Exhibit
      4.1

     

    THIS
      DEBENTURE HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
      OR
      THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
      ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
      EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
      AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
      SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
      TO
      SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
      COMPANY. THIS DEBENTURE MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
      ACCOUNT OR OTHER LOAN SECURED BY THIS DEBENTURE.

    


    THIS
      DEBENTURE IS SUBJECT TO THE TERMS AND CONDITIONS OF THE SUBORDINATION AGREEMENT,
      DATED THE DATE OF THIS DEBENTURE, BETWEEN THE HOLDER AND SILICON VALLEY
      BANK.

    


    Original
      Issue Date: May 31, 2007

     

    $1,650,000.00


    


    $1,650,000
      SECURED ORIGINAL ISSUE DISCOUNT DEBENTURE


    


    THIS
      DEBENTURE is a duly authorized and validly issued Debenture of Technest
      Holdings, Inc., a Nevada corporation, having its principal place of business
      at
      10411 Motor City Drive, Suite 650, Bethesda, Maryland 20817 (the “Company”),
      designated as its $1,650,000 Secured Original Issue Discount Debenture (the
      “Debenture”).

    


    FOR
      VALUE
      RECEIVED, the Company promises to pay to Shelter Island Opportunity Fund, LLC
      or
      its registered assigns (the “Holder”),
      or
      shall have paid pursuant to the terms hereunder, the principal sum of
      $1,650,000.00 by the Maturity Date, and to pay interest to the Holder on the
      aggregate outstanding principal amount of this Debenture in accordance with
      the
      provisions hereof. This Debenture is subject to the following additional
      provisions:

    


    Section
      1.    Definitions.
      For the
      purposes hereof, in addition to the terms defined elsewhere in this Debenture,
      (a) capitalized terms not otherwise defined herein shall have the meanings
      set
      forth in the Securities Purchase Agreement and (b) the following terms shall
      have the following meanings:

    


    “Bankruptcy
      Event”
means
      any of the following events: (a) the Company or any Significant Subsidiary
      (as
      such term is defined in Rule 1-02(w) of Regulation S-X) of the Company commences
      a case or other proceeding under any bankruptcy, reorganization, arrangement,
      adjustment of debt, relief of debtors, dissolution, insolvency or liquidation
      or
      similar law of any jurisdiction relating to the Company or any Significant
      Subsidiary thereof; (b) there is commenced against the Company or any
      Significant Subsidiary thereof any such case or proceeding that is not dismissed
      within 60 days after commencement; (c) the Company or any Significant Subsidiary
      thereof is adjudicated insolvent or bankrupt or any order of relief or other
      order approving any such case or proceeding is entered; (d) the Company or
      any
      Significant Subsidiary thereof suffers any appointment of any custodian or
      the
      like for it or any substantial part of its property that is not discharged
      or
      stayed within 60 calendar days after such appointment; (e) the Company or any
      Significant Subsidiary thereof makes a general assignment for the benefit of
      creditors; (f) the Company or any Significant Subsidiary thereof calls a meeting
      of its creditors with a view to arranging a composition, adjustment or
      restructuring of its debts; or (g) the Company or any Significant Subsidiary
      thereof, by any act or failure to act, expressly indicates its consent to,
      approval of or acquiescence in any of the foregoing or takes any corporate
      or
      other action for the purpose of effecting any of the foregoing.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    “Change
      of Control Transaction”
means
      the occurrence after the date hereof of any of (i) an acquisition by an
      individual or legal entity or “group” (as described in Rule 13d-5(b)(1)
      promulgated under the Exchange Act), excluding Markland, of effective control
      (whether through legal or beneficial ownership of capital stock of the Company,
      by contract or otherwise) of in excess of 25% of the voting securities of the
      Company or any Subsidiary, or (ii) the Company or any Subsidiary merges into
      or
      consolidates with any other Person, or any Person merges into or consolidates
      with the Company or any Subsidiary and, after giving effect to such transaction,
      the stockholders of the Company immediately prior to such transaction own less
      than 50% of the aggregate voting power of the Company or the successor entity
      of
      such transaction, or the Company owns less than 50% of the aggregate voting
      power of such Subsidiary, or (iii) the Company or any Subsidiary sells or
      transfers all or substantially all of its assets to another Person, whether
      in
      one transaction or in a series of related transactions.

    


    “Event
      of Default”
shall
      have the meaning set forth in Section 5.

    


    “Maturity
      Date”
means
      the earlier of (i) May 31, 2010 and (ii) the date this Debenture is permitted
      or
      required to be paid in accordance with the terms hereof (whether as a result
      of
      a prepayment, acceleration or otherwise).

    


    “Original
      Issue Date”
means
      the date of the first issuance of this Debenture, regardless of any transfers
      of
      this Debenture and regardless of the number of instruments which may be issued
      to evidence this Debenture.

    


    Permitted
      Lien”
means
      the individual and collective reference to the following: (a) Liens for taxes,
      assessments and other governmental charges or levies not yet due or Liens for
      taxes, assessments and other governmental charges or levies being contested
      in
      good faith and by appropriate proceedings for which adequate reserves (in the
      good faith judgment of the management of the Company) have been established
      in
      accordance with GAAP; and (b) Liens imposed by law which were incurred in the
      ordinary course of the Company’s business, such as carriers’, warehousemen’s and
      mechanics’ Liens, statutory landlords’ Liens, and other similar Liens arising in
      the ordinary course of the Company’s business, and which (x) do not individually
      or in the aggregate materially detract from the value of such property or assets
      or materially impair the use thereof in the operation of the business of the
      Company or (y) are being contested in good faith by appropriate proceedings,
      which proceedings have the effect of preventing for the foreseeable future
      the
      forfeiture or sale of the property or asset subject to such Lien.

     

    “Prime
      Rate”
means,
      at any date, the “Prime Rate,” as published in The
      Wall Street Journal
      (Eastern
      Edition) on such date or on the Trading Date immediately preceding such date
      if
      such date is not a Trading Date.

     

    
      
        
        

      

      
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    “Securities
      Purchase Agreement”
means
      the Securities Purchase Agreement between the Company and the original Holder,
      dated as of the Original Issue Date, as amended, modified or supplemented from
      time to time in accordance with its terms.

    


    Section
      2.    Interest
      and Payments.

     

    a)    Interest
      Rate.
      Interest shall accrue each day on the aggregate outstanding principal amount
      of
      this Debenture at the rate per annum equal to the higher of (i) the sum of
      3.00%
      plus the Prime Rate on such date and (ii) 11.25%.

    


    b)    Payments
      of Principal and Interest.
      The
      outstanding principal amount of this Debenture, and all accrued interest
      thereon, will be payable in 33 equal monthly installments, each in the amount
      of
      $50,000, commencing on August 31, 2007 and
      continuing on the same day of each month thereafter until the Maturity Date.
      All
      unpaid principal on the Debenture, and accrued interest thereon, will be paid
      in
      full on the Maturity Date.

    


    c)    Method
      of Payment.
      All
      payments hereunder shall be made in immediately available funds on the date
      the
      same is due in such manner as directed by the Holder.

    


    d)    Interest
      Calculations.
      Interest shall be calculated on the basis of a 360-day year and shall accrue
      daily commencing on the Original Issue Date until payment in full of the
      principal sum, together with all accrued and unpaid interest and other amounts
      which may become due hereunder, has been made. 

    


    e)    Prepayment.
      The
      Company may prepay all or any portion of the principal amount of this Debenture
      upon at least two Trading Days’ notice to the Holder by paying the amount of
      principal desired to be prepaid and, if such prepayment occurs after September
      30, 2007, together with a payment equal to 10% of the amount being prepaid.
      All
      prepayments of principal hereunder shall be applied to the payment obligation
      of
      the Company under Section 2(b) in inverse order of maturity. At the option
      of
      the Holder upon notice to the Company, the principal amount of this Debenture
      and all accrued and unpaid interest hereon, shall become due and payable on
      the
      date on which a Change of Control Transaction shall have been consummated.
      

    


    f)    Termination
      Fee.
      On the
      Maturity Date (including, without limitation, as a result of the occurrence
      of a
      Change of Control with respect to EOIR), the Company shall pay to the Holder,
      as
      a termination fee (and not as a penalty), an amount equal to the product of
      (i)
      $45,000 and (ii) the number of months that have elapsed between the Original
      Issue Date and the date such payment is made by the Company to the Holder (the
      “Termination Fee”); it being understood and agreed that if any such month shall
      be less than a full calendar month, the Termination Fee payable for that month
      shall be pro rated based on the number of days elapsed during that
      month.

     

    
      
        
        

      

      
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    Section
      3.    Registration
      of Transfers and Exchanges.
      

     

    a)    Different
      Denominations.
      This
      Debenture is exchangeable for an equal aggregate principal amount of Debenture
      of different authorized denominations, as requested by the Holder surrendering
      the same. No service charge will be payable for such registration of transfer
      or
      exchange.

     

    b)    Investment
      Representations.
      This
      Debenture has been issued subject to certain investment representations of
      the
      original Holder set forth in the Securities Purchase Agreement and may be
      transferred or exchanged only in compliance with the Securities Purchase
      Agreement and applicable federal and state securities laws and regulations.
      

    


    c)    Reliance
      on Debenture Register.
      Prior
      to due presentment for transfer to the Company of this Debenture, the Company
      and any agent of the Company may treat the Person in whose name this Debenture
      is duly registered on the Debenture Register as the owner hereof for the purpose
      of receiving payment as herein provided and for all other purposes, whether
      or
      not this Debenture is overdue, and neither the Company nor any such agent shall
      be affected by notice to the contrary.

    


    Section
      4.    Covenants.
      As long
      as any portion of this Debenture remains outstanding, the Company agrees as
      follows:

    


    a)    other
      than the Company’s obligations existing on the Original Issue Date to (i)
      Silicon Valley Bank and (ii) the Persons named in each of the Subordinated
      Debt
      Subordination Agreements, it shall not enter
      into, create incur,
      assume, guarantee or suffer to exist any indebtedness for borrowed money of
      any
      kind, including but not limited to, a guarantee, on or with respect to any
      of
      its property or assets now owned or hereafter acquired or any interest therein
      or any income or profits therefrom, unless in any such case, the obligations
      of
      the Company with respect thereto are not secured, directly or indirectly, by
      any
      assets of the Company and are subordinated to the obligations of the Company
      hereunder on terms satisfactory to the Holder;

     

    b)    other
      than Permitted Liens and Liens granted prior to the Original Issue Date to
      (i)
      Silicon Valley Bank and
      (ii)
      the Persons named in each of the Subordinated Debt Subordination
      Agreements,
      it
      shall not enter into, create, incur, assume or suffer to exist any Liens of
      any
      kind, on or with respect to any of its property or assets now owned or hereafter
      acquired or any interest therein or any income or profits
      therefrom;

    


    c)    it
      shall
      not amend its charter documents, including without limitation, the certificate
      of incorporation and bylaws, in any manner that materially and adversely affects
      any rights of the Holder;

    


    
      
        
        

      

      
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    d)    it
      shall
      not engage in any business other than as described in its SEC Reports filed
      with
      the Commission prior to the Original Issue Date and all activities related
      thereto; 

    


    e)    it
      shall
      not enter into any agreement with respect to any of the foregoing;
      

    


    f)    it
      shall
      comply in all material respects with all of its obligations under the License
      Agreement; 

    


    g)    it
      shall
      not amend or terminate, or consent to or suffer to exist any amendment or
      termination of, the License Agreement;
      

    


    h)    it
      shall
      pledge to the Holder (and execute and deliver to the Holder all pledge and
      security agreements and other documents and instruments as the Holder may
      request) all of the Company’s right, title and interest in and to all of the
      outstanding shares of capital stock of EOIR immediately
      following the release of the Lien held by Silicon Valley Bank in such shares
      (as
      long as EOIR is then still a Subsidiary of the Company);
      and

    


    i)    it
      shall
      comply with the provisions of Section 6.7 of the Loan and Security Agreement,
      dated August 4, 2006, as amended as of the Original Issue Date, among Silicon
      Valley Bank, the Company and the Subsidiaries of the Company named
      therein.

     

    Section
      5.    Events
      of Default.
      

    


    a)    “Event
      of Default”
means,
      wherever used herein, any of the following events (whatever the reason for
      such
      event and whether such event shall be voluntary or involuntary or effected
      by
      operation of law or pursuant to any judgment, decree or order of any court,
      or
      any order, rule or regulation of any administrative or governmental
      body):

    


    i.    any
      default in the payment of (A) the principal amount of this Debenture or (B)
      interest or other amounts owing to the Holder on this Debenture within two
      Trading Days as and when the same shall become due and payable (whether on
      the
      Maturity Date or by acceleration or otherwise);

     

    ii.    the
      Company shall fail to observe or perform any other covenant or agreement
      contained in this Debenture or any other Transaction Document to which it is
      a
      party which failure is not cured, if possible to cure, within the earlier to
      occur
      of
(A)
      two
Trading
      Days after notice of such failure sent by the Holder
      and
      (B) three Trading Days after the Company has become or should have become aware
      of such failure;

    


    iii.   a
      material default or any event of default (subject to any grace or cure period
      provided in the applicable agreement, document or instrument) shall occur under
      (A) any of the Transaction Documents or (B) any other material agreement, lease,
      document or instrument to which the Company or any Subsidiary is obligated
      (and
      not covered by clause (vi) below);

    


    
      
        
        

      

      
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    iv.   any
      representation
      or warranty made in this Debenture, any other Transaction Documents, any written
      statement pursuant hereto or thereto or any other report, financial statement
      or
      certificate made or delivered to the Holder or any other Holder shall
      be
      untrue or incorrect in any material respect as of the date when made or deemed
      made;

    


    v.    the
      Company or any Significant Subsidiary shall be subject to a Bankruptcy
      Event;

     

    vi.    the
      Company or any Subsidiary shall default on any of its obligations under any
      mortgage, credit agreement or other facility, indenture agreement, factoring
      agreement or other instrument under which there may be issued, or by which
      there
      may be secured or evidenced, any indebtedness for borrowed money or money due
      under any long term leasing or factoring arrangement that (a) involves an
      obligation greater than $100,000, whether such indebtedness now exists or shall
      hereafter be created, and (b) results in such indebtedness becoming or being
      declared due and payable prior to the date on which it would otherwise become
      due and payable; or

    


    vii.    any
      monetary judgment, writ or similar final process shall be entered or filed
      against the Company, any Subsidiary or any of their respective property or
      other
      assets for more than $100,000, and such judgment, writ or similar final process
      shall remain unvacated, unbonded or unstayed for a period of 45 calendar
      days.

    


    b)    Remedies
      Upon Event of Default.
      If any
      Event of Default hereunder occurs, the outstanding principal amount of this
      Debenture plus accrued but unpaid interest and other amounts owing in respect
      thereof through the date of acceleration, shall become, at the Holder’s
      election, immediately due and payable. Commencing after the occurrence of any
      Event of Default hereunder and during its continuance, the interest rate on
      this
      Debenture shall accrue at an interest rate equal to 18.00% per annum. In
      connection with such acceleration described herein, the Holder need not provide,
      and the Company hereby waives, any presentment, demand, protest or other notice
      of any kind, and the Holder may immediately and without expiration of any grace
      period enforce any and all of its rights and remedies hereunder and all other
      remedies available to it under applicable law and the Transaction Documents.
      Such acceleration may be rescinded and annulled by Holder at any time prior
      to
      payment hereunder and the Holder shall have all rights as a holder of the
      Debenture until such time, if any, as the Holder receives full payment pursuant
      to this Section 5(b). No such rescission or annulment shall affect any
      subsequent Event of Default or impair any right consequent thereon.

     

    Section
      6.    Miscellaneous.
      

    


    a)    Notices.
      Any and
      all notices or other communications or deliveries to be provided by the Holder
      hereunder shall be delivered as set forth in the Securities Purchase Agreement.
      

    


    
      
        
        

      

      
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    b)    Absolute
      Obligation.
      Except
      as expressly provided herein, no provision of this Debenture shall alter or
      impair the obligation of the Company, which is absolute and unconditional,
      to
      pay the principal of, and accrued interest, as applicable, on this Debenture
      at
      the time, place, and rate, and in the coin or currency, herein prescribed.
      This
      Debenture is a direct, unconditional and secured debt obligation of the Company.
      

     

    c)    Lost
      or Mutilated Debenture.
      If this
      Debenture shall be mutilated, lost, stolen or destroyed, the Company shall
      execute and deliver, in exchange and substitution for and upon cancellation
      of a
      mutilated Debenture, or in lieu of or in substitution for a lost, stolen or
      destroyed Debenture, a new Debenture for the principal amount of this Debenture
      so mutilated, lost, stolen or destroyed, but only upon receipt of evidence
      of
      such loss, theft or destruction of such Debenture, and of the ownership hereof,
      reasonably satisfactory to the Company.

    


    d)    Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Debenture shall be governed by and construed and enforced in accordance
      with the internal laws of the State of New York, without regard to the
      principles of conflict of laws thereof. 

    


    e)    Waiver.
      Any
      waiver by the Holder of a breach of any provision of this Debenture shall not
      operate as or be construed to be a waiver of any other breach of such provision
      or of any breach of any other provision of this Debenture. The failure of the
      Holder to insist upon strict adherence to any term of this Debenture on one
      or
      more occasions shall not be considered a waiver or deprive that party of the
      right thereafter to insist upon strict adherence to that term or any other
      term
      of this Debenture. Any waiver by the Holder must be in writing.

     

    f)    Severability.
      If any
      provision of this Debenture is invalid, illegal or unenforceable, the balance
      of
      this Debenture shall remain in effect, and if any provision is inapplicable
      to
      any Person or circumstance, it shall nevertheless remain applicable to all
      other
      Persons and circumstances. If it shall be found that any interest or other
      amount deemed interest due hereunder violates the applicable law governing
      usury, the applicable rate of interest due hereunder shall automatically be
      lowered to equal the maximum rate of interest permitted under applicable law.
      

    


    g)    Next
      Business Day.
      Whenever any payment or other obligation hereunder shall be due on a day other
      than a Business Day, such payment shall be made on the next succeeding Business
      Day.

    


    h)    Headings.
      The
      headings contained herein are for convenience only, do not constitute a part
      of
      this Debenture and shall not be deemed to limit or affect any of the provisions
      hereof.

    


    (Signature
      Page Follows)

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the Company has caused this Debenture to be duly executed
      by a
      duly authorized officer as of the date first above indicated.

     

    
      	 	 	 
	 	
              TECHNEST
                HOLDINGS, INC.

            
	 
 	 
 	 
 
	 	By:  	/s/ Gino
              M. Pereira
	 	
              
Name:
              Gino M. Pereira
	 	Title:
              Chief
              Financial Officer




       

    

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