SECURITIES PURCHASE AGREEMENT

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT is made as of the 20th day of May, 2009, by and between Technest Holdings, Inc. (the “ Company ”), a Nevada corporation, and each of the persons whose names are set forth on the Schedule of Purchasers attached hereto as Exhibit A (the “ Purchasers ” and each individually as a “ Purchaser ”).

WHEREAS, each Purchaser wishes to purchase from the Company, and the Company wishes to sell to each Purchaser, certain shares (the “ Shares ”) of the Company’s Series D 5% Convertible Preferred Stock, par value $0.0001 per share (“ Series D Preferred ”) a copy of whose certificate of designation is set forth below in Exhibit B;

NOW, THEREFORE, in consideration of the mutual covenants contained in this Agreement, the parties agree as follows:

SECTION 1   Sale of Securities .

1.1   Authorization of Sale of the Securities .  Subject to the terms and conditions of this Agreement, the Company has authorized the sale and issuance to the Purchasers of the number of Shares set forth next to each Purchaser’s name on Exhibit A hereof.

1.2   Agreement to Sell and Purchase the Shares .  At the Closing (as defined below), the Company will issue and sell the Shares to each Purchaser, severally and not jointly, and each Purchaser will buy the Shares from the Company set forth opposite such Purchaser’s name on Exhibit A , upon the terms and conditions hereinafter set forth, at the purchase price set forth on Exhibit A .

1.3   Several and not Joint Obligations .  The representations, warranties, covenants, agreements and obligations of the Purchasers under this Agreement are several and not joint.

1.4   Time of the Essence .  Time is of the essence in this Agreement.  If no Closing (as hereinafter defined) has take place by May 20, 2009, the Company may unilaterally and in its sole discretion terminate this Agreement as to any or all Purchasers, in which case no terminated party shall have any liability to or claim against the Company under or in connection with this Agreement or the transactions contemplated by this Agreement.

1.5   Closing .  Subject to and in reliance upon all of the representations, warranties, covenants, terms and conditions of this Agreement, the closing shall take place at the offices of the Company located in Bethesda, Maryland at 10:00 a.m., local time, on May 20, 2009, or at such other location, date and time as many be agreed upon between the applicable Purchasers and Company (such closing being called the “ Closing ”).

SECTION 2   Representations, Warranties and Covenants of the Company .

The Company hereby represents and warrants to, and covenants with, the Purchasers as follows:

3.1   Organization and Qualification .  The Company is a corporation, validly existing and in good standing under the laws of the State of Nevada; and the Company is duly qualified to do business as a foreign corporation and is in good standing in each other jurisdiction in which qualification is required, except where the failure to be so qualified will not have a material adverse effect.

 

 

3.2   Issuance, Sale and Delivery of the Shares .  Both the Shares being purchased hereunder, and the underlying shares of the Company’s common stock into which the Shares may convert are duly authorized and, when issued, delivered and paid for in the manner set forth in this Agreement, will be duly authorized, validly issued, fully paid and nonassessable, and will be free of any liens or encumbrances other than liens or encumbrances created or imposed upon the Purchasers.

3.3   Due Execution, Delivery and Performance of the Agreements .  The Company has full corporate power and authority to enter into this Agreement, to issue and sell the Shares, and perform the transactions contemplated by this Agreement.  The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions therein contemplated will not violate any provision of the Restated Articles of Incorporation or by-laws of the Company.

3.4   SEC Filings .  Each report, schedule, registration statement and definitive proxy statement filed by the Company with the Securities and Exchange Commission (the “ Commission ”) under the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), since December 31, 2007 is available on EDGAR (as such documents have since the time of their filing been amended, the “ Information Documents ”), which are all the documents (other than preliminary material) that the Company was required to file with the Commission since such date.  Except as disclosed to the Purchasers, as of their respective dates, the Information Documents complied in all material respects with  the requirements of the Exchange Act and the rules and regulations of the Commission thereunder applicable to the Information Documents, and none of the Information Documents contained at the time they were filed, any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

3.5 Authorized Shares .   The authorized capital stock of the Company consists of (i) 495,000,000 shares of Common Stock, $.001 par value per share, of which  20,676,739 shares have been issued and are outstanding as of the date hereof and (ii) 5,000,000 of Preferred Stock, of which 150 shares have been designated as Series A Preferred Stock, 64.631  shares of which have been issued and are outstanding;  1,149,425 shares have been designated as Series B Preferred Stock, none of which are outstanding;  1,149,425 shares have been designated as Series C Preferred Stock,  402,294 shares of which have been issued and are outstanding; 3,000 shares have been designated as Series D Preferred Stock, 1,300 shares of which have been issued and are outstanding as of the date hereof.  All issued and outstanding shares of Common Stock and Preferred Stock have been duly authorized and validly issued and are fully paid and nonassessable.

 

 

SECTION 4   Representations, Warranties and Covenants of the Purchasers

4.1   Experience; Accredited Investor Status .  Each Purchaser, individually and not jointly, represents and warrants to, and covenants with, the Company that: (i) he is an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, (ii) he is knowledgeable, sophisticated and experienced in making, and is qualified to make, decisions with respect to investments in securities representing an investment decision like that involved in the purchase of the Shares, including investments in securities issued by the Company, and has requested, received, reviewed and understood all information he deems relevant in making an informed decision to purchase the Shares; (iii) he acknowledges that the offering of the Shares pursuant to this Agreement has not been reviewed by the Securities and Exchange Commission or any state regulatory authority; (iv) it is acquiring the Shares set forth next to his name on Exhibit A hereto, for his own account for investment only and with no intention of effecting a distribution any of such Shares or any arrangement or understanding with any other persons regarding the distribution of such Shares; (v) he will not, directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit any offers to buy, purchase or otherwise acquire or take a pledge of) any of the Shares except in compliance with the Securities Act of 1933, as amended (the “ Securities Act ”), rules and regulations promulgated under the Securities Act and any applicable state securities or blue sky laws; (vi) he understands that the securities are “restricted securities” as such term is defined in Rule 144(a)(3) promulgated under the Securities Act, and that the Shares are illiquid in that they may not readily be resold and that the Company has no obligation or plan to register the resale of the Shares by the Purchaser under the Securities Act; (vii) he has, in connection with his decision to purchase Shares, not relied upon any representations or other information (whether oral or written) other than as set forth in the representations and warranties of the Company contained herein; (viii) he has had an opportunity to discuss this investment with representatives of the Company and ask questions of them and such questions have been answered to his full satisfaction.

4.2   Acknowledgement of Risk .  Each Purchaser, individually and not jointly, recognizes that an investment in the Shares is speculative and involves a high degree of risk, including a risk of total loss of the Purchaser’s investment.  Each Purchaser, individually and not jointly, acknowledges that they have been afforded an opportunity to ask questions and to review any documents that might be necessary to evaluate the degree of risk involved in the transactions contemplated by this Agreement.

 

 

4.3   Acknowledgement of Company’s Reliance .  Each Purchaser, individually and not jointly, represents and warrants that all of the information provided to the Company or its agents or representatives concerning such Purchaser’s suitability to invest in the Company and the representations and warranties contained herein, are complete, true, and correct as of the date hereof, and understands that the Company is relying on the statements contained herein to establish an exemption from registration under U.S. federal and state securities laws.  Each Purchaser, individually and not jointly, represents and warrants that the address set forth in the signature page hereto is such Purchaser’s true and correct domicile.

4.4   Restrictions on Transfer .  Each Purchaser agrees to not, without the prior written consent of the Company, directly or indirectly, make any offer, sale, assignment, transfer, encumbrance, contract to sell, grant of an option to purchase or other disposition of any Shares beneficially owned (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended) by the Purchaser on the date hereof or hereafter acquired for a period of six months subsequent to the date hereof.  Each Purchaser agrees and consents to the entry of stop transfer instructions with the Company’s transfer agent against the transfer of Shares except in compliance with this agreement.

SECTION 5.   Certain Covenants of the Company

 

 

SECTION 6   Expenses .  Each party hereto will pay its own expenses in connection with the transactions contemplated hereby, whether or not such transactions shall be consummated.

SECTION 7   Notices .  All notices, requests, consents, and other communications under this Agreement shall be in writing and shall be delivered by hand, sent via overnight courier, sent by facsimile, or mailed by first class certified or registered mail, return receipt requested, postage prepaid:

or to such other person at such other place as the Company shall designate to the Purchasers in writing; and if to the Purchasers, at the address as set forth on Exhibit A , or at such other address or addresses as may have been furnished to the Company in writing pursuant to this Section 7 .

SECTION 8   Severability .  In case any provision contained in this Agreement should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not in any way be affected or impaired thereby.

SECTION 9   Governing Law .  This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws. Each of the parties consents to the exclusive jurisdiction of the federal courts whose districts encompass any part of the County of New York or the state courts of the State of New York sitting in the County of New York in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non conveniens , to the bringing of any such proceeding in such jurisdictions.  Each party hereto agrees to waive its right to a trial by jury in any proceeding in connection with any dispute associated with this Agreement.

SECTION 10   Entire Agreement .  This Agreement contains the entire agreement of the parties with respect to the subject matter hereof and supersedes and is in full substitution for any and all prior oral or written agreements and understandings between them related to such subject matter, and neither party hereto shall be liable or bound to the other party hereto in any manner with respect to such subject matter by any representations, indemnities, covenants or agreements except as specifically set forth herein.

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be executed as of the date first above written by their duly authorized representatives shown below:

 

 

 Exhibit A

Schedule of Purchasers

 

 

Exhibit B

Certificate of Designation

 

CERTIFICATE OF DESIGNATION OF RIGHTS AND PREFERENCES

FOR SERIES D 5% CONVERTIBLE PREFERRED STOCK

OF

TECHNEST HOLDINGS, INC.

Pursuant to Section 78.1955 of the Nevada Revised Statutes, Technest Holdings, Inc., a Nevada corporation (the "Company"), does hereby certify:

FIRST: That pursuant to authority expressly vested in it by the Restated Articles of Incorporation, as amended, of the Company, the Board of Directors of the Company has adopted the following resolution establishing a new series of Preferred Stock of the Company, consisting of Three Thousand (3,000) shares designated "Series D 5% Convertible Preferred Stock," with such powers, designations, preferences, and relative participating, optional, or other rights, if any, and the qualifications, limitations, or restrictions thereof, as are set forth in the resolutions:

SECOND: That said resolutions of the directors of the Company were duly adopted in accordance with the provisions of Sections 78.315 and 78.1955 of the Nevada Revised Statutes.

IN WITNESS WHEREOF, the undersigned hereby affirms, under penalties of perjury, that the foregoing instrument is the act and deed of the Company and that the facts stated therein are true.  Dated as of the 1st day of October, 2008.

 

 

EXHIBIT

 

 

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