Document:

Registration Rights Agreement

    Exhibit
      10.2

     

     

    REGISTRATION
      RIGHTS AGREEMENT

    

    This
      Registration Rights Agreement (this “Agreement”) is made and entered into as of
      March 24, 2006, among Markland Technologies, Inc., a Florida corporation
      (“Markland”), and the investor signatories hereto (each such investor is an
“Investor” and all such investors are, collectively, the
“Investors”).

    

    This
      Agreement is made pursuant to the Redemption and Securities Purchase Agreement,
      dated as of the date hereof, among Markland and the Investors (the “Redemption
      Agreement”).

    

    Markland
      and the Investors hereby agree as follows:

    

    1. Definitions

    

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

    

    “Effectiveness
      Date”
means
      the ninetieth (90th) calendar day following the date of the Initial
      Closing.

    

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

    

    “Escrow
      Agent”
is
      the
      escrow agent under the Escrow Agreement.

    

    “Escrow
      Agreement”
has
      the
      meaning ascribed to such term in the Redemption Agreement.

    

    “Escrow
      Shares”
means
      the shares of Technest Common Stock held by the Escrow Agent pursuant to the
      terms of the Escrow Agreement.

    

    “Exchange
      Act”
mean
      the Securities Exchange Act of 1934, as amended.

    

    “Holder”
or
      “Holders”
means
      the holder or holders, as the case may be, from time to time of Registrable
      Securities.

    

    “Indemnified
      Party”
shall
      have the meaning set forth in Section 6(c) hereof.

    

    “Indemnifying
      Party”
shall
      have the meaning set forth in Section 6(c) hereof.

    

    “Losses”
shall
      have the meaning set forth in Section 6(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
      (1) shares of Technest Common Stock issuable upon conversion of the Series
      E
      Preferred Stock issued to the Investors pursuant to the Redemption Agreement,
      including the Redemption Series E Shares and the Purchased Series E Shares,
      (2)
      shares of Technest Common Stock that may be issued to the Investors under
      Section 9 of the Redemption Agreement and (3) shares of Technest Common Stock
      issuable as payment of liquidated damages (the “Liquidated Damage Shares”)
      pursuant to Sections 2(b) of this Agreement, and (4) any securities issued
      or
      issuable upon any stock split, dividend or other distribution recapitalization
      or similar event with respect to the foregoing.

    

    “Registration
      Statement”
means
      the registration statements required to be filed hereunder and any additional
      registration statements contemplated by Section 3(c), 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, 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.

    

    “Series
      E Preferred Stock”
means
      shares of Series E Preferred Stock, par value $.0001 per share, of
      Markland.

    

    “Technest”
means
      Technest Holdings, Inc., a Nevada corporation.

    

    “Technest
      Common Stock”
means
      shares of Common Stock, par value $.001 per share, of Technest.

    

    
      
        
        

      

      
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    2. Shelf
      Registration

    

    (a) As
      soon
      as practicable following the date hereof, Markland shall cause Technest to
      prepare and file with the Commission a “Shelf” Registration Statement covering
      the resale of the Registrable Securities for an offering to be made on a
      continuous basis pursuant to Rule 415. The Registration Statement shall be
      on
      Form SB-2 (unless Technest is not then eligible to register for resale the
      Registrable Securities on Form SB-2, in which case such registration shall
      be on
      another appropriate form in accordance herewith) and shall contain (unless
      otherwise directed by the Holders) substantially the “Plan of Distribution”
attached hereto as Annex
      A.
      Subject
      to the terms of this Agreement, Markland shall cause Technest to use its best
      efforts to cause the Registration Statement to be declared effective under
      the
      Securities Act as promptly as possible after the filing thereof, but in any
      event prior to the Effectiveness Date, and shall cause Technest to use its
      best
      efforts to keep such Registration Statement continuously effective under the
      Securities Act until the earlier of (a) the date that is twenty-four (24) months
      following the date on which the shelf registration becomes effective or (b)
      until all Registrable Securities covered by such Registration Statement have
      been sold or may be sold without volume restrictions pursuant to Rule 144(k)
      as
      determined by the counsel to Technest pursuant to a written opinion letter
      to
      such effect, addressed and acceptable to Technest’s transfer agent and the
      affected Holders (the “Effectiveness Period”). Markland (or Technest) shall
      promptly notify the Holders via email of the effectiveness of the Registration
      Statement.

    

    (b) If
      (i)
      the Registration Statement contemplated by Section 2(a) is not declared
      effective by the Commission by the Effectiveness Date, or (ii) after the
      Effectiveness Date, a Registration Statement ceases for any reason to remain
      continuously effective as to all Registrable Securities for which it is required
      to be effective, or the Holders are not permitted to utilize the Prospectus
      therein to resell such Registrable Securities for an aggregate of twenty (20)
      Trading Days during any 12 month period (which need not be consecutive Trading
      Days) (any such failure or breach being referred to as an “Event”,
      and
      for purposes of clause (i) the date on which such Event occurs, or for purposes
      of clause (ii) the date on which such 20 Trading Day period is exceeded being
      referred to as “Event
      Date”),
      then,
      on each such Event Date and every monthly anniversary thereof until the
      applicable Event is cured, Markland shall pay to each Holder, as liquidated
      damages and not as a penalty, a number of shares of Technest Common Stock equal
      to 1.0% per month, pro rata on a daily basis, of the number of shares of
      Technest Common Stock issuable upon conversion of the Series E Preferred Stock
      then held by such Holder; provided, however, that in no event shall the number
      of shares of Technest Common Stock issued as liquidated damages exceed an
      aggregate of 12.0% of the number of shares of Technest Common Stock issuable
      upon conversion of the Series E Preferred Stock then held by such Holder. The
      shares of Technest Common Stock to be paid as liquidated damages hereunder
      shall
      be paid out of the Escrow Shares in accordance with the procedures set forth
      in
      the Escrow Agreement. The liquidated damages pursuant to the terms hereof shall
      apply on a pro-rata basis for any portion of a month prior to the cure of an
      Event.

    

    
      
        
        

      

      
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    3. Registration
      Procedures

    

    In
      connection with Markland’s registration obligations hereunder, Markland shall
      cause Technest to do the following:

    

    (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), Technest shall, (i) furnish to each Holder copies of all such
      documents proposed to be filed, which documents (other than those incorporated
      or deemed to be incorporated by reference) will be subject to the review of
      such
      Holders, and (ii) cause its officers and directors, counsel and independent
      certified public accountants to respond to such inquiries as shall be necessary,
      in the reasonable opinion of counsel to the Holders conduct a reasonable
      investigation within the meaning of the Securities Act.

    

    (b) (i)
      Prepare and file with the Commission such amendments, including post-effective
      amendments, to a Registration Statement and the Prospectus used in connection
      therewith as may be necessary to keep a Registration Statement continuously
      effective as to the applicable Registrable Securities for the Effectiveness
      Period and prepare and file with the Commission such additional Registration
      Statements in order to register for resale under the Securities Act all of
      the
      Registrable Securities; (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 a Registration Statement or any amendment thereto and promptly provide the
      Holders true and complete copies of all correspondence from and to the
      Commission relating to a 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 a
      Registration Statement during the applicable period in accordance (subject
      to
      the terms of this Agreement) with the intended methods of disposition by the
      Holders thereof set forth in such Registration Statement as so amended or in
      such Prospectus as so supplemented.

    

    (c) If
      during
      the Effectiveness Period, the number of Liquidated Damage Shares at any time
      exceeds the number of Liquidated Damage Shares then registered in a Registration
      Statement, then Markland shall cause Technest to file as soon as reasonably
      practicable, an additional Registration Statement covering the resale by the
      Holders of such additional Liquidated Damage Shares.

    

    
      
        
        

      

      
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    (d) Notify
      the Holders of Registrable Securities to be sold (which notice shall, pursuant
      to clauses (ii) through (vi) 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 a Registration Statement is proposed to be filed; (B) when the
      Commission notifies Technest whether there will be a “review” of such
      Registration Statement and whenever the Commission comments in writing on such
      Registration Statement (Technest shall provide true and complete copies thereof
      and all written responses thereto to each of the Holders); and (C) with respect
      to a 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 a 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 Technest 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; (v) of the occurrence of any event or passage of time that makes the
      financial statements included in a Registration Statement ineligible for
      inclusion therein or any statement made in a 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
      a
      Registration Statement, Prospectus or other documents so that, in the case
      of a
      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; and
      (vi) the occurrence or existence of any pending corporate development with
      respect to Technest that Technest believes may be material and that, in the
      determination of Technest, makes it not in the best interest of Technest to
      allow continued availability of the Registration Statement or Prospectus;
provided that
      any and
      all of such information shall remain confidential to each Holder until such
      information otherwise becomes public, unless disclosure by a Holder is required
      by law.

    

    (e) Promptly
      deliver to each Holder, without charge, as many copies of the Prospectus or
      Prospectuses (including each form of prospectus) and each amendment or
      supplement thereto as such Persons may reasonably request. Subject to the terms
      of this Agreement, Markland shall cause Technest to consent to the use of such
      Prospectus and each amendment or supplement thereto by each of the selling
      Holders in connection with the offering and sale of the Registrable Securities
      covered by such Prospectus and any amendment or supplement thereto.

    

    (f) Use
      commercially reasonable efforts to register or qualify the resale of such
      Registrable Securities as required under applicable securities or Blue Sky
      laws
      of each State within the United States as any Holder requests in writing, to
      keep each such registration or qualification (or exemption therefrom) effective
      during the Effectiveness Period; provided that
      Technest
      shall not be required to qualify generally to do business in any jurisdiction
      where it is not then so qualified or subject Technest to any material tax in
      any
      such jurisdiction where it is not then so subject.

    

    
      
        
        

      

      
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    (g) Cooperate
      with the Holders 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, to
      the
      extent permitted by the Redemption Agreement, of all restrictive legends, and
      to
      enable such Registrable Securities to be in such denominations and registered
      in
      such names as any such Holders may request.

    

    (h) 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
      Technest notifies the Holders in accordance with clauses (ii) through (vi)
      of
      Section 3(d) above to suspend the use of the use of any Prospectus until the
      requisite changes to such Prospectus have been made, or Technest otherwise
      notifies the Holders of its election to suspend the availability of a
      Registration Statement and Prospectus pursuant to clause (vi) of Section 3(d),
      then the Holders shall suspend use of such Prospectus. Markland will cause
      Technest to use its best efforts to ensure that the use of the Prospectus may
      be
      resumed as promptly as is practicable, except that in the case of suspension
      of
      the availability of a Registration Statement and Prospectus pursuant to clause
      (vi) of Section 3(d), Technest shall not be required to take such action until
      such time as it shall determine that the continued availability of the
      Registration Statement and Prospectus is no longer not in the best interests
      of
      Technest. Technest shall be entitled to exercise the right under this Section
      3(h) to suspend the availability of a Registration Statement and Prospectus,
      subject only to the payment of partial liquidated damages pursuant to Section
      2(b).

    

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

    

    (j) Use
      its
      best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
      of
      (i) any order suspending the effectiveness of a Registration Statement, or
      (ii)
      any suspension of the qualification (or exemption from qualification) of any
      of
      the Registrable Securities for sale in any jurisdiction, at the earliest
      practicable moment.

    

    (k) Technest
      may require each Holder to furnish to Technest a statement as to the number
      of
      shares of Common Stock beneficially owned by such Holder and the controlling
      person thereof, within two trading days of the such request. During any periods
      that Technest is unable to meet its obligations hereunder with respect to the
      registration of the Registrable Securities solely because any Holder fails
      to
      furnish such information within two trading days of such request, any partial
      liquidated damages that are accruing as to all Holders at such time shall be
      tolled and any Event that may otherwise occur as to such Holder solely because
      of such delay shall be suspended, until such information is delivered to
      Technest.

    

    
      
        
        

      

      
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    4. Obligations
      of the Holders.
      In
      connection with sales of Registrable Securities pursuant to a Registration
      Statement, each Holder agrees as follows:

    

    (a) It
      shall
      be a condition precedent to the obligations of Markland or Techgnest to take
      any
      action pursuant to Section 3 with respect to the Registrable Securities of
      any
      Holder that such Holder shall furnish to Technest such information regarding
      itself, the Registrable Securities held by it, and the intended method of
      disposition of such securities as shall be reasonably required to effect the
      registration of such Holder’s Registrable Securities.

    

    (b) Each
      Holder shall comply with all applicable securities laws in connection with
      its
      sales of Registrable Securities, including, without limitation, any prospectus
      delivery requirement.

    

    5. Registration
      Expenses.
      Markland shall cause Technest to pay all fees and expenses incident to the
      performance of or compliance with this Agreement, 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 Technest Common Stock is then listed for trading,
      and (B) in compliance with applicable state securities or Blue Sky laws
      reasonably agreed to by Technest in writing (including, without limitation,
      fees
      and disbursements of counsel for Technest 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 Holders )), (ii) printing expenses
      (including, without limitation, printing prospectuses requested by the Holders),
      (iii) messenger, telephone and delivery expenses, (iv) fees and disbursements
      of
      counsel for Technest, and (v) fees and expenses of all other persons retained
      by
      Technest in connection with the consummation of the transactions contemplated
      by
      this Agreement. In addition, Technest 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 Technest be
      responsible for any broker or similar commissions or any legal fees or other
      costs of the Holders.

    

    
      
        
        

      

      
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    6. Indemnification

    

    (a) Indemnification
      by Technest.
      Markland shall cause Technest to indemnify and hold harmless each Holder, the
      officers, directors, agents, and employees of each of them, each person who
      controls any such Holder (within the meaning of Section 15 of the Securities
      Act
      or Section 20 of the Exchange Act) and the officers, directors, agents 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 such Holder furnished in writing to Technest
      by
      such Holder expressly for use therein, or to the extent that such information
      relates to such Holder or such Holder’s proposed method of distribution of
      Registrable Securities and was reviewed and expressly approved in writing by
      such Holder 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
      3(d)(ii)-(vi), the use by such Holder of an outdated or defective Prospectus
      after Technest has notified such Holder in writing that the Prospectus is
      outdated or defective and prior to the receipt by such Holder of the Advice
      contemplated in Section 7(c). Markland shall cause Technest to notify the
      Holders promptly of the institution, threat or assertion of any Proceeding
      arising from or in connection with the transactions contemplated by this
      Agreement of which Technest is aware.

    

    (b) Indemnification
      by Holders.
      Each
      Holder shall, severally and not jointly, indemnify and hold harmless Technest,
      the directors, officers, agents and employees of each of them, each person
      who
      controls either of them (within the meaning of Section 15 of the Securities
      Act
      and Section 20 of the Exchange Act), and the directors, officers, agents 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) such Holder’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 such Holder
      to Technest 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 such Holder furnished in writing to Technest
      by
      such Holder expressly for use therein, or to the extent such information relates
      to such Holder or such Holder’s proposed method of distribution of Registrable
      Securities and was reviewed and expressly approved in writing by such Holder
      expressly 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 3(d)(ii)-(vi), the
      use
      by such Holder of an outdated or defective Prospectus after Technest has
      notified such Holder in writing that the Prospectus is outdated or defective
      and
      prior to the receipt by such Holder of the Advice contemplated in Section 7(c).
      In no event shall the liability of any selling Holder hereunder be greater
      in
      amount than the dollar amount of the net proceeds received by such Holder upon
      the sale of the Registrable Securities giving rise to such indemnification
      obligation.

    

    
      
        
        

      

      
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    (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.

    

    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 all Holders 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).

    

    
      
        
        

      

      
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    (d) Contribution.
      If a
      claim for indemnification under Section 6(a) or 6(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 6(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.

    

    The
      parties hereto agree that it would not be just and equitable if contribution
      pursuant to this Section 6(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.
      Notwithstanding the provisions of this Section 6(d), no Holder shall be required
      to contribute, in the aggregate, any amount in excess of the amount by which
      the
      proceeds actually received by such Holder from the sale of the Registrable
      Securities subject to the Proceeding exceeds the amount of any damages that
      such
      Holder has otherwise been required to pay by reason of such untrue or alleged
      untrue statement or omission or alleged omission.

    

    7. 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 Markland and the Holders of a majority of the then outstanding
      Registrable Securities. Notwithstanding the foregoing, a waiver or consent
      to
      depart from the provisions hereof with respect to a matter that relates
      exclusively to the rights of one or some Holders and that does not directly
      or
      indirectly affect the rights of other Holders may be given by Holders of all
      of
      the Registrable Securities to which such waiver or consent relates; provided,
      however,
      that
      the
      provisions of this sentence may not be amended, modified, or supplemented except
      in accordance with the provisions of the immediately preceding
      sentence.

    

    (b) Compliance.
      Each
      Holder 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.

    

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (c) Discontinued
      Disposition.
      Each
      Holder agrees by its acquisition of such Registrable Securities that, upon
      receipt of a notice from Technest of the occurrence of any event of the kind
      described in Sections 3(d)(ii), (iii) or (vi), such Holder will forthwith
      discontinue disposition of such Registrable Securities under a Registration
      Statement until such Holder’s receipt of the copies of the supplemented
      Prospectus and/or amended Registration Statement contemplated by Section 3(h),
      or until it is advised in writing (the “Advice”)
      by
      Technest 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. Markland or Technest may provide appropriate stop orders
      to enforce the provisions of this paragraph.

    

    (d) 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 Redemption
      Agreement.

    

    (e) 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 and shall inure to the benefit of
      each
      Holder. Markland may not assign its rights or obligations hereunder without
      the
      prior written consent of the Holders of a majority of the then-outstanding
      Registrable Securities. Each Holder may assign their respective rights hereunder
      in the manner and to the persons as permitted under the Redemption
      Agreement.

    

    (f) 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.

    

    (g) 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 State of New York, 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 New
      York, Borough of Manhattan, 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 hereby irrevocably waives personal service of process
      and
      consents to process being served in any such suit, action or proceeding by
      mailing a copy thereof to such party at the address in effect for notices to
      it
      under this Agreement and agrees that such service shall constitute good and
      sufficient service of process and notice thereof. Nothing contained herein
      shall
      be deemed to limit in any way any right to serve process in any manner permitted
      by law. 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.

    

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

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

    

    (l) 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.

    

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

    

    (j) Independent
      Nature of Investors’ Obligations and Rights.
      The
      obligations of each Investor hereunder are several and not joint with the
      obligations of any other Investor hereunder, and no Investor shall be
      responsible in any way for the performance of the obligations of any other
      Investor hereunder. Nothing contained herein or in any other agreement or
      document delivered at any closing, and no action taken by any Investor pursuant
      hereto or thereto, shall be deemed to constitute the Investors as a partnership,
      an association, a joint venture or any other kind of entity, or create a
      presumption that the Investors are in any way acting in concert with respect
      to
      such obligations or the transactions contemplated by this Agreement. Each
      Investor shall be entitled to protect and enforce its rights, including without
      limitation the rights arising out of this Agreement, and it shall not be
      necessary for any other Investor to be joined as an additional party in any
      proceeding for such purpose.

    

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

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

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

    

    MARKLAND
      TECHNOLOGIES, INC.

     

    By:
      /s/
      Robert
      Tarini                                             

    Name:
      Robert Tarini

    Title:
      Chief Executive Officer

    

    

    

    [SIGNATURE
      PAGE OF HOLDERS FOLLOWS]

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    

    [SIGNATURE
      PAGE OF HOLDERS TO RRA]

    

    

    
      	 	
              JAMES
                LLC

            
	 	 
	 	 
	 	
              By:Illegible                                                                                      
                

            
	 	
              Name:
                Navigator Management Ltd. - Director

            
	 	 
	 	 
	 	
              SOUTHRIDGE
                PARTNERS LP

            
	 	 
	 	 
	 	
              By:/s/
                Stephen
                Hicks                                                              
                       

            
	 	
              Name:
                Stephen Hicks

            
	 	 
	 	 
	 	
              SOUTHSHORE
                CAPITAL FUND LTD.

            
	 	 
	 	 
	 	
              By:Illegible                                                                                       
                

            
	 	
              Name:
                Navigator Management Ltd. - Director

            
	 	 
	 	 
	 	
              BRITTANY
                CAPITAL MANAGEMENT, LTD.

            
	 	 
	 	 
	 	
              By:/s/
                Barry W.
                Herman                                                                 
                

            
	 	
              Name:
                Barry W. Herman, President

            

    

    

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    

    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 purchasers;

            

    

    

    
      	 	
              ·

            	
              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 or Common Stock 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.

    

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    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. 

     

    16Escrow Agreement

    Exhibit
      10.3

    

    

    ESCROW
      AGREEMENT

    

    

    ESCROW
      AGREEMENT (this “Agreement”) made as of March 24, 2006 by and among Markland
      Technologies, Inc., a Florida corporation (“Markland”), James LLC, Southridge
      Partners LP, Southshore Capital Fund Ltd. and Brittany Capital Management,
      Ltd.
      (collectively, the “Investors”), Greenfield Capital Partners, LLC
      (“Greenfield”), Southridge Capital Management LLC, as representative of the
      Investors and Greenfield (the “Representative”), and Greenberg Traurig, LLP, as
      escrow agent (the “Escrow Agent”).

    

    WHEREAS,
      Markland and the Investors are parties to that certain Redemption and Securities
      Purchase Agreement, dated as of the date hereof (the “Redemption Agreement”),
      pursuant to which the Investors will acquire shares of Markland’s Series E
      Preferred Stock, par value $.0001 per share (the “Series E Preferred
      Stock”);

    

    WHEREAS,
      Markland and Greenfield are parties to that certain Termination Agreement,
      dated
      as of the date hereof, pursuant to which Greenfield will acquire shares of
      Series E Preferred Stock;

    

    WHEREAS,
      pursuant to its terms, the Series E Preferred Stock is convertible into
      outstanding shares of common stock, par value $.001 per share (the “Technest
      Common Stock”), of Technest Holdings, Inc., a Nevada corporation (“Technest”),
      which shares are currently held by Markland;

    

    WHEREAS,
      Markland and the Investors are also party to that certain Registration Rights
      Agreement, dated as of the date hereof (the “Registration Rights
      Agreement”);

    

    WHEREAS,
      in connection with certain “Events” outlined in the Registration Rights
      Agreement, Markland may be required to pay, as partial liquidated damages,
      additional shares of Technest Common Stock to the Investors; and

    

    WHEREAS,
      in order to secure the conversion rights associated with the Series E Preferred
      Stock and the potential payment of liquidated damages under the Registration
      Rights Agreement, Section 5 of the Redemption Agreement provides for Markland
      to
      deposit an aggregate 3,804,000 shares of Technest Common Stock with the Escrow
      Agent to hold and distribute pursuant to this Agreement (an additional 500,000
      shares of Technest Common Stock will be deposited hereunder to help secure
      the
      conversion rights of Greenfield’s shares of Series E Preferred
      Stock).

    

    NOW,
      THEREFORE, in consideration of these premises and for other good and valuable
      consideration, the receipt and sufficiency of which is hereby acknowledged,
      the
      parties hereto hereby agree as follows.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    1. Appointment
      of the Escrow Agent and Representative.

     

    1.1 Escrow
      Agent. The Escrow Agent is hereby appointed as escrow agent for the purposes
      set
      forth herein, and the Escrow Agent hereby accepts such appointment on the terms
      set forth herein.

     

    1.2 Representative.
      The Representative is hereby appointed as agent and representative of the
      Investors and Greenfield for the purposes set forth herein, and the
      Representative accepts such appointment on the terms set forth
      herein.

     

    2. Escrow
      Shares.

     

    2.1 Deposit.
      In
      accordance with Section 5 of the Redemption Agreement, on the date of the
      Initial Closing (as defined in the Redemption Agreement), Markland shall deposit
      with the Escrow Agent one or more certificates representing an aggregate of
      3,804,000 shares of Technest Common Stock. In addition, on the date of the
      Initial Closing, Markland shall deposit with the Escrow Agent an additional
      500,000 shares of Technest Common Stock to help secure the conversion rights
      of
      Greenfield’s shares of Series E Preferred Stock. The aggregate 4,304,000 shares
      of Technest Common Stock being deposited hereunder are referred to herein as
      the
“Escrow Shares.” Although the Escrow Shares shall be issued in the name of the
      Escrow Agent or its nominee, as Escrow Agent, all Escrow Shares shall be held
      by
      the Escrow Agent for the benefit of Markland until such shares become the
      property of the Investors and/or Greenfield in accordance with this Agreement.
      If during the term of this Agreement there is declared a stock dividend or
      stock
      split, all securities thereby issuable with respect to the Escrow Shares shall
      be deposited hereunder and shall be deemed “Escrow Shares” for the purposes of
      this Agreement and if, in connection therewith, the Escrow Agent is required
      by
      the terms of such stock dividend or stock split to exchange the certificates
      then held by it for a different number of shares or certificates it is hereby
      irrevocably authorized to do so. If during the term of this Agreement, and
      prior
      to the Escrow Shares becoming property of the Investors and/or Greenfield,
      there
      is paid to the Escrow Agent any dividends in cash or other property (other
      than
      securities) in respect of the Escrow Shares, such dividends shall be paid
      promptly by the Escrow Agent to Markland. If during the term of this Agreement,
      and following the Escrow Shares becoming property of the Investors and/or
      Greenfield, but prior to the distribution of such Escrow Shares to the Investors
      and/or Greenfield, there is paid to the Escrow Agent any dividends in cash
      or
      other property (other than securities) in respect of the Escrow Shares, such
      dividends shall be paid promptly by the Escrow Agent to the Representative,
      who
      shall then disburse such dividends to the proper Investors and/or Greenfield.
      The Escrow Shares shall be disbursed by the Escrow Agent in accordance with
      the
      terms of this Agreement.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    2.2 Voting
      of
      Escrow Shares. The Escrow Shares held by the Escrow Agent pursuant to this
      Agreement shall be deemed issued and outstanding, shall appear as issued and
      outstanding in Technest’s stock records, and shall be legally outstanding under
      applicable state law. With respect to any matter on which stockholders of
      Technest have a right to vote, the Escrow Agent, upon receipt of written notices
      to such effect, on behalf of Markland, acting at the written direction of
      Markland received not less than three (3) business days prior to such vote,
      shall exercise the right to vote, or not vote, all Escrow Shares (or any portion
      thereof); provided, however, that the Escrow Agent shall at the expense of
      Markland promptly forward, or cause to be forwarded, copies of any proxies,
      proxy statements or other materials which it receives to Markland, and shall
      vote the applicable portion of the Escrow Shares in accordance with any written
      instructions timely received by the Escrow Agent from Markland. Absent any
      such
      written instructions, the Escrow Agent shall not vote any Escrow
      Shares.

     

    3. Distribution
      of Escrow Shares. The Escrow Agent shall not distribute all or any portion
      of
      the Escrow Shares to any party, except in accordance with this Section
      3.

     

    3.1 Distribution
      Upon Conversion of Series E Preferred Stock.

     

    a. Notice
      of Conversion.
      Upon
      the Escrow Agent’s receipt of a duly executed Notice of Conversion (as defined
      in the Articles of Amendment to the Articles of Incorporation of Markland
      creating the Series E Preferred Stock (the “Series E Articles”)) from a holder
      of Series E Preferred Stock in accordance with the Series E Articles, the Escrow
      Agent shall deliver (or cause to be delivered) certificates representing the
      shares of Technest Common Stock issuable upon conversion of the shares of Series
      E Preferred Stock being converted (the “Conversion Shares”) out of the Escrow
      Shares to the holder of the Series E Preferred Stock being converted (a
“Converting Holder”) at the address specified in the Notice of Conversion, via
      express courier, by electronic transfer or otherwise. The number of Conversion
      Shares shall be based on the most recent existing Conversion Ratio (as defined
      in the Series E Articles) as to which the Escrow Agent has then been notified
      by
      Markland.

     

    b. Dispute
      Notices.
      The
      Escrow Agent will use commercially reasonable efforts to cause the Conversion
      Shares to be issued to the Converting Holders as soon as practicable, but no
      earlier than three (3) Business Days following receipt by the Escrow Agent
      of
      the Notice of Conversion; provided, however, that if within the period of two
      (2) Business Days following receipt by the Escrow Agent of the Notice of
      Conversion, the Escrow Agent shall have received from Markland a written notice
      (a “Conversion Dispute Notice”) stating that Markland disputes in good faith the
      validity of or the number of Conversion Shares specified in such Notice of
      Conversion or any portion thereof (a “Conversion Disputed Amount”) and providing
      in reasonable detail the reasons therefor, the Escrow Agent shall transfer
      any
      Conversion Shares to the Converting Holder that are not the subject of a
      dispute, but shall not transfer any such Conversion Disputed Amount, with
      respect to such disputed conversion, to the Converting Holder other than
      pursuant to Section 4.1 of this Agreement. Markland shall send a copy of each
      Conversion Dispute Notice to the Converting Holder at the same time that such
      Conversion Dispute Notice is sent to the Escrow Agent. For purposes of this
      Agreement, the term “Business Day” means any day (other than a Saturday or
      Sunday) on which (A) the New York Stock Exchange is open and (B) banks are
      not
      authorized or required to close in Boston, Massachusetts or Wilmington,
      Delaware.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    c. If
      the
      Escrow Agent shall not have received a Conversion Dispute Notice with respect
      to
      the number of Conversion Shares specified in a Notice of Conversion, or any
      portion thereof, within the period of two (2) Business Days following its
      receipt of such Notice of Conversion, Markland shall be forever barred and
      precluded from contesting in any manner or forum whatsoever the distribution
      of
      Escrow Shares not so disputed.

     

    d. If
      at any
      time the number of Conversion Shares exceeds the number of Escrow Shares then
      held by the Escrow Agent, the Escrow Agent shall have no liability or
      responsibility for any deficiency.

     

    3.2 Distributions
      to Holders as Payment of Liquidated Damages Under the Registration Rights
      Agreement.

     

    a. If
      the
      Holders (as defined in the Registration Rights Agreement) are entitled to
      liquidated damages under Section 2(b) of the Registration Rights Agreement,
      the
      Representative shall deliver to the Escrow Agent (with a copy to Markland)
      a
      written notice (a “Liquidated Damages Notice”) setting forth in reasonable
      detail the nature of the claim and an estimate of the number of Escrow Shares
      (the “Liquidated Damages Shares”) which the Representative believes the Holders
      are entitled to be paid pursuant to the Registration Rights Agreement. The
      Liquidated Damages Notice shall specify the exact number of Escrow Shares that
      the Representative believes that each Holder is entitled to under the
      Registration Rights Agreement, as well as delivery instructions for each
      Holder.

     

    b. Dispute
      Notices.
      The
      Escrow Agent will use commercially reasonable efforts to cause the Liquidated
      Damages Shares to be issued to the Holders as soon as practicable, but no
      earlier than six (6) Business Days following receipt by the Escrow Agent of
      the
      Liquidated Damages Notice; provided, however, that if within the period of
      five
      (5) Business Days following receipt by the Escrow Agent of the Liquidated
      Damages Notice, the Escrow Agent shall have received from Markland a written
      notice (a “Liquidated Damages Dispute Notice”) stating that Markland disputes in
      good faith the validity of or the number of Liquidated Damages Shares specified
      in such Liquidated Damages Notice or any portion thereof (a “Liquidated Damages
      Disputed Amount”) and providing in reasonable detail the reasons therefor, the
      Escrow Agent shall transfer any Liquidated Damages Shares to the Holders that
      are not the subject of a dispute, but shall not transfer any such Liquidated
      Damages Disputed Amount, with respect to such disputed amount, to the Holders
      other than pursuant to Section 4.2 of this Agreement. Markland shall send a
      copy
      of each Liquidated Damages Dispute Notice to the Representative at the same
      time
      that such Liquidated Damages Notice Dispute Notice is sent to the Escrow
      Agent.

     

    c. If
      the
      Escrow Agent shall not have received a Liquidated Damages Dispute Notice with
      respect to the number of Liquidated Damages Shares specified in a Liquidated
      Damages Notice, or any portion thereof, within the period of five (5) Business
      Days following its receipt of such Liquidated Damages Notice, Markland shall
      be
      forever barred and precluded from contesting in any manner or forum whatsoever
      the distribution of Escrow Shares not so disputed.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    d. If
      at any
      time the number of Liquidated Damages Shares exceeds the number of Escrow Shares
      then held by the Escrow Agent, the Escrow Agent shall have no liability or
      responsibility for any deficiency.

     

    3.3 Release
      of Escrow Shares to Markland.

     

    a. Upon
      the
      effectiveness of the first Registration Statement contemplated by Section 2(a)
      of the Registration Rights Agreement, Markland and the Representative shall
      negotiate in good faith to determine an equitable number of Escrow Shares (the
      “Equitable Number”) to be released to Markland. Markland and the Representative
      shall use their best efforts to determine the Equitable Number within 30 days
      of
      the effective date of such Registration Statement. As soon as practicable
      following the Escrow Agent’s receipt of a fully executed written agreement
      between Markland and the Representative with respect to the Equitable Number,
      a
      number of Escrow Shares equal to the Equitable Number shall be released to
      Markland.

     

    b. Upon
      the
      termination of the Effectiveness Period (as defined in the Registration Rights
      Agreement), a number of shares equal to (i) 465,000 minus
      (ii) the
      number of Escrow Shares released pursuant to Section 3.3(a) minus
      (iii)
      the number of Liquidated Damages Shares transferred pursuant to this Agreement,
      shall be released to Markland.

     

    c. Upon
      termination of this Agreement pursuant to Section 5 below, any remaining Escrow
      Shares shall be released to Markland.

     

    4. Disputed
      Amounts. 

     

    4.1 Conversion
      Disputes. Upon receipt by the Escrow Agent of a written notice from Markland
      and/or a Converting Holder with respect to a Conversion Disputed Amount
      specifying the number of Conversion Shares to which such Converting Holder
      is
      entitled, accompanied by (i) a fully executed written agreement between Markland
      and such Converting Holder with respect to such Conversion Disputed Amount
      or
      (ii) a certified copy of a final, nonappealable order of a court or arbitrator
      or tribunal of arbitrators of competent jurisdiction determining the number
      of
      Conversion Shares to which the Converting Holder is entitled, the Escrow Agent
      shall transfer to such Converting Holder from the Escrow Shares such number
      of
      Conversion Shares (to the extent not previously transferred).

     

    4.2 Liquidated
      Damages Disputes. Upon receipt by the Escrow Agent of a written notice from
      Markland and/or the Representative with respect to a Liquidated Damages Disputed
      Amount specifying the number of Liquidated Damages Shares to which the Holders
      are entitled, accompanied by (i) a fully executed written agreement between
      Markland and the Representative with respect to such Liquidated Damages Disputed
      Amount or (ii) a certified copy of a final, nonappealable order of a court
      or
      arbitrator or tribunal of arbitrators of competent jurisdiction determining
      the
      number of Liquidated Damages Shares to which the Holders are entitled, the
      Escrow Agent shall transfer to the Holders from the Escrow Shares such number
      of
      Liquidated Damages Shares (to the extent not previously
      transferred).

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    5. Termination.

     

    5.1 This
      Agreement shall terminate on the later to occur of (i) the termination of the
      Effectiveness Period and (ii) the date on which all shares of Series E Preferred
      Stock have been converted (such later date, the “Termination Date”), if and to
      the extent that there are no outstanding disputes relating to Conversion Shares
      or Liquidated Damages Shares which remain unresolved on the Termination Date.
      If
      that is the case, then on the Termination Date, the Escrow Agent shall release
      any remaining Escrow Shares to Markland.

     

    5.2 If,
      however, on the Termination Date there are outstanding disputes relating to
      Conversion Shares or Liquidated Damages Shares which remain unresolved, then
      this Agreement shall continue in effect until all such disputes have been
      resolved. At such time as all remaining disputes hereunder have been resolved
      pursuant to and in accordance with Sections 4.1 and/or 4.2, as the case may
      be,
      the Escrow Agent shall release any remaining Escrow Shares to
      Markland.

     

    5.3 Anything
      contained herein to the contrary notwithstanding, the provisions of Section
      8
      and Section 10 shall remain in full force and effect and shall survive the
      termination of this Agreement for so long as the Escrow Agent may have any
      liability.

     

    6. Scope
      of
      Undertaking. The Escrow Agent shall have no responsibility or obligation of
      any
      kind in connection with this Agreement and the Escrow Shares, and shall not
      be
      required to deliver the same or any part thereof or take any action with respect
      to any matters that might arise in connection therewith, other than (i) to
      receive, hold, and make delivery of the Escrow Shares as herein expressly
      provided or by reason of a judgment or order of a court of competent
      jurisdiction and (ii) as contemplated by Sections 2.1 and 2.2.

     

    7. Knowledge
      and Sufficiency of Documents. The Escrow Agent shall not be bound by or have
      any
      responsibility with respect to compliance with any agreement between any of
      the
      other parties hereto, irrespective of whether the Escrow Agent has knowledge
      of
      the existence of any such agreement or terms and provisions thereof, the Escrow
      Agent’s only duty, liability, and responsibility being to receive, hold and
      deliver the Escrow Shares as herein provided. The Escrow Agent shall not be
      required in any way to determine the validity or sufficiency, whether in form
      or
      in substance, of the Escrow Shares or the validity, sufficiency, genuineness
      or
      accuracy of any instrument, document, certificate, statement or notice referred
      to in this Agreement or contemplated hereby; or the identity or authority of
      the
      persons executing the same, and it shall be sufficient if any writing purporting
      to be such instrument, document, certificate, statement or notice is delivered
      to the Escrow Agent and purports on its face to be correct in form and signed
      or
      otherwise executed by the party or parties required to sign or execute the
      same
      under this Agreement.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    8. Right
      of
      Interpleader. Should any controversy arise between Markland, on one hand, and
      the Representative, the Investors, Greenfield and/or any Holders, on the other,
      or any other person, firm or entity, with respect to this Agreement, the Escrow
      Shares, or any part thereof, or the right of any party or other person to
      receive the Escrow Shares, or should such parties fail to designate another
      Escrow Agent as provided in Section 15 hereof, or if the Escrow Agent should
      be
      in doubt as to what action to take, the Escrow Agent shall have the right (but
      not the obligation) to (i) withhold delivery of the Escrow Shares until the
      controversy is resolved as provided in Section 4 hereof, the conflicting demands
      are withdrawn or its doubt is resolved as provided in Section 4 hereof, or
      (ii)
      institute a bill of interpleader in any court of competent jurisdiction to
      determine the rights of the parties hereto (the right of the Escrow Agent to
      institute such bill of interpleader, however, shall not be deemed to modify
      the
      manner in which the Escrow Agent is entitled to make disbursements of the Escrow
      Shares as hereinabove set forth, other than to tender the Escrow Shares into
      the
      registry of such court). Should a bill of interpleader be instituted, or should
      the Escrow Agent be threatened with litigation or become involved in litigation
      in any manner whatsoever on account of this Agreement or the Escrow Shares,
      then
      as between themselves and the Escrow Agent, Markland, the Investors and
      Greenfield, jointly and severally, hereby bind and obligate themselves, their
      successors, heirs, executors and assigns to pay the Escrow Agent its reasonable
      attorneys’ fees and any and all other disbursements, expenses, losses, costs and
      damages of the Escrow Agent in connection with or resulting from such threatened
      or actual litigation. Notwithstanding the foregoing, as between themselves,
      Markland, on the one hand, and the Investors and Greenfield, on the other hand,
      shall each pay one-half of all amounts payable to the Escrow Agent pursuant
      to
      this paragraph.

     

    9. Scope
      of
      Duties and Errors in Judgment. It is expressly understood and agreed that the
      Escrow Agent shall be under no duty or obligation to give any notice, or to
      do
      or to omit the doing of any action or anything with respect to the Escrow
      Shares, except to hold the same in the Escrow Account and to make disbursements
      in accordance with the terms of this Agreement. Without limiting the generality
      of the foregoing, it is acknowledged and
      agreed
      that (i) no implied duties shall be read into this Agreement on the part
      of
      the
      Escrow Agent, and (ii) the Escrow Agent shall not be obligated to take any
      legal
      or remedial action which might in its judgment involve it in any expense or
      liability for which it has not been furnished acceptable indemnification. The
      Escrow Agent, its shareholders, associates and employees shall not be liable
      for
      any error in judgment or any
      act
      or
      steps taken or permitted to be taken in good faith, or for any mistake of law
      or
      fact, or for anything it may do or refrain from doing in connection herewith,
      except for its own willful misconduct or gross negligence.

     

    10. Indemnity.
      As between themselves and the Escrow Agent, Markland, the Investors and
      Greenfield, jointly and
      severally,
      agree to indemnify the Escrow Agent against and hold the Escrow Agent harmless
      from any and all losses, costs, damages, expenses, claims, and attorney’s fees
      and expenses suffered or incurred by the Escrow Agent as a result of,
      in
      connection with or arising from or out of the acts or omissions of the Escrow
      Agent in performance of or pursuant to this Agreement, except such acts or
      omissions as may result from the Escrow Agent’s willful misconduct or gross
      negligence. In no event shall the Escrow Agent be liable for indirect, punitive,
      special or consequential damages.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    Markland,
      the Investors and Greenfield, jointly and severally, agree to assume any and
      all
      obligations imposed now or hereafter by any applicable tax
      law
      with
      respect to the distribution of Escrow Shares under this Agreement, and to
      indemnify and hold the Escrow Agent harmless from and against any taxes,
      additions for late payment, interest, penalties and other expenses, that may
      be
      assessed against the Escrow Agent in any such payment or other activities under
      this Agreement. Markland and the Representative undertake to instruct the Escrow
      Agent in writing with respect to the Escrow Agent’s responsibility for
      withholding and other taxes, assessments, or other governmental charges,
      certifications and
      governmental
      reporting in connection with its acting as Escrow Agent under this Agreement.
      Markland, the Investors and Greenfield, jointly and severally, agree to
      indemnify and
      hold
      the
      Escrow Agent harmless from any
      liability
      on account of taxes, assessments or other governmental charges, including,
      without limitation, the withholding or deduction or the failure to withhold
      or
      deduct the same, and any liability for failure to obtain proper certifications
      or to properly report to governmental authorities, to which the Escrow Agent
      may
      be or become subject in connection with or which arises out of this Agreement,
      including costs and expenses (including reasonable legal fees and expenses),
      interest and penalties.

     

    Notwithstanding
      the foregoing, as between themselves, Markland, on the one hand, and the
      Investors and Greenfield, on the other, shall each pay one-half of all amounts
      payable to the Escrow Agent pursuant to this paragraph.

     

    11. Responsibilities
      of the Representative.

     

    11.1 General.
      The Representative has been designated by the Investors and Greenfield to
      represent the Investors and Greenfield with respect to the Escrow Shares
      pursuant to the terms of this Agreement. The duties of the Representative
      hereunder shall be limited to the observance of the express provisions of this
      Agreement. The Representative shall not be subject to, or be obliged to
      recognize, any other agreement between the parties hereto or directions or
      instructions not specifically set forth or provided for herein or in the
      Redemption Agreement.

     

    11.2 Reimbursement
      of Expenses of the Representative. The Investors and Greenfield shall reimburse
      the Representative for reasonable out-of-pocket expenses incurred by the
      Representative in the performance of his duties hereunder.

     

    11.3 Duties.
      The Investors and Greenfield hereby authorize and direct the Representative
      to
      take all action necessary in connection with the implementation of this
      Agreement on behalf of the Investors, including, without limitation, giving
      and
      receiving all notices required to be given under this Agreement, settling any
      dispute arising hereunder and executing all such documents as the Representative
      shall deem necessary or appropriate in connection with the transactions
      contemplated by this Agreement. All decisions and actions by the Representative
      shall be binding upon all of the Investors and Greenfield, and the Investors
      and
      Greenfield shall have no right to object, dissent, protest or otherwise contest
      the same.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    11.4 Reliance.
      By their execution of this Agreement, the Investors and Greenfield agree that
      (i) Markland and the Escrow Agent shall be able to rely conclusively on the
      instructions and decisions of the Representative as to any actions required
      or
      permitted to be taken by the Investors, Greenfield or the Representative
      hereunder, and no party hereto shall have any cause of action against any other
      for any action taken in reliance upon the instructions or decisions of the
      Representative, (ii) all actions, decisions and instructions of the
      Representative shall be conclusive and binding upon all of the Investors and
      Greenfield, and the Investors and Greenfield shall have no cause of action
      against the Representative or any other person for any action taken, decision
      made or instruction given by the Representative under this Agreement, except
      for
      gross negligence, breach of fiduciary duties owed to the Investors and
      Greenfield, fraud or willful breach of this Agreement by the Representative
      and
      (iii) the provisions of this Section 11 are independent and severable, shall
      constitute an irrevocable power of attorney, coupled with an interest and
      surviving death, granted by the Investors and Greenfield to the Representative
      and shall be binding upon the executors, heirs, legal representatives and
      successors of each Investor and Greenfield.

     

    12. Notices.
      Any notice, request, demand or other communication required or permitted
      hereunder shall be in writing and shall be deemed to have been given if
      delivered or sent by facsimile transmission, upon receipt, or if sent by
      registered or certified mail, upon the sooner of the date on which receipt
      is
      acknowledged or the expiration of three days after deposit in United States
      post
      office facilities properly addressed with postage prepaid. All notices to a
      party will be sent to the addresses set forth below or to such other address
      or
      person as such party may designate by notice to each other party
      hereunder:

     

    
      	
              TO
                MARKLAND:

            	 	
              Markland
                Technologies, Inc.

            
	 	 	
              88
                Royal Little Drive

            
	 	 	
              Providence,
                RI 02904

            
	 	 	
              Attn:
                Robert Tarini

            
	 	 	
              Fax:401-454-1806

            
	 	 	 
	
              With
                a copy to:

            	 	
              Greenberg
                Traurig, LLP

            
	 	 	
              One
                International Place

            
	 	 	
              Boston,
                MA 02110

            
	 	 	
              Attn:
                Jonathan Bell, Esq.

            
	 	 	
              Fax:
                (617) 310-6001

            
	 	 	 
	
              TO
                REPRESENTATIVE:

            	 	
              Southridge
                Capital Management LLC

            
	 	 	
              90
                Grove Street, Suite 204

            
	 	 	
              Ridgefield,
                CT 06877

            
	 	 	
              Attn:
                Stephen Hicks

            
	 	 	
              Fax:
                (203) 431-8301

            
	 	 	 
	 	 	 
	
              TO
                ESCROW AGENT:

            	 	
              Greenberg
                Traurig, LLP

            
	 	 	
              One
                International Place

            
	 	 	
              Boston,
                MA 02110

            
	 	 	
              Attn:
                Jonathan Bell, Esq.

            
	 	 	
              Fax:
                (617) 310-6001

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    13. Consultation
      with Legal Counsel. The Escrow Agent may consult with its in--house counsel
      or
      other counsel satisfactory to it in respect to questions relating to its duties
      or responsibilities hereunder or otherwise in connection herewith and shall
      not
      be liable for any action taken, suffered, or omitted by the Escrow Agent in
      good
      faith upon the advice of such counsel. The Escrow Agent may act through its
      shareholders, associates, employees, agents and attorneys.

     

    14. Reimbursement
      of Expenses. The Escrow Agent shall be entitled to reimbursement from Markland
      of all its reasonable costs and expenses, including reasonable fees and expenses
      of legal counsel incurred by it in connection with the preparation, operating,
      administration and enforcement of this Agreement. The Escrow Agent shall be
      entitled to reimbursement on demand for all expenses incurred in connection
      with
      the administration of this Agreement or the escrow created hereby which are
      in
      excess of its compensation for normal services hereunder, including, without
      limitation, payment of any legal fees and expenses incurred by the Escrow Agent
      in connection with resolution of any dispute by any party hereunder.
      Notwithstanding the foregoing, with respect to any such costs and expenses
      incurred in connection with a dispute, Markland, on the one hand, and the
      Investors and Greenfield, on the other, shall each pay one-half of all amounts
      payable to the Escrow Agent pursuant to this paragraph.

     

    15. Resignation.
      The Escrow Agent may resign upon 10 days’ prior written notice to Markland and
      the Representative, and upon the written instruction of Markland and the
      Representative, the Escrow Agent shall deliver the Escrow Shares to any
      designated substitute Escrow Agent mutually agreeable to such parties. If
      Markland and the Representative fail to designate a substitute Escrow Agent
      within 10 days, the Escrow Agent, in its sole discretion and its sole option,
      either may (i) continue to hold the Escrow Shares, or (ii) institute a bill
      of
      interpleader as contemplated by Section 8 hereof.

     

    16. Compensation.
      Markland covenants and agrees to pay to the Escrow Agent the fee determined
      by
      the Escrow Agent, from time to time, to be applicable to this escrow and bear
      all costs and expenses incurred by the Escrow Agent in connection therewith;
      provided that the Investors and Greenfield agree to collectively pay one-half
      of
      such costs and expenses to the extent they are incurred in connection with
      a
      dispute.

     

    17. Governing
      Law. This Agreement shall be construed under and governed by the internal laws
      of the State of New York without regard to its conflict of laws provisions.
      The
      parties hereto hereby submit themselves to the jurisdiction of the state and
      federal courts of the State of New York for the resolution of any disputes
      hereunder and agree that New York shall constitute a convenient forum for the
      resolution of any such disputes.

     

    18. Force
      Majeure. Neither Markland, the Representative nor the Escrow Agent shall be
      responsible for delays or failures in performance resulting from acts beyond
      their control. Such acts shall include but not be limited to acts of God,
      strikes, lockouts, riots, acts of war or terrorism, epidemics, governmental
      regulations superimposed after the fact, fire, communication line failures,
      computer viruses, power failures, earthquakes or other disasters.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    19. Entire
      Agreement. This Agreement evidences the entire agreement among Markland, the
      Investors, Greenfield, the Representative and the Escrow Agent in connection
      with the Escrow Shares and no other agreement entered into between the parties
      or any of them shall be considered or adopted or binding, in whole or in part,
      by or upon the Escrow Agent, notwithstanding that any other such agreement
      may
      be deposited herewith or the Escrow Agent may have knowledge
      thereof.

     

    20. Binding
      Effect. This Agreement shall be binding upon the respective parties hereto
      and
      their heirs, executors, successors and assigns.

     

    21. Amendments
      and Waivers. This Agreement may be amended, modified and supplemented, and
      compliance with any provision hereof may be waived, only by a writing signed
      by
      Markland, the Escrow Agent and the Representative.

     

    22. Severability.
      If one or more of the provisions contained herein for any reason shall be held
      to be invalid, illegal or unenforceable in any respect, such invalidity,
      illegality or unenforceability shall not affect any other provisions hereof,
      and
      this Agreement shall be construed as if such invalid, illegal or unenforceable
      provision had never been contained herein.

     

    23. Reproduction
      of Documents. This Agreement and all documents relating thereto, including,
      without limitation, (a) consents, waivers and modifications which may hereafter
      be executed, and (b) certificates and other information previously or hereafter
      furnished, may be reproduced by any photographic, photostatic, microfilm,
      optical disk, micro-card, miniature photographic or other similar process.
      The
      parties agree that any such reproduction shall be admissible in evidence as
      the
      original itself in any judicial or administrative proceeding, whether or not
      the
      original is in existence and whether or not such reproduction was made by a
      party in the regular course of business, and that any enlargement, facsimile
      or
      further reproduction of such reproduction shall likewise be admissible in
      evidence.

     

    24. Captions.
      Section headings and captions have been inserted for convenience only and do
      not
      in anyway limit the provisions set out in the various sections
      hereof.

     

    25. Execution
      in Counterparts. For the convenience of the parties and to facilitate execution,
      this Agreement may be executed in two or more counterparts, each of which shall
      be deemed an original, but all of which shall constitute one and the same
      document and such counterparts may be delivered by facsimile.

     

    

    

    [End
      of
      Text]

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
      executed as of the date first written above.

    

    
      	 	
              MARKLAND
                TECHNOLOGIES, INC.

            
	 	 
	 	 
	 	
              By:
                /s/
                Robert
                Tarini                                                             

            
	 	
              Name:
                Robert Tarini

            
	 	
              Title:
                Chief Executive Officer

            
	 	 
	 	 
	 	
              GREENBERG
                TRAURIG, LLP, as Escrow Agent

            
	 	 
	 	 
	 	
              By:
                /s/
                Brad
                Jacobson                                                         

            
	 	
              Name:
                Brad Jacobson, Esq.

            
	 	 
	 	 
	 	
              SOUTHRIDGE
                CAPITAL MANAGEMENT LLC, as Representative

            
	 	 
	 	 
	 	
              By:
                /s/
                Stephen
                Hicks                                                         

            
	 	
              Name:
                Stephen Hicks

            
	 	 
	 	 
	 	
              JAMES
                LLC

            
	 	 
	 	 
	 	
              By:
                Illegible                                                                           
                

            
	 	
              Name:
                Navigator Management Ltd. - Director

            
	 	 
	 	 
	 	
              SOUTHRIDGE
                PARTNERS LP

            
	 	 
	 	 
	 	
              By:
                /s/
                Stephen
                Hicks                                                           
                

            
	 	
              Name:
                Stephen Hicks

            
	 	 
	 	 

    

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

     

    
      	 	
              SOUTHSHORE
                CAPITAL FUND LTD.

            
	 	 
	 	 
	 	
              By:Illegible                                                                              
                

            
	 	
              Name:
                Navigator Management Ltd. - Director

            
	 	 
	 	 
	 	
              BRITTANY
                CAPITAL MANAGEMENT, LTD.

            
	 	 
	 	 
	 	
              By:/s/
                Barry W.
                Herman                                                        
                

            
	 	
              Name:
                Barry W. Herman, President

            
	 	 
	 	 
	 	
              GREENFIELD
                CAPITAL PARTNERS, LLC

            
	 	 
	 	 
	 	
              By:/s/
                Michael
                Byl                                                                   
                

            
	 	
              Name:
                Michael Byl

            

    

     

     

    13

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