Reg Rights Agreement - Silicon Valley Bank


    EXHIBIT
      4.2


    REGISTRATION
      RIGHTS AGREEMENT

    


    This
      Registration Rights Agreement (this “Agreement”)
      is
      made and entered into as of August 4, 2006, among Technest Holdings, Inc.,
      a
      Nevada corporation (the “Company”),
      and
      Silicon Valley Bank, a California chartered bank (the “Bank”).

    


    This
      Agreement is made in connection with the Loan and Security Agreement, dated
      as
      of the date hereof among the Company and the Bank (the “Loan
      Agreement”).

    


    The
      Company and the Bank hereby agree as follows:

    


    1.
      Definitions.

    


    Capitalized
      terms used and not otherwise defined herein that are defined in the Loan
      Agreement shall have the meanings given such terms in the Loan
      Agreement.
      As used
      in this Agreement, the following terms shall have the following
      meanings:

    


    “Common
      Stock”
means
      common stock, par value $.001 per share of the Company.

    


    “Effectiveness
      Period”
shall
      have the meaning set forth in Section
      2.

    


    “Indemnified
      Party”
shall
      have the meaning set forth in Section
      5(c)
      hereof.

    


    “Indemnifying
      Party”
shall
      have the meaning set forth in Section
      5(c)
      hereof.

    


    “Losses”
shall
      have the meaning set forth in Section
      5(a).

     

    “Proceeding”
means
      an action, claim, suit, investigation or proceeding (including, without
      limitation, an investigation or partial proceeding, such as a deposition),
      whether commenced or threatened.

     

    “Prospectus”
means
      the prospectus included in a Registration Statement (including, without
      limitation, a prospectus that includes any information previously omitted from
      a
      prospectus filed as part of an effective registration statement in reliance
      upon
      Rule 430A promulgated under the Securities Act), as amended or supplemented
      by
      any prospectus supplement, with respect to the terms of the offering of any
      portion of the Registrable Securities covered by a Registration Statement,
      and
      all other amendments and supplements to the Prospectus, including post-effective
      amendments, and all material incorporated by reference or deemed to be
      incorporated by reference in such Prospectus.

    


    “Registrable
      Securities”
means
      the Shares and any securities issued or issuable upon any stock split, dividend
      or other distribution recapitalization or similar event.

     

    
      
        
        

      

      
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    “Registration
      Statement”
means
      the registration statements required to be filed hereunder, including (in each
      case) the Prospectus, amendments and supplements to such registration statement
      or Prospectus, including pre- and post-effective amendments, all exhibits
      thereto, and all material incorporated by reference or deemed to be incorporated
      by reference in such registration statement.

    


    “Rule
      415”
means
      Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same purpose and
      effect as such Rule.

    


    “Rule
      424”
means
      Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
      Rule may be amended from time to time, or any similar rule or regulation
      hereafter adopted by the Commission having substantially the same purpose and
      effect as such Rule.

    


    “Securities
      Act”
means
      the Securities Act of 1933, as amended.

    


    “Shares”
shall
      mean the shares of Common Stock underlying the Warrant.

    


    “Trading
      Days”
      means
      (i)
      a day on which the Common Stock is traded on a trading market (other than the
      OTC Bulletin Board), or (ii) if the Common Stock is not listed on a trading
      market (other than the OTC Bulletin Board), a day on which the Common Stock
      is
      traded in the over-the-counter market, as reported by the OTC Bulletin Board,
      (iii) if the Common Stock is not quoted on any trading market, a day on which
      the Common Stock is quoted in the over-the-counter market as reported by the
      National Quotation Bureau Incorporated (or any similar organization or agency
      succeeding to its functions of reporting prices), or (iv) in the event that
      the
      Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof,
      a Business Day.

     

    “Warrant”
shall
      mean the warrant to purchase shares of Common Stock issued to the Bank in
      connection with the Loan Agreement.

     

    2.
      Registration.
      

    


    (a)
      If at
      any time during the Effectiveness Period there is not an effective Registration
      Statement covering the resale of all of the Registrable Securities and (i)
      the
      Company shall determine to prepare and file with the Commission a Registration
      Statement relating to an offering for its own account or the account of others
      under the Securities Act of any of its equity securities, other than on Form
      S-4
      or Form S-8 (each as promulgated under the Securities Act) or their then
      equivalents relating to equity securities to be issued solely in connection
      with
      any acquisition of any entity or business or equity securities issuable in
      connection with stock option or other employee benefit plans, then the Company
      shall send to the
      Bank
      written notice of such determination and, if within five business days after
      receipt of such notice, the Bank shall so request in writing, the Company shall
      include in such Registration Statement for resale all or any part of such
      Registrable Securities such holder requests to be registered; or (ii) the
      Company is then eligible to submit Registration Statements covering secondary
      offerings of its equity securities on Form S-3 (or
      any
      successor form) under
      the
      Securities Act, and the Bank requests, in writing, that the Company submit
      a
      Registration Statement covering all or part of the resale of the Registrable
      Securities
      for
      offerings to be made on a continuous basis pursuant to Rule 415,
      then
      the Company shall, not less than forty-five days after the receipt of such
      request, submit a Registration Statement on Form S-3 (or any successor form)
      covering the Registrable Securities; provided, that, the Company shall not
      be
      required to register any Registrable Securities pursuant to this Section 2(a)
      that are eligible for resale pursuant to Rule 144 promulgated under the
      Securities Act or that are the subject of a then effective Registration
      Statement and provided further that the Company shall not be required to effect
      registration pursuant to a request under clause (ii) above of this Section
      2(a)
      more than once during any twelve (12) month period. Upon the effectiveness
      of a
      Registration Statement covering the Shares, the Company shall use its
      commercially reasonable efforts to keep such Registration Statement continuously
      effective under the Securities Act until the earlier of (a) the date on which
      the Bank no longer owns any of the Registrable Securities, (b) until all
      Registrable Securities covered by such Registration Statement have been sold
      or
      may be sold without volume restrictions pursuant to Rule 144 as determined
      by
      the counsel to the Company pursuant to a written opinion letter to such effect,
      addressed and acceptable to the Company’s transfer agent and the Bank (the
“Effectiveness
      Period”);
      and
      (c) June __, 2008. The Company shall promptly notify the Bank via email of
      the
      effectiveness of the Registration Statement.

     

     

    
      
         

      

      
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    (b)
      Notwithstanding the provisions of Section
      2(a),
      the
      Company shall not be obligated to include the Registrable Securities in a
      registration statement covering (i) those shares of Common Stock comprising
      a
      dividend announced by Markland Technologies, Inc., with a record date of May
      1,
      2006 and a distribution date of July 5, 2006, or (ii) shares of Common Stock
      subject to a firmly underwritten public offering.

    


    (c)
      After
      the date on which the Registration Statement is declared effective by the SEC,
      the Company may delay the disclosure of material non-public information
      concerning the Company by suspending the use of the prospectus included in
      the
      Registration Statement for a period of time not to exceed thirty (30)
      consecutive Trading Days (each, a “Blackout
      Period”)
      if the
      Board of Directors of the Company shall have determined in good faith that
      it is
      in the best interest of the Company to suspend such use; provided that the
      Company shall promptly (i) notify the Bank in writing of the existence of (but
      in no event, without the prior written consent of the Bank, shall the Company
      disclose to the Bank any facts or circumstances regarding) material non-public
      information giving rise to a Blackout Period, (ii) advise the Bank in writing
      to
      cease all sales under the Registration Statement until the end of the Blackout
      Period and (iii) use commercially reasonable efforts to terminate the Blackout
      Period as promptly as possible. The Company may not declare more than three
      Blackout Periods in any 365-calendar day period. 

     

    
      
        
        

      

      
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    3.
      Registration
      Procedures.

    


    In
      connection with the Company's registration obligations hereunder, the Company
      shall:

    


    (a)
      Not
      less than two Trading Days prior to the filing of each Registration Statement
      or
      any related Prospectus or any amendment or supplement thereto (including any
      document that would be incorporated or deemed to be incorporated therein by
      reference), the Company shall permit the Bank to review the Registration
      Statement and all amendments and supplements thereto prior to their filing
      with
      the Commission. 

    


    (b)
      (i)
      Prepare and file with the Commission such amendments, including post-effective
      amendments, to the Registration Statement and the Prospectus used in connection
      therewith as may be necessary to keep a Registration Statement continuously
      effective as to the Registrable Securities for the Effectiveness Period; (ii)
      cause the related Prospectus to be amended or supplemented by any required
      Prospectus supplement (subject to the terms of this Agreement), and as so
      supplemented or amended to be filed pursuant to Rule 424; (iii) respond promptly
      to any comments received from the Commission with respect to the Registration
      Statement or any amendment thereto and, upon written request of the Bank,
      provide the Bank true and complete copies of all correspondence from and to
      the
      Commission relating to the Registration Statement; and (iv) comply in all
      material respects with the provisions of the Securities Act and the Exchange
      Act
      with respect to the disposition of all Registrable Securities covered by the
      Registration Statement during the applicable period in accordance (subject
      to
      the terms of this Agreement) with the intended methods of disposition by the
      Bank thereof set forth in the Registration Statement as so amended or in the
      Prospectus as so supplemented.

    


    (c)
      Notify the Bank (which notice shall, pursuant to clauses
      (ii) through (v)
      hereof,
      be accompanied by an instruction to suspend the use of the Prospectus until
      the
      requisite changes have been made) promptly (and, in the case of (i)(A) below,
      not less than two Trading Days prior to such filing) (i)(A) when a Prospectus
      or
      any Prospectus supplement or post-effective amendment to the Registration
      Statement is proposed to be filed; (B) when the Commission notifies the Company
      whether there will be a “review” of the Registration Statement and whenever the
      Commission comments in writing on the Registration Statement; and (C) with
      respect to the Registration Statement or any post-effective amendment, when
      the
      same has become effective; (ii) of any request by the Commission or any other
      Federal or state governmental authority for amendments or supplements to the
      Registration Statement or Prospectus or for additional information; (iii) of
      the
      issuance by the Commission of any stop order suspending the effectiveness of
      a
      Registration Statement covering any or all of the Registrable Securities or
      the
      initiation of any Proceedings for that purpose; (iv) of the receipt by the
      Company of any notification with respect to the suspension of the qualification
      or exemption from qualification of any of the Registrable Securities for sale
      in
      any jurisdiction, or the initiation or threatening of any Proceeding for such
      purpose; and (v) of the occurrence of any event or passage of time that makes
      the financial statements included in the Registration Statement ineligible
      for
      inclusion therein or any statement made in the Registration
      Statement or Prospectus or any document incorporated or deemed to be
      incorporated therein by reference untrue in any material respect or that
      requires any revisions to the Registration Statement, Prospectus or other
      documents so that, in the case of the Registration Statement or the Prospectus,
      as the case may be, it will not contain any untrue statement of a material
      fact
      or omit to state any 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. 

    
       

      
        
          
          

        

        
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    (d)
      Promptly deliver to the Bank, without charge, as many copies of the Prospectus
      or Prospectuses (including each form of prospectus) and each amendment or
      supplement thereto as the Bank may reasonably request. Subject to the terms
      of
      this Agreement, the Company hereby consents to the use of such Prospectus and
      each amendment or supplement thereto by the Bank in connection with the offering
      and sale of the Registrable Securities covered by such Prospectus and any
      amendment or supplement thereto.

    


    (e)
      Cooperate with the Bank to facilitate the timely preparation and delivery of
      certificates representing Registrable Securities to be delivered to a transferee
      pursuant to a Registration Statement, which certificates shall be free of all
      restrictive legends, and to enable such Registrable Securities to be in such
      denominations and registered in such names as the Bank may request.

    


    (f)
      Upon
      the occurrence of any event contemplated by this Section 3, as promptly as
      reasonably possible, prepare a supplement or amendment, including a
      post-effective amendment, to a Registration Statement or a supplement to the
      related Prospectus or any document incorporated or deemed to be incorporated
      therein by reference, and file any other required document so that, as
      thereafter delivered, neither a Registration Statement nor such Prospectus
      will
      contain an untrue statement of a material fact or omit 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.
      If the
      Company notifies the Bank in accordance with clauses
      (ii) through (v) of Section 3(c)
      above to
      suspend the use of the Prospectus until the requisite changes to such Prospectus
      have been made, or the Company otherwise notifies the Bank of its election
      to
      suspend the availability of the Registration Statement and Prospectus pursuant
      to Section
      2(c),
      then
      the Bank shall suspend use of such Prospectus. The Company will use its
      commercially reasonable efforts to ensure that the use of the Prospectus may
      be
      resumed as promptly as is practicable.

    


    (g)
      Comply with all applicable rules and regulations of the Commission.

    


    (h)
      Use
      its commercially reasonable efforts to avoid the issuance of, or, if issued,
      obtain the withdrawal of any order suspending the effectiveness of a
      Registration Statement.

     

    
      
        
        

      

      
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    (i)
      The
      Company may require, at any time prior to the second Trading Day prior to the
      filing date of the Registration Statement, the Bank to furnish to the Company
      a
      statement as to the number of shares of Common Stock beneficially owned by
      the
      Bank and, if requested by the Commission, the controlling person thereof, within
      two Trading Days of the Company’s request. 

    


    4.
      Registration
      Expenses.
      All
      fees and expenses incident to the performance of or compliance with this
      Agreement by the Company shall be borne by the Company whether or not any
      Registrable Securities are sold pursuant to the Registration Statement. The
      fees
      and expenses referred to in the foregoing sentence shall include, without
      limitation, (i) all registration and filing fees (including, without limitation,
      fees and expenses (A) with respect to filings required to be made with the
      principal market on which the Common Stock is then listed for trading, and
      (B)
      in compliance with applicable state securities or Blue Sky laws reasonably
      agreed to by the Company in writing (including, without limitation, fees and
      disbursements of counsel for the Company in connection with Blue Sky
      qualifications or exemptions of the Registrable Securities and determination
      of
      the eligibility of the Registrable Securities for investment under the laws
      of
      such jurisdictions as requested by the Bank )), (ii) printing expenses
      (including, without limitation, expenses of printing certificates for
      Registrable Securities and of printing prospectuses requested by the Bank),
      (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements
      of
      counsel for the Company, and (v) fees and expenses of all other persons retained
      by the Company in connection with the consummation of the transactions
      contemplated by this Agreement. In addition, the Company shall be responsible
      for all of its internal expenses incurred in connection with the consummation
      of
      the transactions contemplated by this Agreement (including, without limitation,
      all salaries and expenses of its officers and employees performing legal or
      accounting duties), the expense of any annual audit and the fees and expenses
      incurred in connection with the listing of the Registrable Securities on any
      securities exchange as required hereunder. In no event shall the Company be
      responsible for any broker or similar commissions or any legal fees or other
      costs of the Bank.

    


    5.
      Indemnification.

    


    (a)
      Indemnification
      by the Company.
      The
      Company shall, notwithstanding any termination of this Agreement, indemnify
      and
      hold harmless the Bank, the officers, directors, and employees of the Bank,
      each
      person who controls the Bank (within the meaning of Section 15 of the Securities
      Act or Section 20 of the Exchange Act) and the officers, directors, and
      employees of each such controlling person, to the fullest extent permitted
      by
      applicable law, from and against any and all losses, claims, damages,
      liabilities, costs (including, without limitation, costs of preparation and
      reasonable attorneys' fees) and expenses (collectively, “Losses”),
      as
      incurred, arising out of or relating to any untrue or alleged untrue statement
      of a material fact contained in a Registration Statement, any Prospectus or
      any
      form of prospectus or in any amendment or supplement thereto or in any
      preliminary prospectus, or arising out of or relating to any omission or alleged
      omission of a material fact required to be stated therein or necessary to make
      the statements therein (in the case of any Prospectus or form of prospectus
      or
      supplement thereto, in light of the circumstances under which they were made)
      not misleading, except to the extent, but only to the extent, that
(1)
      such
      untrue statements or omissions or alleged untrue statements or omissions are
      based upon information regarding the Bank furnished in writing to the Company
      by
      the Bank expressly for use therein, or to the extent that such information
      relates to the Bank or the Bank’s proposed method of distribution of Registrable
      Securities and was reviewed and expressly approved in writing by the Bank
      expressly for use in a Registration Statement, such Prospectus or such form
      of
      Prospectus or in any amendment or supplement thereto or (2) in the case of
      an
      occurrence of an event of the type specified in Section
      2(c) or Section 3(c)(ii)-(v),
      the use
      by the Bank of an outdated or defective Prospectus after the Company has
      notified the Bank in writing that the Prospectus is outdated or defective and
      prior to the receipt by the Bank of the Advice contemplated in Section
      6(d).
      The
      Company shall notify the Bank promptly of the institution, threat or assertion
      of any Proceeding arising from or in connection with the transactions
      contemplated by this Agreement of which the Company is aware.

    
       

      
        
          
          

        

        
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    (b)
      Indemnification
      by Bank.
      The
      Bank shall, severally and not jointly, indemnify and hold harmless the Company,
      its directors, officers, and employees, each Person who controls the Company
      (within the meaning of Section 15 of the Securities Act and Section 20 of the
      Exchange Act), and the directors, officers, or employees of such controlling
      Persons, to the fullest extent permitted by applicable law, from and against
      all
      Losses (as determined by a court of competent jurisdiction in a final judgment
      not subject to appeal or review) arising out of or based upon any untrue
      statement of a material fact contained in any Registration Statement, any
      Prospectus, or any form of prospectus, or in any amendment or supplement
      thereto, or arising solely out of or based solely upon: (i) the Bank’s failure
      to comply with the prospectus delivery requirements of the Securities Act or
      (ii) any omission of a material fact required to be stated therein or necessary
      to make the statements therein not misleading to the extent, but only to the
      extent, such untrue statement or omission is contained in any information so
      furnished in writing by the Bank to the Company specifically for inclusion
      in
      such Registration Statement or such Prospectus or to the extent that (1) such
      untrue statements or omissions are based upon information regarding the Bank
      furnished to the Company by the Bank for use therein, or to the extent such
      information relates to the Bank or the Bank's proposed method of distribution
      of
      the Registrable Securities and was reviewed and approved by the Bank for use
      in
      the Registration Statement, such Prospectus or such form of Prospectus or in
      any
      amendment or supplement thereto or (2) in the case of an occurrence of an event
      of the type specified in Section
      2(c) or Section 3(c)(ii)-(v),
      the use
      by the Bank of an outdated or defective Prospectus after the Company has
      notified the Bank in writing that the Prospectus is outdated or defective and
      prior to the receipt by the Bank of the Advice contemplated in Section
      6(d).

    


    (c)
      Conduct
      of Indemnification Proceedings.
      If any
      Proceeding shall be brought or asserted against any Person entitled to indemnity
      hereunder (an "Indemnified
      Party"),
      such Indemnified Party shall promptly notify the Person from whom indemnity
      is
      sought (the "Indemnifying
      Party")
      in
      writing, and the Indemnifying Party shall assume the defense thereof, including
      the employment of counsel reasonably satisfactory to the Indemnified
      Party and the payment of all fees and expenses incurred in connection with
      defense thereof; provided, that the failure of any Indemnified Party to give
      such notice shall not relieve the Indemnifying Party of its obligations or
      liabilities pursuant to this Agreement, except (and only) to the extent that
      such failure shall have prejudiced the Indemnifying Party.

     

    
      
        
        

      

      
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    An
      Indemnified Party shall have the right to employ separate counsel in any such
      Proceeding and to participate in the defense thereof, but the fees and expenses
      of such counsel shall be at the expense of such Indemnified Party or Parties
      unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
      expenses; or (2) the Indemnifying Party shall have failed promptly to assume
      the
      defense of such Proceeding and to employ counsel reasonably satisfactory to
      such
      Indemnified Party in any such Proceeding; or (3) the named parties to any such
      Proceeding (including any impleaded parties) include both such Indemnified
      Party
      and the Indemnifying Party, and such Indemnified Party shall have been advised
      by counsel that a material conflict of interest is likely to exist if the same
      counsel were to represent such Indemnified Party and the Indemnifying Party
      (in
      which case, if such Indemnified Party notifies the Indemnifying Party in writing
      that it elects to employ separate counsel at the expense of the Indemnifying
      Party, the Indemnifying Party shall not have the right to assume the defense
      thereof and the expense of one such counsel for the Bank shall be at the expense
      of the Indemnifying Party). The Indemnifying Party shall not be liable for
      any
      settlement of any such Proceeding effected without its written consent, which
      consent shall not be unreasonably withheld. No Indemnifying Party shall, without
      the prior written consent of the Indemnified Party, effect any settlement of
      any
      pending Proceeding in respect of which any Indemnified Party is a party, unless
      such settlement includes an unconditional release of such Indemnified Party
      from
      all liability on claims that are the subject matter of such
      Proceeding.

    


    Subject
      to the terms of this Agreement, all fees and expenses of the Indemnified Party
      (including reasonable fees and expenses to the extent incurred in connection
      with investigating or preparing to defend such Proceeding in a manner not
      inconsistent with this Section) shall be paid to the Indemnified Party, as
      incurred, within thirty days of written notice thereof to the Indemnifying
      Party
      (regardless of whether it is ultimately determined that an Indemnified Party
      is
      not entitled to indemnification hereunder; provided, that the Indemnifying
      Party
      may require such Indemnified Party to undertake to reimburse all such fees
      and
      expenses to the extent it is finally judicially determined that such Indemnified
      Party is not entitled to indemnification hereunder).

    


    (d)
      Contribution.
      If a
      claim for indemnification under Section
      5(a) or 5(b)
      is
      unavailable to an Indemnified Party (by reason of public policy or otherwise),
      then each Indemnifying Party, in lieu of indemnifying such Indemnified Party,
      shall contribute to the amount paid or payable by such Indemnified Party as
      a
      result of such Losses, in such proportion as is appropriate to reflect the
      relative fault of the Indemnifying Party and Indemnified Party in connection
      with the actions, statements or omissions that resulted in such Losses as well
      as any other relevant equitable considerations. The relative fault of such
      Indemnifying Party and Indemnified Party shall be determined by reference to,
      among other things, whether
      any action in question, including any untrue or alleged untrue statement of
      a
      material fact or omission or alleged omission of a material fact, has been
      taken
      or made by, or relates to information supplied by, such Indemnifying Party
      or
      Indemnified Party, and the parties' relative intent, knowledge, access to
      information and opportunity to correct or prevent such action, statement or
      omission. The amount paid or payable by a party as a result of any Losses shall
      be deemed to include, subject to the limitations set forth in Section
      5(c),
      any
      reasonable attorneys' or other reasonable fees or expenses incurred by such
      party in connection with any Proceeding to the extent such party would have
      been
      indemnified for such fees or expenses if the indemnification provided for in
      this Section was available to such party in accordance with its
      terms.

    
       

      
        
          
          

        

        
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    The
      parties hereto agree that it would not be just and equitable if contribution
      pursuant to this Section
      5(d)
      were
      determined by pro rata allocation or by any other method of allocation that
      does
      not take into account the equitable considerations referred to in the
      immediately preceding paragraph.

    


    6.
      Miscellaneous.

    


    (a)
      Amendments
      and Waivers.
      The
      provisions of this Agreement, including the provisions of this sentence, may
      not
      be amended, modified or supplemented, and waivers or consents to departures
      from
      the provisions hereof may not be given, unless the same shall be in writing
      and
      signed by the Company and the Bank. 

    


    (b)
      No
      Inconsistent Agreements.
      Neither
      the Company nor any of its subsidiaries has entered, as of the date hereof,
      nor
      shall the Company or any of its subsidiaries, on or after the date of this
      Agreement, enter into any agreement with respect to its securities, that
      conflicts with the provisions hereof, except for such agreements, the
      conflicting provisions of which have been waived. 

    


    (c)
      Compliance.
      The
      Bank covenants and agrees that it will comply with the prospectus delivery
      requirements of the Securities Act as applicable to it in connection with sales
      of Registrable Securities pursuant to the Registration Statement.

    


    (d)
      Discontinued
      Disposition.
      The
      Bank agrees by its acquisition of such Registrable Securities that, upon receipt
      of a notice from the Company of the occurrence of any event of the kind
      described in Section
      2(c) or Sections 3(c)(ii)-(v),
      the
      Bank will forthwith discontinue disposition of such Registrable Securities
      under
      a Registration Statement until the Bank's receipt of the copies of the
      supplemented Prospectus and/or amended Registration Statement contemplated
      by
Section
      3(f),
      or
      until it is advised in writing (the “Advice”)
      by the
      Company that the use of the applicable Prospectus may be resumed, and, in either
      case, has received copies of any additional or supplemental filings that are
      incorporated or deemed to be incorporated by reference in such Prospectus or
      Registration Statement. The Company may provide appropriate stop orders to
      enforce the provisions of this paragraph.

     

    
      
        
        

      

      
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    (e)
      Notices.
      Any and
      all notices or other communications or deliveries required or permitted to
      be
      provided hereunder shall be delivered as set forth in the Loan Agreement.


    


    (f)
      Successors
      and Assigns.
      This
      Agreement shall inure to the benefit of and be binding upon the successors
      and
      permitted assigns of each of the parties. The Company may not assign its rights
      or obligations hereunder without the prior written consent of the Bank. The
      Bank
      may assign their respective rights hereunder in the manner and to successors
      as
      permitted under the Plan of Distribution, provided however that in conjunction
      with any such assignment, the Bank shall obtain from the successor and provide
      to the Company, a written agreement by such successor to be bound by each of
      the
      provisions of this Agreement.

    


    (g)
      Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which when
      so
      executed shall be deemed to be an original and, all of which taken together
      shall constitute one and the same Agreement. In the event that any signature
      is
      delivered by facsimile transmission, such signature shall create a valid binding
      obligation of the party executing (or on whose behalf such signature is
      executed) the same with the same force and effect as if such facsimile signature
      were the original thereof.

    


    (h)
      Governing
      Law.
      All
      questions concerning the construction, validity, enforcement and interpretation
      of this Agreement shall be governed by and construed and enforced in accordance
      with the internal laws of the Commonwealth of Massachusetts, without regard
      to
      the principles of conflicts of law thereof. Each party hereby irrevocably
      submits to the jurisdiction of the state and federal courts sitting in the
      City
      of Boston, County of Suffolk, for the adjudication of any dispute hereunder
      or
      in connection herewith or with any transaction contemplated hereby or discussed
      herein, and hereby irrevocably waives, and agrees not to assert in any suit,
      action or proceeding, any claim that it is not personally subject to the
      jurisdiction of any such court, that such suit, action or proceeding is
      improper. Each party hereto hereby irrevocably waives, to the fullest extent
      permitted by applicable law, any and all right to trial by jury in any legal
      proceeding arising out of or relating to this Agreement or the transactions
      contemplated hereby.

    


    (i)
      Cumulative
      Remedies.
      The
      remedies provided herein are cumulative and not exclusive of any remedies
      provided by law.

    


    (j)
      Severability.
      If any
      term, provision, covenant or restriction of this Agreement is held by a court
      of
      competent jurisdiction to be invalid, illegal, void or unenforceable, the
      remainder of the terms, provisions, covenants and restrictions set forth herein
      shall remain in full force and effect and shall in no way be affected, impaired
      or invalidated, and the parties hereto shall use their reasonable efforts to
      find and employ an alternative means to achieve the same or substantially the
      same result as that contemplated by such term, provision, covenant or
      restriction. 

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (k)
      Headings.
      The
      headings in this Agreement are for convenience of reference only and shall
      not
      limit or otherwise affect the meaning hereof.

    


    


    ********************

    
 

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
      as
      of the date first written above.

     

    
      	 	TECHNEST HOLDINGS, INC.
	 	 
	 	By: /s/
              Gino
              Pereira                                           
               
	 	Name: Gino
              Pereira                                            
               
	 	Title: Chief
              Financial
              Officer                            
               
	 	 
	 	 
	 	 
	 	SILICON VALLEY BANK 
	 	 
	 	By: /s/
              Michael
              Tramack                                    
              
	 	Name: Michael
              Tramack                              
                     
	 	Title: Senior
              Vice
              President                    
                         
              
	 	 


    

    
 

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

       

    Annex
      A

    


    Plan
      of Distribution

    


    Each
      Selling Stockholder (the “Selling
      Stockholders”)
      of the
      common stock (“Common
      Stock”)
      of
      Technest Holdings, Inc., a Nevada corporation (the “Company”)
      and
      any of their pledgees, assignees and successors-in-interest may, from time
      to
      time, sell any or all of their shares of Common Stock on the Over the Counter
      Bulletin Board or any other stock exchange, market or trading facility on which
      the shares are traded or in private transactions. These sales may be at fixed
      or
      negotiated prices. A Selling Stockholder may use any one or more of the
      following methods when selling shares:

     

    
      	 	
              ·

            	
              ordinary
                brokerage transactions and transactions in which the broker-dealer
                solicits the Selling Stockholder;

            


    

     

    
      	 	
              ·

            	
              block
                trades in which the broker-dealer will attempt to sell the shares
                as agent
                but may position and resell a portion of the block as principal to
                facilitate the transaction;

            


    

     

    
      	 	
              ·

            	
              purchases
                by a broker-dealer as principal and resale by the broker-dealer for
                its
                account;

            


    

     

    
      	 	
              ·

            	
              an
                exchange distribution in accordance with the rules of the applicable
                exchange;

            


    

     

    
      	 	
              ·

            	
              privately
                negotiated transactions;

            


    

     

    
      	 	
              ·

            	
              broker-dealers
                may agree with the Selling Stockholders to sell a specified number
                of such
                shares at a stipulated price per
                share;

            


    

     

    
      	 	
              ·

            	
              a
                combination of any such methods of sale;
                or

            


    

     

    
      	 	
              ·

            	
              any
                other method permitted pursuant to applicable
                law.

            


    

     

    The
      Selling Stockholders may also sell shares under Rule 144 under the Securities
      Act of 1933, as amended (the “Securities
      Act”),
      if
      available, rather than under this prospectus. Broker-dealers engaged by the
      Selling Stockholders may arrange for other brokers-dealers to participate in
      sales. Broker-dealers may receive commissions or discounts from the Selling
      Stockholders (or, if any broker-dealer acts as agent for the purchaser of
      shares, from the purchaser) in amounts to be negotiated. Each Selling
      Stockholder does not expect these commissions and discounts relating to its
      sales of shares to exceed what is customary in the types of transactions
      involved.

     

    The
      Selling Stockholders may from time to time pledge or grant a security interest
      in some or all of the Shares owned by them and, if they default in the
      performance of their secured obligations, the pledgees or secured parties may
      offer and sell the shares of Common Stock from time to time under this
      prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or
      other applicable provision of the Securities Act amending the list of Selling
      Stockholders to include the pledgee, transferee or other successor in interest
      as Selling Stockholders under this prospectus. 

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    The
      Selling Stockholders also may transfer the shares of Common Stock in other
      circumstances, in which case the transferees, pledgees or other successors
      in
      interest will be the selling beneficial owners for purposes of this
      prospectus.

     

    The
      Company is required to pay certain fees and expenses incurred by the Company
      incident to the registration of the shares. The Company has agreed to indemnify
      the Selling Stockholders against certain losses, claims, damages and
      liabilities, including liabilities under the Securities Act.

     

    


    


     

    14