Third Party Stock Pledge Agreement


    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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