EXHIBIT 10.5

THIRD PARTY
STOCK PLEDGE AGREEMENT
 
 
THIS STOCK PLEDGE AGREEMENT (the “Agreement”) is made this 4th day of August,
2006 by and between MARKLAND TECHNOLOGIES, INC., a Florida corporation with a
principal place of business at 222 Metro Center Blvd., Warwick, Rhode Island
02886 (“Pledgor”) and SILICON VALLEY BANK, a California-chartered bank, with its
principal place of business at 3003 Tasman Drive, Santa Clara, California 95054
and with a loan production office located at One Newton Executive Park, Suite
200, 2221 Washington Street, Newton, Massachusetts 02462 (“Bank”).
 
Recitals
 
Bank proposes to make certain loans to Technest Holdings, Inc. (the “Borrower”)
pursuant to: (i) a certain Loan and Security Agreement dated as of August 4,
2006 between Borrower, Lender, and certain other parties party thereto, as
amended from time to time (as amended, the “Term Loan Agreement”), and (ii) a
certain Loan and Security Agreement (Working Capital Line of Credit) dated as of
August 4, 2006 between Borrower and Lender, and certain other parties party
thereto, as amended from time to time (as amended, the “WCL Loan Agreement”)
(hereinafter the Term Loan Agreement and the WCL Loan Agreement are collectively
referred to as, the “Loan Agreement”). To secure the Obligations, as defined in
the Loan Agreement and as referenced in the Unconditional Guaranty between
Pledgor and Bank dated as of even date herewith (the “Guaranty”), Pledgor has
agreed to pledge to Bank 1,739,130 (number of shares worth $6,000,000, to be
determined on the closing date) shares of capital stock of Borrower in which
Pledgor now owns or hereafter acquires an interest (the “Shares”). Any
capitalized terms used without definition herein shall have the meanings
assigned to them in the Loan Agreement.
 
NOW, THEREFORE, Pledgor and Bank agree as follows:
 
1.    Pledge of Securities.
 
(a)    Pledgor hereby pledges, assigns and delivers to Bank and grants to Bank a
security interest in the Shares, together with all proceeds and substitutions
thereof, all cash, stock and other moneys and property paid thereon, all rights
to subscribe for securities declared or granted in connection therewith, and all
other cash and noncash proceeds of the foregoing (all hereinafter called the
“Pledged Collateral”), as security for the prompt performance of all of the
Obligations, as defined in the Loan Agreement and as referenced in the Guaranty
(the “Secured Indebtedness”), and Pledgor’s obligations hereunder.
 
(b)    The term “Pledged Collateral” shall also include any securities,
instruments or distributions of any kind issuable, issued or received by Pledgor
upon conversion of, in respect of, or in exchange for any other Pledged
Collateral, including, but not limited to, those arising from a stock dividend,
stock split, reclassification, reorganization, merger, consolidation, sale of
assets or other exchange of securities or any dividends or other distributions
of any kind upon or with respect to the Pledged Collateral.
 
(c)    The certificate or certificates for the securities included in the
Pledged Collateral, accompanied by an instrument of assignment duly executed in
blank by Pledgor, have been, or will be immediately upon the subsequent receipt
thereof by Borrower, delivered by Pledgor to Bank. Pledgor shall cause the books
of Borrower to reflect the pledge of the Shares. Upon the occurrence of an Event
of Default hereunder, Bank may effect the transfer of any securities included in
the Pledged Collateral into the name of Bank and cause new certificates
representing such securities to be issued in the name of Bank. Pledgor will
execute and deliver such documents, and take or cause to be taken such actions,
as Bank may reasonably request to perfect or continue the perfection of Bank’s
security interest in the Pledged Collateral.
 
 
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2.    Representations, Warranties and Covenants. Pledgor represents and warrants
to and covenants with Bank that:
 
(a)    The Pledged Collateral is owned by Pledgor free and clear of any security
interests, liens or encumbrances;
 
(b)    Pledgor has full power and authority to create a first lien on the
Pledged Collateral in favor of Bank and no disability or contractual obligation
exists which would prohibit Pledgor from pledging the Pledged Collateral
pursuant to this Pledge Agreement, and Pledgor will not assign, create or permit
to exist any other claim to, lien or encumbrance upon, or security interest in
any of the Pledged Collateral;
 
(c)    There are no subscriptions, warrants or other options exercisable with
respect to the Shares;
 
(d)    The Shares have been duly authorized and validly issued, and are fully
paid and non-assessable; and
 
(e)    The Pledged Collateral is not the subject of any present or threatened
suit, action, arbitration, administrative or other proceeding, and Pledgor knows
of no reasonable grounds for the institution of any such proceedings.
 
All the above representations and warranties shall survive the making of this
Agreement.
 
3.    Voting Prior to Demand. Unless an Event of Default (as defined below)
shall have occurred and be continuing, Pledgor shall be entitled to exercise any
voting rights with respect to the Pledged Collateral and to give consents,
waivers and ratifications in respect thereof, provided that no vote shall be
cast or consent, waiver or ratification given or action taken which would be
inconsistent with any of the terms of this Agreement or which would constitute
or create any violation of any of such terms. All such rights of Pledgor to vote
and give consents, waiver and ratifications shall upon notice to Pledgor cease
in case such an Event of Default hereunder shall occur and be continuing.
 
4.    Events of Default. Each of the following shall constitute an event of
default (“Event of Default”) hereunder:
 
(a)    The occurrence of, and the continuance of, an Event of Default under the
Loan Agreement; or
 
(b)    The breach of any provision of this Agreement by Pledgor or the failure
by Pledgor to observe or perform any of the provisions of this Agreement.
 
5.    Bank’s Remedies Upon Default.
 
(a)    Upon the occurrence and during the continuance of an Event of Default,
Bank shall have the right to exercise all such rights as a secured party under
the Uniform Commercial Code of the Commonwealth of Massachusetts as it, in its
sole judgment, shall deem necessary or appropriate, including the right to sell
all or any part of the Pledged Collateral at one or more public or private sales
upon ten (10) days’ written notice to Pledgor, and any such sale or sales may be
made for cash, upon credit, or for future delivery, and in connection therewith,
Bank may grant options, provided that any such terms or options shall, in the
best judgment of Bank, be extended only in order to obtain the best possible
price.
 
 
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(b)    Pledgor recognizes that Bank may be unable to effect a public sale of all
or a part of the Pledged Collateral by reason of certain prohibitions contained
in the Securities Act of 1933, as amended (“Act”), so that Bank may be compelled
to resort to one or more private sales to a restricted group of purchasers who
will be obliged to agree, among other things, to acquire the Pledged Collateral
for their own account, for investment and without a view to the distribution or
resale thereof. Pledgor understands that private sales so made may be at prices
and on other terms less favorable to the seller than if the Pledged Collateral
were sold at public sales, and agrees that Bank has no obligation to delay the
sale of any of the Pledged Collateral for the period of time necessary (even if
Bank would agree), to register such securities for sale under the Act. Pledgor
agrees that private sales made under the foregoing circumstances shall be deemed
to have been made in a commercially reasonable manner.
 
(c)    After the sale of any of the Pledged Collateral, Bank may deduct all
reasonable legal and other expenses and attorney’s fees for preserving,
collecting, selling and delivering the Pledged Collateral and for enforcing its
rights with respect to the Secured Indebtedness, and shall apply the residue of
the proceeds to the Secured Indebtedness in such manner as Bank in its
reasonable discretion shall determine, and shall pay the balance, if any to
Pledgor.
 
6.    Amendment of Loan Documents. Pledgor authorizes Bank, without notice,
consent or demand and without affecting its liability hereunder, from time to
time to (a) renew, extend, or otherwise change the terms of the Loan Documents,
as defined in the Loan Agreement, or any part thereof; (b) take and hold
security for the payment of the Loan Documents, and exchange, enforce, waive and
release any such security; and (c) apply such security and direct the order or
manner of sale thereof as Bank in its sole discretion may determine.
 
7.    Pledgor Waivers. Pledgor waives any right to require Bank to (a) proceed
against Borrower, any guarantor or any other person; (b) proceed against or
exhaust any security held from Borrower; (c) marshal any assets of Borrower; or
(d) pursue any other remedy in Bank’s power whatsoever. Bank may, at its
election, exercise or decline or fail to exercise any right or remedy it may
have against Borrower or any security held by Bank, including without limitation
the right to foreclose upon any such security by judicial or nonjudicial sale,
without affecting or impairing in any way the liability of Pledgor hereunder.
Pledgor waives any defense arising by reason of any disability or other defense
of Borrower or by reason of the cessation from any cause whatsoever of the
liability of Borrower. Pledgor waives any setoff, defense or counterclaim that
Borrower may have against Bank. Pledgor waives any right of subrogation or
reimbursement, contribution or other rights against Borrower, and Pledgor waives
any right to enforce any remedy that Bank now has or may hereafter have against
Borrower. Pledgor waives any defense arising out of the absence, impairment or
loss of any right of reimbursement or subrogation or any other rights against
Borrower until payment in full of the Obligations and termination of the Loan
Agreement and the Guaranty. Pledgor waives all rights to participate in any
security now or hereafter held by Bank. Pledgor waives all presentments, demands
for performance, notices of nonperformance, protests, notices of protest,
notices of dishonor, notices of acceptance of this Pledge Agreement, notices of
any default, notices of payment and nonpayment, or any nonpayment at maturity,
notices of release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees at any time held by Bank
on which Pledgor may in any way be liable, and notices of the existence,
creation, or incurring of new or additional indebtedness. Pledgor assumes the
responsibility for being and keeping itself informed of the financial condition
of Borrower and of all other circumstances bearing upon the risk of nonpayment
of any indebtedness or nonperformance of any obligation of Borrower, warrants to
Bank that it will keep so informed, and agrees that absent a request for
particular information by Pledgor, Bank shall have no duty to advise Pledgor of
information known to Bank regarding such condition or any such circumstances.
 
 
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8.    Borrower Insolvency. If Borrower becomes insolvent or is adjudicated
bankrupt or files a petition for reorganization, arrangement, composition or
similar relief under any present or future provision of the United States
Bankruptcy Code, or if such a petition is filed against Borrower, and in any
such proceeding some or all of any indebtedness or obligations under the Loan
Documents are terminated or rejected or any obligation of Borrower is modified
or abrogated, or if Borrower’s obligations are otherwise avoided for insolvency,
bankruptcy or any similar reason, Pledgor agrees that Pledgor’s liability
hereunder shall not thereby be affected or modified and such liability shall
continue in full force and effect as if no such action or proceeding had
occurred. This Agreement shall continue to be effective or be reinstated, as the
case may be, if any payment must be returned by Bank upon the insolvency,
bankrupt-cy or reorganization of Borrower, Pledgor, any other person, or
otherwise, as though such payment had not been made.
 
9.    Indemnification. Pledgor agrees to defend, indemnify and hold harmless
Bank and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in
connection with the transactions contemplated by this Agreement, and (b) all
losses or expenses in any way suffered, incurred, or paid by Bank as a result of
or in any way arising out of, following, or consequential to transactions
between Bank and Pledgor, under this Agreement (including without limitation
attorneys’ fees and expenses), except for obligations, demands, claims,
liabilities, losses and Bank expenses caused by Bank’s gross negligence or
willful misconduct.
 
10.    Notices. Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by certified mail,
postage prepaid, return receipt requested, or by prepaid telefacsimile to
Pledgor or to Bank, as the case may be, at its addresses set forth below. Such
notice shall be deemed effective three (3) days after deposit if sent by first
class mail, upon actual receipt if personally delivered or sent by certified
mail, or upon confirmed transmission if sent via telefacsimile.
 
If to Pledgor:                 Markland Technologies, Inc.
222 Metro Center Blvd.
Warwick, Rhode Island 02886
Attn: Mr. Robert Tarini
Facsimile No.: (401) 454-1806
Email: rtarini@aol.com

with copies to:              Greenberg Traurig, LLP
One International Place
Boston, Massachusetts 02110
Attn: Jonathan Bell, Esquire
Facsimile No.: (617) 310-6001
Email: bellj@gtlaw.com
 
If to Bank:                     Silicon Valley Bank
One Newton Executive Park, Suite 200
2221 Washington Street
Newton, Massachusetts 02462         
                                Attn: Mr. Michael Tramack    
Facsimile No.: (617) 969-5962
Email: mtramack@svb.com
 
with copies to:              Riemer & Braunstein LLP
Three Center Plaza
Boston, Massachusetts 02108
Attn: David A. Ephraim, Esquire
Facsimile No.: (617) 880-3456
Email: dephraim@riemerlaw.com
 

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The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.
 
11.    CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
 
The laws of the Commonwealth of Massachusetts shall apply to this Agreement.
PLEDGOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES,
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE COMMONWEALTH OF MASSACHUSETTS IN ANY ACTION, SUIT,
OR PROCEEDING OF ANY KIND, AGAINST IT WHICH ARISES OUT OF OR BY REASON OF THIS
AGREEMENT; PROVIDED, HOWEVER, THAT IF FOR ANY REASON BANK CANNOT AVAIL ITSELF OF
THE COURTS OF THE COMMONWEALTH OF MASSACHUSETTS, PLEDGOR ACCEPTS JURISDICTION OF
THE COURTS AND VENUE IN SANTA CLARA COUNTY, CALIFORNIA.
 
PLEDGOR AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY
OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE FOREGOING WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT. EACH
PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
 
(a)    This Agreement may not be amended or modified except by a written
instrument signed by Bank and Pledgor.
 
(b)    This Agreement and the agreements and instruments executed in connection
therewith constitute the entire agreement between Bank and Pledgor with respect
to the subject matter hereof and supersede all prior agreements, understandings,
offers and negotiations, oral or written.
 
(c)    This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which shall together constitute one and
the same document.
 
12.   Termination. This Agreement shall terminate on the earlier to occur of (i)
the date which is two (2) years from the Effective Date of the Loan Agreement
(the “Release Date”) provided no Event of Default has occurred and is continuing
thereunder or (ii) if an Event of Default has occurred and is continuing on the
Release Date, immediately upon the cure of such Event of Default. Upon the
termination of this Agreement, Bank shall return any certificates for the
securities included in the Pledged Collateral to Pledgor, to the extent Bank has
possession of same, and shall terminate any control agreements relating to this
Agreement.
 
 
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EXECUTED as a sealed instrument this 4th day of August, 2006 under the laws of
the Commonwealth of Massachusetts.
 
 
PLEDGOR:
 
MARKLAND TECHNOLOGIES, INC.
 
By: /s/ Gino Pereira                                                        
Name: Gino Pereira                                                         
Title: Chief Financial Officer                                         
 
BANK:
 
SILICON VALLEY BANK
 
By: /s/ Michael Tramack                                              
Name: Michael Tramack                                               
Title: Senior Vice President                                         
 

 
 
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