EXHIBIT 4.8
TECHNEST HOLDINGS, INC.
CERTIFICATE OF DESIGNATION OF
SERIES C CONVERTIBLE PREFERRED STOCK
NEVADA REVISED STATUTES SECTION 78.1955
Technest Holdings, Inc., a Nevada corporation (the "COMPANY"),
certifies by and through its undersigned President or Vice-President and
Secretary or Assistant Secretary that the Board of Directors of the Company,
pursuant to Nevada Revised Statutes Section 78.1955 and Article IV, Section 2 of
the Restated Articles of Incorporation of the Company, has adopted a resolution
establishing a series of the Company's authorized preferred stock designated as
Series C Convertible Preferred Stock (the "SERIES C PREFERRED STOCK").
The number of shares of the Series C Preferred Stock which the Company
is authorized to issue is 1,149,425.
The voting powers, designations, preferences, limitations, restrictions
and relative rights of the Series C Preferred Stock are set forth in the
Unanimous Consent of the Directors of Technest Holdings, Inc. set forth in
EXHIBIT A attached hereto and made a part hereof.
In witness whereof, the undersigned have executed this Certificate of
Designation as of the 11th day of February, 2005.
TECHNEST HOLDINGS, INC.
By:____________________________
Name:
Title:
EXHIBIT A
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UNANIMOUS WRITTEN CONSENT OF THE DIRECTORS
OF
TECHNEST HOLDINGS, INC.
TO
ACTIONS TAKEN WITHOUT A MEETING
Pursuant to Section 78.315 of the Nevada Revised Statutes and Article
IV, Section 2 of the Restated Articles of Incorporation (the "RESTATED ARTICLES
OF INCORPORATION") of Technest Holdings, Inc., a Nevada corporation (the
"COMPANY"), the undersigned, being all of the directors (the "DIRECTORS") of the
Company, hereby take the following actions by unanimous written consent (this
"CONSENT") in lieu of a meeting of the Directors, as set forth in the following
resolutions, such resolutions setting forth the designations, powers,
preferences and rights of the Company's Series C Convertible Preferred Stock
(the "CERTIFICATE OF DESIGNATIONS"):
WHEREAS, the Directors desire to establish and designate a series of
shares of preferred stock of the Company and to fix and determine the
designation, number, voting powers, preferences, limitations, restrictions and
relative rights thereof in accordance with the following resolutions;
NOW, THEREFORE, be it hereby:
RESOLVED: That the Company shall be, and hereby is, authorized to issue
up to 1,149,425 shares of a series of the preferred stock, $0.001 par value per
share, of the Company with the following voting powers, designation,
preferences, limitations, restrictions and relative rights (the "SERIES C
PREFERRED STOCK"):
1. DIVIDENDS. The Series C Preferred Shares shall not bear any
dividends except as provided herein.
2. CONVERSION OF SERIES C PREFERRED SHARES. A person or entity holding
shares of Series C Preferred Stock (a "HOLDER") shall have the following
conversion rights:
(a) CONVERSION RIGHT. subject to the limitation set forth in
SECTION 2(B) and subject to the availability of sufficient authorized shares of
Common Stock for issuing at conversion, each share of Series C Preferred Stock
(a "SERIES C PREFERRED SHARE") shall be convertible, at the option of the Holder
thereof at the office of the Company or any transfer agent for the Series C
Preferred Stock, into such number of fully paid and nonassessable shares of the
Company's common stock, $.001 par value per share ("COMMON STOCK"), rounded
downward to the nearest whole share in accordance with SECTION 2(E) below, and
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as is determined by dividing $2.175 by the Series C Conversion Price (as defined
below) in effect at the time of conversion. The "SERIES C CONVERSION PRICE"
shall initially be equal to $.0102993. Such initial Series C Conversion Price,
and the rate at which shares of Series C Preferred Stock may be converted into
shares of Common Stock, shall be subject to adjustment as provided below.
(b) CONVERSION RESTRICTIONS. In no event shall any Holder be
entitled to convert Series C Preferred Shares if such conversion would cause the
aggregate number of shares of Common Stock beneficially owned by the Holder and
its affiliates (including, but not limited to, any person who may be deemed an
affiliate for purposes of aggregation under Rule 144(e) promulgated under the
Securities Act of 1933, as amended) to exceed 4.999% of the outstanding shares
of the Common Stock following such conversion. For purposes of this paragraph,
beneficial ownership shall be calculated in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended. By written notice to the Company, a
holder may waive the provisions of this SECTION 2(B) as to itself but any such
waiver will not be effective until the 65th day after delivery thereof and such
waiver shall have no effect on any other holder PROVIDED THAT, in no event shall
the number of shares of Common Stock that may be acquired by a holder and its
affiliates (including, but not limited to, any person who may be deemed an
affiliate for purposes of aggregation under Rule 144(e) promulgated under the
Securities Act of 1933, as amended) exceed 9.999% of the outstanding shares of
the Markland Common Stock following such conversion.
(c) CERTAIN ADJUSTMENTS AND OTHER EVENTS. The Series C
Conversion Price will be subject to adjustment from time to time as provided in
this SECTION 2(C).
(i) ADJUSTMENTS FOR SUBDIVISIONS OR COMBINATIONS OF
COMMON STOCK. In the event the outstanding shares of
Common Stock shall be subdivided by stock split,
stock dividend, reclassification or otherwise, into a
greater number of shares of Common Stock or the
Company shall declare a dividend payable in any right
to acquire Common Stock for no consideration, the
Series C Conversion Price in effect immediately prior
to such event shall, concurrently with the
effectiveness of such subdivision, be proportionately
decreased. In the event the outstanding shares of
Common Stock shall be combined or consolidated by
reclassification or otherwise into a lesser number of
shares of Common Stock, the Series C Conversion Price
in effect immediately prior to such event shall,
concurrently with the effectiveness of such
combination or consolidation, be proportionately
increased.
(ii) ADJUSTMENTS FOR STOCK DIVIDENDS AND OTHER
DISTRIBUTIONS. In the event the Company makes, or
fixes a record date for the determination of holders
of Common Stock entitled to receive any distribution
(excluding repurchases of securities by the Company
not made on a PRO RATA basis) payable in property or
in securities of the Company other than shares of
Common Stock, and other than as otherwise adjusted
for in this SECTION 2(C)(I), (III) OR (IV), in
connection with a dividend, then and in each such
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event the Holders of the Series C Preferred Stock
shall receive, at the time of such distribution, the
amount of property or the number of securities of the
Company that they would have received had their
Series C Preferred Shares been converted into Common
Stock on the date of such event.
(iii) ADJUSTMENTS FOR REORGANIZATION,
RECLASSIFICATIONS OR SIMILAR EVENTS. If the Common
Stock shall be changed into shares of any other class
or classes of stock, whether by capital
reorganization, reclassification or otherwise (other
than a subdivision or combination of shares provided
for in SECTIONS 2(C)(I)), referred to herein as an
"ORGANIC Change", then the Series C Conversion Price
then in effect shall, concurrently with the
effectiveness of such reorganization or
reclassification or other event, be proportionately
adjusted so that each Series C Preferred Share shall
thereafter be convertible into such number of shares
of such other class or classes of stock as the number
of shares of Common Stock of the corporation
deliverable upon conversion of such Series C
Preferred Share immediately before such
reorganization, reclassification or other event would
have become in connection with such reorganization,
reclassification or other event.
(iv) SPIN OFF. If, at any time prior to a Conversion
Date, the Company consummates a spin off or otherwise
divests itself of a part of its business or
operations or disposes of all or of a part of its
assets in a transaction (the "SPIN OFF") in which the
Company does not receive just compensation for such
business, operations or assets, but causes securities
of another entity (the "SPIN OFF SECURITIES") to be
issued to security Holders of the Company, then the
Company shall cause (i) to be reserved Spin Off
Securities equal to the number thereof which would
have been issued to the Holder had all of the
Holder's Series C Preferred Shares outstanding on the
record date (the "RECORD DATE") for determining the
amount and number of Spin Off Securities to be issued
to security Holders of the Company been converted as
of the close of business on the trading day
immediately before the Record Date (the "RESERVED
SPIN OFF SHARES"), and (ii) to be issued to the
Holder on the conversion of all or any of the
outstanding Series C Preferred Shares, such amount of
the Reserved Spin Off Shares equal to (x) the
Reserved Spin Off Shares multiplied by (y) a
fraction, of which (a) the numerator is the principal
amount of the outstanding Series C Preferred Shares
then being converted, and (b) the denominator is the
principal amount of all the outstanding Series C
Preferred Shares.
(v) NOTICES.
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(1) Immediately upon any adjustment, the
Company will give written notice thereof to
each Holder of Series C Preferred Shares,
setting forth in reasonable detail and
certifying the calculation of such
adjustment.
(2) The Company will give written notice to
each Holder of Series C Preferred Shares at
least ten (10) days prior to the date on
which the Company closes its books or sets a
record date (I) with respect to any dividend
or distribution upon the Common Stock, (II)
with respect to any pro rata subscription
offer to Holders of Common Stock or (III)
for determining rights to vote with respect
to any Organic Change, dissolution or
liquidation.
(3) The Company will also give written
notice to each Holder of Series C Preferred
Shares at least ten (10) days prior to the
date on which any Organic Change,
dissolution or liquidation will take place.
(d) MECHANICS OF CONVERSION.
(i) HOLDER'S DELIVERY REQUIREMENTS. To convert Series
C Preferred Shares into full shares of Common Stock
on any date (the "CONVERSION DATE"), the Holder
thereof shall (A) deliver or transmit by facsimile,
for receipt on or prior to 11:59 p.m., Eastern
Standard Time, on such date, a copy of a fully
executed notice of conversion in the form attached
hereto as ANNEX A (the "CONVERSION NOTICE") to the
Company or its designated transfer agent for the
Series C Preferred Stock (the "TRANSFER AGENT"), and
(B) surrender to a common carrier for delivery to the
Company or the Transfer Agent as soon as practicable
following such date, the original certificates
representing the Series C Preferred Shares being
converted (or an indemnification undertaking with
respect to such shares in the case of their loss,
theft or destruction) (the "PREFERRED STOCK
CERTIFICATES") and the originally executed Conversion
Notice.
(ii) COMPANY'S RESPONSE. Upon receipt by the Company
or the Transfer Agent of the Preferred Stock
Certificates to be converted pursuant to a Conversion
Notice, together with the originally executed
Conversion Notice, the Company or the Transfer Agent
(as applicable) shall, within five (5) business days
following the date of receipt, (A) issue and
surrender to a common carrier for overnight delivery
to the address specified in the Conversion Notice, a
certificate, registered in the name of the Holder or
its designee, for the number of shares of Common
Stock to which the Holder shall be entitled or (B)
credit the aggregate number of shares of Common Stock
to which the Holder shall be entitled to the Holder's
or its designee's balance account at The Depository
Trust Company.
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(iii) RECORD HOLDER. The person or persons entitled
to receive the shares of Common Stock issuable upon a
conversion of Series C Preferred Shares shall be
treated for all purposes as the record Holder or
Holders of such shares of Common Stock on the
Conversion Date.
(e) FRACTIONAL SHARES. The Company shall not issue any
fraction of a share of Common Stock upon any conversion. All shares of Common
Stock (including fractions thereof) issuable upon conversion of more than one
share of the Series C Preferred Shares by a Holder thereof shall be aggregated
for purposes of determining whether the conversion would result in the issuance
of a fraction of a share of Common Stock. If, after the aforementioned
aggregation, the issuance would result in the issuance of a fraction of a share
of Common Stock, the Company shall round such fraction of a share of Common
Stock down to the nearest whole share.
(f) TAXES. The Company shall pay any and all taxes which may
be imposed upon it with respect to the issuance and delivery of Common Stock
upon the conversion of the Series C Preferred Shares.
(g) CANCELLATION OF SERIES C PREFERRED STOCK. If any shares of
Series C Preferred Stock are converted pursuant to this Certificate of
Designations, the shares so converted shall be cancelled and shall return to the
status of authorized, but unissued preferred stock of no designated series.
3. REISSUANCE OF CERTIFICATES. In the event of a conversion pursuant to
this Certificate of Designations of less than all of the Series C Preferred
Shares represented by a particular Preferred Stock Certificate, the Company
shall promptly cause to be issued and delivered to the Holder of such Series C
Preferred Shares a Preferred Stock Certificate representing the remaining Series
C Preferred Shares which have not been so converted or redeemed.
4. RESERVATION OF SHARES. The Company shall use its best efforts to
effect a reverse split of its outstanding shares of Common Stock sufficient to
provide for conversion of the Series C Preferred Shares. After such reverse
split, so long as any of the Series C Preferred Shares are outstanding, the
Company shall reserve and keep available out of its authorized and unissued
Common Stock, solely for the purpose of effecting the conversion of the Series C
Preferred Shares, such number of shares of Common Stock as shall from time to
time be sufficient to affect the conversion of all of the Series C Preferred
Shares then outstanding.
5. VOTING RIGHTS. The Series C Shares shall have no voting rights
except as otherwise provided in SECTION 9 or as required by the Chapter 78 of
the Nevada Revised Statutes.
6. LIQUIDATION PREFERENCE.
(a) LIQUIDATION, DISSOLUTION, WINDING-UP. In the event of any
voluntary or involuntary liquidation, dissolution, or winding up of the Company,
and after payment in full has been made the holders of senior securities of the
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full amounts to which they shall be entitled by reason of their ownership of the
senior securities, the Holders of the Series C Preferred Shares shall be
entitled to receive, prior and in preference to any distribution of any assets
or funds of the Company to the holders of the Common Stock by reason of their
ownership thereof, an amount per Series C Preferred Share equal to $2.175 (such
sum being referred to as the "LIQUIDATION VALUE"); PROVIDED THAT, if the assets
and funds of the Company legally available for distribution to stockholders by
reason of their ownership of the stock of this Company shall be insufficient to
permit the payment to the Holders of the Series C Preferred Stock of the
aggregate Liquidation Value which they would otherwise be entitled to receive,
plus all amounts due to holders of shares of other classes or series of
preferred stock of the Company that are of equal rank with the Series C
Preferred Stock for purposes of preference in the event of any voluntary or
involuntary liquidation, dissolution, or winding up of the Company ("PARI PASSU
SHARES"), then the entire assets and funds of the Company legally available for
distribution to the holders of the Series C Preferred Shares and the Pari Passu
Shares shall be distributed ratable among the holders of the Series C Preferred
Stock and the Pari Passu Shares in proportion to the aggregate assets or funds
of the Company each holder of the Series C Preferred Shares or Pari Passu Shares
would receive based on their ownership of such shares if there were an amount of
assets or funds of the Company legally available to pay the full liquidation
preference due to the holders of the Series C Preferred Shares and the Pari
Passu Shares by reason of their ownership thereof. The purchase or redemption by
the Company of stock of any class in any manner permitted by law, shall not for
the purposes hereof, be regarded as a liquidation, dissolution or winding up of
the Company. Neither the consolidation or merger of the Company with or into any
other Person, nor the sale or transfer by the Company of less than substantially
all of its assets, shall, for the purposes hereof, be deemed to be a
liquidation, dissolution or winding up of the Company. No Holder of Series C
Preferred Shares shall be entitled to receive any amounts with respect thereto
upon any liquidation, dissolution or winding up of the Company other than the
amounts provided for herein.
(b) RANK. The Series C Preferred Stock shall rank (i) senior
to Company's Common Stock, (ii) Pari Passu with the Company's Series A
Convertible Preferred Stock, (iii) Pari Passu to the Company's Series B
Preferred Stock.
7. PREFERRED RATE. All shares of Common Stock shall be of junior rank
to all Series C Preferred Shares in respect to the preferences as to
distributions and payments upon the liquidation, dissolution, and winding up of
the Company. Without the prior express written consent of the Holders of not
less than a majority of the then outstanding Series C Preferred Shares, the
Company shall not hereafter authorize or make any amendment to the Company's
Certificate of Incorporation or bylaws, or make any resolution of the board of
directors with the Nevada Secretary of State containing any provisions, which
would materially and adversely affect or otherwise impair the rights or relative
priority of the Holders of the Series C Preferred Shares relative to the Holders
of the Common Stock. In the event of the merger or consolidation of the Company
with or into another corporation, the Series C Preferred Shares shall maintain
their relative powers, designations, and preferences provided for herein and no
merger shall result inconsistent therewith.
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8. RESTRICTION ON DIVIDENDS. If any Series C Preferred Shares are
outstanding, without the prior express written consent of the Holders of not
less than a majority of the then outstanding Series C Preferred Shares, the
Company shall not, directly or indirectly, declare, pay or make any dividends or
other distributions upon any of the Common Stock, unless written notice thereof
has been given to Holders of the Series C Preferred Shares at least 10 days
prior to the earlier of (a) the record date taken for or (b) the payment of any
such dividend or other distribution. Notwithstanding the foregoing, this SECTION
8 shall not prohibit the Company from declaring and paying a dividend in cash
with respect to the Common Stock so long as the Company: (i) pays simultaneously
to each Holder of Series C Preferred Shares an amount in cash equal to the
amount such Holder would have received had all of such Holder's Series C
Preferred Shares been converted to Common Stock pursuant to SECTION 2 hereof one
business day prior to the record date for any such dividend.
9. VOTE TO CHANGE THE TERMS OF SERIES C PREFERRED SHARES. Except as
provided in SECTION 7 above, the affirmative vote at a meeting duly called for
such purpose, or the written consent without a meeting of the Holders of not
less than a majority of the then outstanding Series C Preferred Shares, shall be
required for any change, modification or amendment to this Certificate of
Designations or any waiver of any right of the Series C Preferred Shares or any
amendment to the Company's Restated Articles of Incorporation if such amendment
would materially and adversely affect the rights, preferences or privileges of
the Series C Preferred Shares.
10. LOST OR STOLEN CERTIFICATES. Upon receipt by the Company of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Preferred Stock Certificate representing Series C Preferred
Shares, and, in the case of loss, theft or destruction, of an indemnification
undertaking, in form and substance reasonably satisfactory to the Company, by
the Holder to the Company and, in the case of mutilation, upon surrender and
cancellation of the preferred stock certificate(s), the Company shall execute
and deliver new preferred stock certificate(s) of like tenor and date; provided,
that, the Company shall not be obligated to re-issue preferred stock
certificates if the Holder contemporaneously requests the Company to convert
such Series C Preferred Shares into Common Stock.
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ANNEX A
TECHNEST HOLDINGS, INC.
CONVERSION NOTICE
Reference is made to the Certificate of Designations, Preferences and
Rights of Technest Holdings, Inc. (the "CERTIFICATE OF DESIGNATIONS"). In
accordance with and pursuant to the Certificate of Designations, the undersigned
hereby elects to convert the number of shares of Series C Convertible Preferred
Stock, $.001 par value per share ("SERIES C PREFERRED SHARES"), of Technest
Holdings, Inc., a Nevada corporation (the "COMPANY"), indicated below into
shares of the Company's common stock, $.001 par value per share (the "COMMON
STOCK"), by tendering the stock certificate(s) representing the share(s) of
Series C Preferred Shares specified below as of the date specified below.
The undersigned acknowledges that any sales by the undersigned of the
securities issuable to the undersigned upon conversion of the Series C Preferred
Shares shall be made only pursuant to (i) a registration statement effective
under the Securities Act of 1933, as amended (the "ACT"), or (ii) advice of
counsel that such sale is exempt from registration required by Section 5 of the
Act.
Please confirm the following information:
Date of Conversion:
________________________________________
Number of Series C Preferred Shares to be converted
________________________________________
Stock certificate no(s). of Series C Preferred Shares
to be converted:
________________________________________
Number of shares of Common:
________________________________________
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Please issue the Common Stock into which the Series C Preferred Shares are being
converted in the following name and to the following address:
Issue to(1):
________________________________________
Facsimile Number:_______________________
Authorization:
________________________________________
By:_____________________________________
Title:__________________________________
Date:___________________________________
ACKNOWLEDGED AND AGREED:
TECHNEST HOLDINGS, INC.
By: _________________________________
Name: _______________________________
Title: ______________________________
Date: ___________________
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(1) If other than to the record Holder of the Series C Preferred Shares, any
applicable transfer tax must be paid by the undersigned.
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