party, whether or not disclosed, and any other
liability of the Company or any Subsidiary, whether known or unknown, or whether
fixed or contingent, except in any such case to the extent, if any, that a
reserve for such litigation, proceeding or liability is disclosed in the
Company's financial statements and the amount of such reserve is listed on
Schedule 9.2(e) to this Agreement.
The remedies provided in this Section 9.2 will not be exclusive of or limit any
other remedies that may be available to the Stockholders or the other
Indemnified Persons. Damages shall be reduced by the amount of insurance
proceeds payable with respect to the underlying claim.
9.3 Pledge of Collateral for Indemnity. On the First Closing Date,
the Company shall pledge and deliver to the Stockholders, and shall grant the
Stockholders a security
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interest in each and all of the Technest Shares as collateral to secure the
performance of the Company's obligations under Section 9.2 and shall execute and
deliver a Pledge and Security Agreement (the "Company Pledge and Security
Agreement") in a form mutually agreeable to each of the parties thereto to
evidence the pledge set forth in this Section 9.3. This Company Pledge and
Security Agreement (but not the Company's indemnity obligations under Section
9.2) shall terminate on the third anniversary of the First Closing Date. To
further secure the Company's obligations under Section 9.2, Technest shall also
execute and deliver, on the First Closing Date, a Pledge and Security Agreement
(the "Technest Pledge and Security Agreement") in favor of the Stockholders in a
form mutually agreeable to each of the parties thereto.
9.4 Indemnification and Payment of Damages by Technest. Technest
will indemnify and hold harmless the Company, and will pay to the Company the
amount of any Damages arising, directly or indirectly, from or in connection
with (a) any breach of any representation or warranty made by Technest in this
Agreement or in any certificate delivered by Technest pursuant to this Agreement
or (b) any breach by Technest of any covenant or obligation of Technest in this
Agreement.
9.5 Procedure for Indemnification - Third Party Claims.
(a) Promptly after receipt by an indemnified party under
Section 9.2 or 9.4 of notice of the commencement of any proceeding against it (a
"Proceeding"), such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim, but the failure to notify the indemnifying party
will not relieve the indemnifying party of any liability that it may have to any
indemnified party, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying party's
failure to give such notice.
(b) If any Proceeding referred to in Section 9.5(a) is
brought against an indemnified party and it gives notice to the indemnifying
party of the commencement of such Proceeding, the indemnifying party will,
unless the claim involves Taxes, be entitled to participate in such Proceeding
and, to the extent that it wishes (unless (i) the indemnifying party is also a
party to such Proceeding and the indemnified party determines in good faith that
joint representation would be inappropriate, or (ii) the indemnifying party
fails to provide reasonable assurance to the indemnified party of its financial
capacity to defend such Proceeding and provide indemnification with respect to
such Proceeding), to assume the defense of such Proceeding with counsel
satisfactory to the indemnified party and, after notice from the indemnifying
party to the indemnified party of its election to assume the defense of such
Proceeding, the indemnifying party will not, as long as it diligently conducts
such defense, be liable to the indemnified party under this ARTICLE IX for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the indemnified party in
connection with the defense of such Proceeding, other than reasonable costs of
investigation. If the indemnifying party assumes the defense of a Proceeding,
(i) it will be conclusively established for purposes of this Agreement that the
claims made in that Proceeding are within the scope of and subject to
indemnification; (ii) no compromise or settlement of such claims may be effected
by the
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indemnifying party without the indemnified party's consent unless (A) there is
no finding or admission of any violation of a Law or any violation of the rights
of any Person and no effect on any other claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not, within ten
business days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
(c) Notwithstanding the foregoing, if an indemnified
party determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the indemnified party may, by notice to the indemnifying party,
assume the exclusive right to defend, compromise, or settle such Proceeding, but
the indemnifying party will not be bound by any determination of a Proceeding so
defended or any compromise or settlement effected without its consent (which may
not be unreasonably withheld).
(d) The Company hereby consents to the non-exclusive
jurisdiction of any court in which a Proceeding is brought against any
Indemnified Person for purposes of any claim that an Indemnified Person may have
under this Agreement with respect to such Proceeding or the matters alleged
therein, and agrees that process may be served on the Company with respect to
such a claim anywhere in the world.
9.6 Procedure for Indemnification - Other Claims. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
ARTICLE X.
Miscellaneous and General
10.1 Modification or Amendment. Subject to the provisions of the
applicable law, the parties to this Agreement may modify or amend this Agreement
by written agreement executed and delivered by a duly authorized officer of the
respective parties.
10.2 Waiver.
(a) Any provision of this Agreement may be waived prior
to the Second Closing Date if, and only if, such waiver is in writing and
executed and delivered by a duly authorized officer of the respective parties.
(b) No failure or delay by any party in exercising any
right, power or privilege under this Agreement shall operate as a waiver thereof
nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any
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other right, power or privilege. Except as otherwise provided in this Agreement,
the rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by Law.
10.3 Counterparts. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts shall together constitute the same agreement.
10.4 Governing Law and Venue; Waiver of Jury Trial.
(a) This Agreement shall be deemed to be made in and in
all respects shall be interpreted, construed and governed by and in accordance
with New York law without regard to the conflict of law principles thereof,
except that matters relating to the corporate governance of the Company shall be
governed by Nevada law. The parties hereby irrevocably and unconditionally
consent to submit to the exclusive jurisdiction of the courts of the State of
New York and of the United States of America located in the Borough Manhattan
(the "New York Courts") for any litigation arising out of or relating to this
Agreement and the transactions contemplated by this Agreement (and agree not to
commence any litigation relating thereto except in such New York Courts), waive
any objection to the laying of venue of any such litigation in the New York
Courts and agree not to plead or claim in any New York Court that such
litigation brought therein has been brought in an inconvenient forum.
(b) Each party acknowledges and agrees that any
controversy which may arise under this Agreement is likely to involve
complicated and difficult issues, and therefore each party hereby irrevocably
and unconditionally waives any right such party may have to a trial by jury in
respect of any litigation directly or indirectly arising out of or relating to
this Agreement, or the transactions contemplated by this Agreement. Each party
certifies and acknowledges that (i) no representative, agent or attorney of any
other party has represented, expressly or otherwise, that such other party would
not, in the event of litigation, seek to enforce the foregoing waiver, (ii) each
such party understands and has considered the implications of this waiver, (iii)
each party makes this waiver voluntarily, and (iv) each party has been induced
to enter into this Agreement by, among other things, the mutual waivers and
certifications in this Section 10.4.
10.5 Notices. Notices, requests, instructions or other documents to
be given under this Agreement shall be in writing and shall be deemed given, (i)
three business days following sending by registered or certified mail, postage
prepaid, (ii) when sent if sent by facsimile, provided that receipt of the fax
is promptly confirmed by telephone, (iii) when delivered, if delivered
personally to the intended recipient, and (iv) one business day later, if sent
by overnight delivery via a national courier service, and in each case,
addressed to a party at the following address for such party:
If to the Company:
Financial Intranet, Inc.
116 Radio Circle
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Mt. Kisco, New York 10549
Attention: Mr. Michael Sheppard, President
Fax: (914) 277-3338
with a copy (which shall not constitute notice) to:
Chamberlain, Hrdlicka, White, Williams & Martin
1200 Smith Street, Suite 1400
Houston, Texas 77002
Attention: Mr. Ralph K. Miller, Jr.
Fax: (713) 658-2553
If to Technest:
Technest.com, Inc.
One Capital City Plaza
3350 Peachtree Road, Suite 1050
Atlanta, Georgia 30326
Attention: Chief Operating Officer
Fax: (404) 995-9997
with a copy (which shall not constitute notice) to:
Mayer, Brown & Platt
700 Louisiana, Suite 3600
Houston, Texas 77002-2730
Attention: Mr. John M. Mann
Fax: (713) 224-6410
If to a Stockholder, to the address set forth on the signature page
hereto, or to such other persons or addresses as may be designated in writing by
the party to receive such notice as provided above.
10.6 Entire Agreement. This Agreement (including any schedules or
exhibits to this Agreement) constitute the entire agreement, and supersede all
other prior agreements, understandings, representations and warranties both
written and oral, among the parties, with respect to the subject matter of this
Agreement. Each party to this Agreement agrees that, except for the
representations and warranties contained in this Agreement, neither company nor
Technest makes any other representations or warranties, and each hereby
disclaims any other representations or warranties made by itself or any of its
officers, directors, employees, agents, financial and legal advisors or other
representatives, with respect to the execution and delivery of this Agreement or
the transactions contemplated by this Agreement, notwithstanding the delivery or
disclosure to the other or the other's representatives of any documentation or
other information with respect to any one or more of the foregoing.
10.7 No Third Party Beneficiaries. Except as provided in Section
6.7 (Benefits), Section 6.9 (Indemnification of Officers and Directors) and
Section 6.10 (Post-Exchange
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Indemnification), this Agreement is not intended to confer upon any Person other
than the parties to this Agreement any rights or remedies under this Agreement.
10.8 Obligations of the Company. Whenever this Agreement requires a
Subsidiary of the Company to take any action, such requirement shall be deemed
to include an undertaking on the part of the Company to cause such Subsidiary to
take such action.
10.9 Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability or the other provisions of this Agreement.
If any provision of this Agreement, or the application thereof to any Person or
any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefore in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
10.10 Interpretation. The table of contents and headings in this
Agreement are for convenience of reference only, do not constitute part of this
Agreement and shall not be deemed to limit or otherwise affect any of the
provisions of this Agreement. Where a reference in this Agreement is made to a
schedule, such reference shall be to a schedule to this Agreement unless
otherwise indicated. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation."
10.11 Assignment. This Agreement shall not be assignable by
operation of law or otherwise. Any assignment in contravention of the preceding
sentence shall be null and void.
* * * * *
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IN WITNESS WHEREOF, this Agreement and Plan of Reorganization has been
duly executed and delivered by the duly authorized officers of the parties to
this Agreement and Plan of Reorganization as of the date first written above.
TECHNEST.COM, INC.
By:
--------------------------------------
Name:
--------------------------------------
Title:
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FINANCIAL INTRANET, INC.
By:
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Name:
--------------------------------------
Title:
--------------------------------------
52
IN WITNESS WHEREOF, this Agreement and Plan of Reorganization has been
duly executed and delivered by the Stockholder set forth below as of the date
first written above.
Name of Entity (if applicable):
--------------------------------------------
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
Number of shares of Technest owned
by the Stockholder executing this
page:
---------------------------------------
Address of the Stockholder executing this
page:
--------------------------------------------
--------------------------------------------
--------------------------------------------
Fax:
--------------------------------------
Phone:
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2