EXHIBIT 10.3
EXCHANGE AGREEMENT
THIS AGREEMENT made as of this 8th day of February, 2005, by and
between XXXXX LLC, a corporation organized under the laws of the Cayman Islands
("Holder"), and TECHNEST HOLDINGS, INC., a Nevada corporation ("THNS" or the
"Company").
The following terms shall have the specified definitions, unless the
context otherwise requires:
"Common Stock" shall mean the common stock of THNS, $0.001 par value
per share.
R E C I T A L S
A. The Holder is the owner of good and marketable title to various
Promissory Notes issued by THNS (the "Securities"), free and clear of all liens,
pledges and encumbrances as listed in Exhibit A hereto.
B. THNS is currently in default on the Securities and has no means to
repay the principal and accrued interest on those Securities, and wishes to cure
such default. As of December 31, 2004, outstanding principal plus interest on
the Securities amounts to $74,325.00.
C. In consideration of the Holder's agreement to surrender to THNS for
retirement the Securities, and for additional funding to THNS in the amount of
$25,000 ($6,500 of which has already been funded to the Company) THNS agrees to
issue Series A Preferred Stock to Holder, convertible into shares of Common
Stock at par value representing (a) the outstanding principal amount of the
Securities plus interest and (b) the additional $25,000 funding.
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NOW, THEREFORE, for and in consideration of the premises and the mutual
agreement contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
1. On the Closing Date (as defined below), the Holder agrees to
transfer to THNS (a) the Securities, (b) $18,500 in cash.
2. In consideration therefore, THNS agrees to issue to the Holder
99.325 shares of Series A Preferred Stock, convertible into 99,325,000 shares of
Common Stock at par value, as evidenced by a separate securities purchase
agreement between the parties of even date.
3. [Intentionally Omitted]
4. CLOSING DATE. Subject to the satisfaction (or waiver) of the
conditions thereto set forth in Section 9 and Section 10 below, the date and
time of the Exchange pursuant to this Agreement (the "Closing Date") shall be
12:00 noon Eastern Standard Time on January 31, 2005 or such other mutually
agreed upon time.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to the Holder that:
(a) The Company has the corporate power and authority to enter into
this Agreement, and to perform its obligations hereunder. The execution and
delivery by the Company of this Agreement and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement has been duly
executed and delivered by the Company and constitutes valid and binding
obligations of the Company enforceable against it in accordance with its terms,
subject to the effects of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and to the
application of equitable principles in any proceeding (legal or equitable).
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(b) To the actual knowledge of the Company, the execution,
delivery and performance by the Company of this Agreement, and the consummation
of the transactions contemplated hereby, do not and will not breach or
constitute a default under any applicable law or regulation or of any agreement,
judgment, order, decree or other instrument binding on the Company which breach
or default could reasonably by expected to have a material adverse effect on the
Company taken as a whole.
(c) Other than as disclosed in the Company's reports or
registration statements as filed with the Securities and Exchange Commission
(the "SEC"), including the exhibits thereto (the "SEC Documents"), there is no
pending, or to the actual knowledge of the Company, threatened, judicial,
administrative or arbitral action, claim, suit, proceeding or investigation
which might affect the validity or enforceability of this Agreement or which
involves the Company and which if adversely determined, could reasonably be
expected to have a material adverse effect on the Company.
(d) Except as disclosed in Schedule 5(d) hereto, to the actual
knowledge of the Company, no consent or approval of, or exemption by, or filing
with, any party or governmental or public body or authority is required in
connection with the execution, delivery and performance under this Agreement or
the taking of any action contemplated hereunder.
(e) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation.
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(f) The execution, delivery and performance of this Agreement
by the Company, and the consummation of the transactions contemplated hereby,
will not (i) violate any provision of the Company's Certificate of Incorporation
or By-laws, (ii) violate, conflict with or result in the breach of any of the
terms of, result in a material modification of the effect of, otherwise, give
any other contracting party the right to terminate, or constitute (or with
notice or lapse of time or both constitute) a default under, any contract or
other agreement to which the Company is a party or by or to which the Company or
any of the Company's assets or properties may be bound or subject, (iii) violate
any order, judgment, injunction, award or decree of any court, arbitrator or
governmental or regulatory body by which the Company, or the assets or
properties of the Company are bound, (iv) to the Company's actual knowledge,
violate any statute, law or regulation.
6. REPRESENTATIONS AND WARRANTIES OF THE HOLDER. The Holder hereby
represents and warrants to the Company that:
(a) The Holder has the corporate power and authority to enter
into this Agreement and to perform its obligations hereunder. The execution and
delivery by the Holder of this Agreement, and the consummation by the Holder of
the transactions contemplated hereby, have been duly authorized by all necessary
corporate action on the part of the Holder. This Agreement has been duly
executed and delivered by the Holder and constitutes valid and binding
obligations of the Holder, enforceable against it in accordance with its terms,
subject to the effects of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors' rights generally and to the
application of equitable principles in any proceeding (legal or equitable).
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(b) The execution, delivery and performance by the Holder of
this Agreement, and the consummation of the transactions contemplated hereby, do
not and will not breach or constitute a default under any applicable law or
regulation or of any agreement, judgment, order, decree or other instrument
binding on the Holder.
(c) The Holder is a sophisticated investor (as described in
Rule 506(b)(2)(ii) of Regulation D) and an accredited investor (as defined in
Rule 501 of Regulation D), and the Holder has such experience in business and
financial matters that it is capable of evaluating the merits and risks of an
investment in the Preferred Stock. The Holder acknowledges that an investment in
the Preferred Stock is speculative and involves a high degree of risk.
(d) Holder has received all documents, records, books and
other information pertaining to Holder's investment in the Company that have
been requested by Holder.
(e) At no time was Holder presented with or solicited by or
through any leaflet, public promotional meeting, television advertisement or any
other form of general solicitation or advertising.
(f) Except as specifically set forth herein, Holder makes no
representations or warranties any other matter.
(g) The Holder has taken no action which would give rise to
any claim by any person for brokerage commissions, finder's fees or similar
payments relating to this Agreement or the transaction contemplated hereby.
(h) The Holder is the owner of good and marketable title to
the Securities, free and clear of all liens, pledges and encumbrances.
7. GOVERNING LAW; MISCELLANEOUS
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(a) GOVERNING LAW; JURISDICTION. 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 of 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. 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.
(b) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party and
delivered to the other parties.
(c) HEADINGS. The headings of this Agreement are for
convenience of reference and shall not form part of, or affect the
interpretation of, this Agreement.
(d) SEVERABILITY. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction.
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(e) ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the
instruments referenced herein contain the entire understanding of the parties
with respect to the matters covered herein and therein and, except as
specifically set forth herein or therein, neither the Company nor the Holder
make any representation, warranty, covenant or undertaking with respect to such
matters. No provision of this Agreement may be waived other than by an
instrument in writing signed by the party to be charged with enforcement and no
provision of this Agreement may be amended other than by an instrument in
writing signed by the Company and the Holder.
(f) NOTICES. Any notices required or permitted to be given
under the terms of this Agreement shall be sent by certified or registered mail
(return receipt requested) or delivered personally or by courier, overnight
delivery service or by confirmed telecopy, and shall be effective five days
after being placed in the mail, if mailed, or upon receipt or refusal of
receipt, if delivered personally or by courier, overnight delivery service or
confirmed telecopy, in each case addressed to a party. The addresses for such
communications shall be:
If to the Company:
Xxxx Xxxxx
Technest Holdings, Inc.
00 Xxxxx Xxxxxx
Xxxxxxxxxx XX 00000
If to the Holder:
Xxxxx LLC
Xxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxxxxxx Xxxxx
PO Box 972
Road Town
Tortola, British Virgin Islands
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Each party shall provide notice to the other parties of any change in
address.
(g) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Neither the Company, nor the Holder shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other.
8. FURTHER ASSURANCES. Each party shall do and perform or cause to be
done and perform, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
9. CONDITIONS TO THE HOLDER'S OBLIGATION TO EXCHANGE. The obligation of
the Holder to deliver the Securities to THNS on the Closing Date is subject to
the satisfaction, at or before the Closing Date, of each of the following
conditions thereto, provided that these conditions are for the Holder's sole
benefit and may be waived by the Holder at any time in its sole discretion:
(a) THNS shall have executed this Agreement and the Securities
Purchase Agreement of even date and delivered same to the Holder.
(b) The representations and warranties of THNS shall be true
and correct in all material respects as of the date when made and as of the
Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date), and THNS shall have performed,
satisfied and complied in all material respects with the covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by THNS on or prior to the Closing Date.
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(c) THNS shall have delivered to the Holder the shares of
Series A Preferred Stock in accordance with the terms herein.
(d) No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
10. CONDITIONS TO THNS's OBLIGATION TO EXCHANGE. The obligation of THNS
hereunder to deliver the shares of Common Stock on the Closing Date is subject
to the satisfaction, at or before the Closing Date, of each of the following
conditions, provided that these conditions are for THNS's sole benefit and may
be waived by THNS at any time in its sole discretion.
(a) The Holder shall have executed this Agreement and the
Securities Purchase Agreement of even date and delivered same to THNS.
(b) The Holder shall have delivered to THNS the Securities in
accordance with the terms herein.
(c) The representations and warranties of the Holder shall be
true and correct in all material respects as of the date when made and as of the
Closing Date as though made at such time (except for representations and
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warranties that speak as of a specific date) and the Holder shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Holder on or prior to the Closing Date.
(d) No litigation, statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by or in any court or governmental authority of competent jurisdiction
or any self-regulatory organization having authority over the matters
contemplated hereby which prohibits the consummation of any of the transactions
contemplated by this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
TECHNEST HOLDINGS, INC.
By: ________________________________
Name:
Title:
XXXXX LLC
By: ________________________________
Name: ______________________________
Title: _____________________________
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EXHIBIT A
LIST OF SECURITIES
TYPE MATURITY DATE PRINCIPAL AMOUNT ISSUANCE DATE
Convertible Note 12/31/04 $16,950 2/25/2003
Convertible Note 12/31/04 $10,000 2/28/2003
Convertible Note 12/31/04 $2,500 4/23/2003
Convertible Note 12/31/04 $3,000 5/1/2003
Convertible Note 12/31/04 $2,500 5/14/2003
Convertible Note 12/31/04 $5,000 7/22/2003
Convertible Note 12/31/04 $8,607.80 9/23/2003
Convertible Note 12/31/04 $8,500.00 11/17/2003
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