EXECUTION VERSION

SECURITY AGREEMENT

This SECURITY AGREEMENT (this “Agreement”), dated as of May 26, 2010, is made by
and among the grantors listed on the signature pages hereof (collectively,
jointly and severally, the “Grantors” and each, individually, a “Grantor”), and
the secured parties listed on the signature pages hereof (collectively, the
“Secured Parties” and each, individually, a “Secured Party”).
 
RECITALS
 
WHEREAS, pursuant to that certain Securities Purchase Agreement, dated as of May
26, 2010 (as may be amended, restated, supplemented, or otherwise modified from
time to time, including all schedules thereto, collectively, the “Securities
Purchase Agreement”), by and among Paradigm Holdings, Inc., a Wyoming
corporation (“Parent”), and each of the Secured Parties, Parent has agreed to
sell, and each of the Secured Parties have each agreed to purchase, severally
and not jointly, certain Notes; and
 
WHEREAS, each Grantor other than Parent is a direct or indirect wholly-owned
Subsidiary (as defined below) of Parent and will receive direct and substantial
benefits from the purchase by each of the Secured Parties of the Notes; and
 
WHEREAS, in order to induce the Secured Parties to purchase, severally and not
jointly, the Notes as provided for in the Securities Purchase Agreement,
Grantors have agreed to grant a continuing security interest in and to the
Collateral in order to secure the prompt and complete payment, observance and
performance of the Secured Obligations.
 
AGREEMENTS
 
NOW, THEREFORE, for and in consideration of the recitals made above and other
good and valuable consideration, the receipt, sufficiency and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:
 
1.             Defined Terms. All capitalized terms used herein (including in
the preamble and recitals hereof) without definition shall have the meanings
ascribed thereto in the Notes. Any terms used in this Agreement that are defined
in the Code shall be construed and defined as set forth in the Code unless
otherwise defined herein or in the Notes; provided, however, if the Code is used
to define any term used herein and if such term is defined differently in
different Articles of the Code, the definition of such term contained in Article
9 of the Code shall govern. In addition to those terms defined elsewhere in this
Agreement, as used in this Agreement, the following terms shall have the
following meanings:
 
(a)           “Account” means an account (as that term is defined in the Code).
 
(b)           “Account Debtor” means an account debtor (as that term is defined
in the Code).

 
 

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(c)           “Bankruptcy Code” means title 11 of the United States Code, as in
effect from time to time.
 
(d)           “Books” means books and records (including, without limitation,
each Grantor’s Records) indicating, summarizing, or evidencing each Grantor’s
assets (including the Collateral) or liabilities, each Grantor’s Records
relating to its business operations (including, without limitation, stock
ledgers) or financial condition, and each Grantor’s goods or General Intangibles
related to such information.
 
(e)           “Chattel Paper” means chattel paper (as that term is defined in
the Code) and includes tangible chattel paper and electronic chattel paper.
 
(f)            “Code” means the New York Uniform Commercial Code, as in effect
from time to time; provided, however, in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection, priority, or
remedies with respect to any Secured Party’s Lien on any Collateral is governed
by the Uniform Commercial Code as enacted and in effect in a jurisdiction other
than the State of New York, the term “Code” shall mean the Uniform Commercial
Code as enacted and in effect in such other jurisdiction solely for purposes of
the provisions thereof relating to such attachment, perfection, priority, or
remedies.
 
(g)           “Collateral” has the meaning specified therefor in Section 2.
 
(h)           “Commencement Notice” means a written notice, given by any Secured
Party to the other Secured Parties in accordance with the notice provisions set
forth in the Securities Purchase Agreement, pursuant to which such Secured Party
notifies the other Secured Parties of the existence of one or more Events of
Default and of such Secured Party’s intent to commence the exercise of one or
more of the remedies provided for under this Agreement with respect to all or
any portion of the Collateral as a consequence thereof, which notice shall
incorporate a reasonably detailed description of each Event of Default then
existing and of the remedial action proposed to be taken.
 
(i)            “Commercial Tort Claims” means commercial tort claims (as that
term is defined in the Code), and includes those commercial tort claims listed
on Schedule 1 attached hereto.
 
(j)            “Control Agreement” means a control agreement, in form and
substance satisfactory to Secured Parties, executed and delivered by a Grantor,
one or more Secured Parties, and the applicable securities intermediary (with
respect to a Securities Account) or bank (with respect to a Deposit Account), as
may be amended, restated, supplemented, or otherwise modified from time to time.
 
(k)           “Copyrights” means all copyrights and copyright registrations, and
also includes (i) the copyright registrations and recordings thereof and all
applications in connection therewith listed on Schedule 2 attached hereto and
made a part hereof, (ii) all reissues, continuations, extensions or renewals
thereof, (iii) all income, royalties, damages and payments now and hereafter due
or payable under and with respect thereto, including payments under all licenses
entered into in connection therewith and damages and payments for past or future
infringements or dilutions thereof, (iv) the right to sue for past, present and
future infringements and dilutions thereof, (v) the goodwill of each Grantor’s
business symbolized by the foregoing or connected therewith, and (vi) all of
each Grantor’s rights corresponding thereto throughout the world.
 
 
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(l)           “Copyright Security Agreement” means each Copyright Security
Agreement among Grantors, or any of them, and Secured Parties, in substantially
the form of Exhibit A attached hereto, pursuant to which Grantors have granted
to each Secured Party a security interest in all their respective Copyrights, as
may be amended, restated, supplemented, or otherwise modified from time to time.
 
(m)           “Deposit Account” means a deposit account (as that term is defined
in the Code).
 
(n)           “Equipment” means equipment (as that term is defined in the Code).
 
(o)           “Event of Default” has the meaning specified therefor in the
Notes.
 
(p)           “General Intangibles” means general intangibles (as that term is
defined in the Code) and, in any event, includes payment intangibles, contract
rights, rights to payment, rights arising under common law, statutes, or
regulations, choses or things in action, goodwill (including the goodwill
associated with any Trademark, Patent, or Copyright), Patents, Trademarks,
Copyrights, URLs and domain names, industrial designs, other industrial or
Intellectual Property or rights therein or applications therefor, whether under
license or otherwise, programs, programming materials, blueprints, drawings,
purchase orders, customer lists, monies due or recoverable from pension funds,
route lists, rights to payment and other rights under any royalty or licensing
agreements, including Intellectual Property Licenses, infringement claims,
computer programs, information contained on computer disks or tapes, software,
literature, reports, catalogs, pension plan refunds, pension plan refund claims,
insurance premium rebates, tax refunds, and tax refund claims, interests in a
partnership or limited liability company which do not constitute a security
under Article 8 of the Code, and any other personal property other than
Commercial Tort Claims, money, Accounts, Chattel Paper, Deposit Accounts, goods,
Investment Related Property, Negotiable Collateral, and oil, gas, or other
minerals before extraction.
 
(q)           “Governmental Authority” means any domestic or foreign federal,
state, local, or other governmental or administrative body, instrumentality,
board, department, or agency or any court, tribunal, administrative hearing
body, arbitration panel, commission, or other similar dispute-resolving panel or
body.
 
(r)            “Guaranties” means each Guaranty dated of even date herewith
executed by Guarantors in favor of any or all of the Secured Parties, together
with any other guaranty or similar agreement now or hereafter executed by a
Guarantor in favor of any or all of the Secured Parties in connection with the
Notes or any of the other Transaction Documents, as may be amended, restated,
supplemented, or otherwise modified from time to time.
 
 
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(s)           “Guarantor” means each Grantor, other than Parent, and each other
Person that now or hereafter executes a Guaranty.
 
(t)            “Insolvency Proceeding” means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
state or federal bankruptcy or insolvency law or any equivalent laws in any
other jurisdiction, assignments for the benefit of creditors, formal or informal
moratoria, compositions, extensions generally with creditors, or proceedings
seeking reorganization, arrangement, or other similar relief.
 
(u)           “Intellectual Property” means Patents, Copyrights, Trademarks, the
goodwill associated with such Trademarks, trade secrets and customer lists, and
Intellectual Property Licenses.
 
(v)           “Intellectual Property Licenses” means rights under or interests
in any patent, trademark, copyright or other intellectual property, including
software license agreements with any other party, whether the applicable Grantor
is a licensee or licensor under any such license agreement, including the
license agreements listed on Schedule 3 attached hereto and made a part hereof,
as may be amended, restated, supplemented, or otherwise modified from time to
time.
 
(w)           “Inventory” means inventory (as that term is defined in the Code).
 
(x)            “Investment Related Property” means (i) investment property (as
that term is defined in the Code), and (ii) all of the following (regardless of
whether classified as investment property under the Code): all Pledged
Interests, Pledged Operating Agreements, and Pledged Partnership Agreements.
 
(y)           “Lien” has the meaning specified therefor in the Notes.
 
(z)            “Negotiable Collateral” means letters of credit, letter-of-credit
rights, instruments, promissory notes, drafts, and documents.
 
(aa)         “New Subsidiary” has the meaning specified therefor in the Notes.
 
(bb)         “Notes” has the meaning specified therefor in the Securities
Purchase Agreement.
 
(cc)         “Patents” means all patents and patent applications, and also
includes (i) the patents and patent applications listed on Schedule 4 attached
hereto and made a part hereof, (ii) all renewals thereof, (iii) all income,
royalties, damages and payments now and hereafter due or payable under and with
respect thereto, including payments under all licenses entered into in
connection therewith and damages and payments for past or future infringements
or dilutions thereof, (iv) the right to sue for past, present and future
infringements and dilutions thereof, and (v) all of each Grantor’s rights
corresponding thereto throughout the world.
 
 
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(dd)         “Patent Security Agreement” means each Patent Security Agreement
among Grantors and Secured Parties in substantially the form of Exhibit B
attached hereto, pursuant to which Grantors have granted to each Secured Party a
security interest in all their respective Patents, as may be amended, restated,
supplemented, or otherwise modified from time to time.
 
(ee)         “Permitted Liens” has the meaning specified therefor in the Notes.
 
(ff)           “Permitted Secured Party” means, with respect to the exercise of
any remedy provided for under this Agreement, any Secured Party that has
delivered a Commencement Notice with respect to the exercise of such remedy to
the other Secured Parties and has not received a Veto Notice with respect
thereto within the Veto Period; provided, however, there shall only be a single
Permitted Secured Party that may exercise any specific remedy at any one time
(it being agreed that if a Commencement Notice is delivered by more than one
Secured Party with respect to any remedy provided for under this Agreement, then
the first Secured Party to deliver a Commencement Notice and not receive a Veto
Notice within the Veto Period shall be the only Secured Party that may exercise
such remedy).
 
(gg)         “Person” has the meaning specified therefor in the Securities
Purchase Agreement.
 
(hh)         “Pledged Companies” means, each Person listed on Schedule 5 hereto
as a “Pledged Company,” together with each other Person all or a portion of
whose Stock is acquired or otherwise owned by a Grantor after the date hereof.
 
(ii)           “Pledged Interests” means all of each Grantor’s right, title and
interest in and to all of the Stock now or hereafter owned by such Grantor,
regardless of class or designation, including all substitutions therefor and
replacements thereof, all proceeds thereof and all rights relating thereto, also
including any certificates representing the Stock, the right to receive any
certificates representing any of the Stock, all warrants, options, share
appreciation rights and other rights, contractual or otherwise, in respect
thereof, and the right to receive dividends, distributions of income, profits,
surplus, or other compensation by way of income or liquidating distributions, in
cash or in kind, and cash, instruments, and other property from time to time
received, receivable, or otherwise distributed in respect of or in addition to,
in substitution of, on account of, or in exchange for any or all of the
foregoing.
 
(jj)           “Pledged Operating Agreements” means all of each Grantor’s
rights, powers, and remedies under the limited liability company operating
agreements of each of the Pledged Companies that are limited liability
companies, as may be amended, restated, supplemented, or otherwise modified from
time to time.
 
(kk)         “Pledged Partnership Agreements” means all of each Grantor’s
rights, powers, and remedies under the partnership agreements of each of the
Pledged Companies that are partnerships, as may be amended, restated,
supplemented, or otherwise modified from time to time.
 
 
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(ll)           “Proceeds” has the meaning specified therefor in Section 2.
 
(mm)       “Real Property” means any estates or interests in real property now
owned or hereafter acquired by any Grantor and the improvements thereto.
 
(nn)        “Records” means information that is inscribed on a tangible medium
or which is stored in an electronic or other medium and is retrievable in
perceivable form.
 
(oo)        “Secured Obligations” mean all of the present and future payment and
performance obligations of Grantors arising under this Agreement, the Notes, the
Guaranties, and the other Transaction Documents, including, without duplication,
reasonable attorneys’ fees and expenses and any interest, fees, or expenses that
accrue after the filing of an Insolvency Proceeding, regardless of whether
allowed or allowable in whole or in part as a claim in any Insolvency
Proceeding.
 
(pp)        “Securities Account” means a securities account (as that term is
defined in the Code).
 
(qq)        “Security Documents” means, collectively, this Agreement, each
Copyright Security Agreement, each Patent Security Agreement, each Trademark
Security Agreement, each Control Agreement, and each other security agreement,
pledge agreement, assignment, mortgage, security deed, deed of trust, and other
agreement or document executed and delivered by a Grantor as security for any of
the Secured Obligations, as may be amended, restated, supplemented, or otherwise
modified from time to time.
 
(rr)           “Security Interest” and “Security Interests” have the meanings
specified therefor in Section 2.
 
(ss)         “Senior Lender” means Silicon Valley Bank and its successors and
assigns.
 
(tt)           “Significant Secured Party” means, on any date of determination,
any Secured Party holding at least 50 percent (50%) or more of the aggregate
principal amount of Notes outstanding on such date.
 
(uu)        “Stock” means all shares, options, warrants, interests (including,
without limitation, membership and partnership interests), participations, or
other equivalents (regardless of how designated) of or in a Person, whether
voting or nonvoting, including common stock, preferred stock, or any other
“equity security” (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the United States Securities and Exchange
Commission and any successor thereto under the Securities Exchange Act of 1934,
as in effect from time to time).
 
(vv)        “Subsidiaries” and “Subsidiary” each have the meanings specified
therefor in the Notes.
 
 
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(ww)        “Subordination Agreement” shall mean that certain subordination
agreement with respect to certain senior indebtedness by and among the Senior
Parties and the Secured Lender dated on even date herewith, as such may be
amended from time to time.
 
(xx)           “Supporting Obligations” means supporting obligations (as such
term is defined in the Code).
 
(yy)         “Trademarks” means all trademarks, trade names, trademark
applications, service marks, service mark applications, and also includes (i)
the trade names, trademarks, trademark applications, service marks, and service
mark applications listed on Schedule 6 attached hereto and made a part hereof,
and (ii) all renewals thereof, (iii) all income, royalties, damages and payments
now and hereafter due or payable under and with respect thereto, including
payments under all licenses entered into in connection therewith and damages and
payments for past or future infringements or dilutions thereof, (iv) the right
to sue for past, present and future infringements and dilutions thereof, (v) the
goodwill of each Grantor’s business symbolized by the foregoing or connected
therewith, and (vi) all of each Grantor’s rights corresponding thereto
throughout the world.
 
(zz)          “Trademark Security Agreement” means each Trademark Security
Agreement among Grantors and Secured Parties in substantially the form of
Exhibit C attached hereto, pursuant to which Grantors have granted to each
Secured Party a security interest in all their respective Trademarks.
 
(aaa)       “Transaction Documents” has the meaning specified therefor in the
Securities Purchase Agreement.
 
(bbb)      “URL” means “uniform resource locator,” an internet web address.
 
(ccc)       “Veto Notice” means, with respect to any Commencement Notice, a
written notice given by any Significant Secured Party to the other Secured
Parties in accordance with the notice provisions set forth in the Securities
Purchase Agreement pursuant to which such Significant Secured Party notifies the
other Secured Parties of its objection to the commencement of the remedial
action specified in such Commencement Notice and certifies that, to the best of
its knowledge, it is a Significant Secured Party.
 
(ddd)      “Veto Period” means, with respect to any Commencement Notice, the
period of ten (10) consecutive calendar days following the delivery of such
Commencement Notice to the Secured Parties.
 
2.            Grant of Security. Each Grantor hereby unconditionally grants,
assigns, and pledges to each Secured Party a separate, continuing security
interest (each, a “Security Interest” and, collectively, the “Security
Interests”) in all assets of such Grantor (other than Real Property) whether now
owned or hereafter acquired or arising and wherever located (collectively, the
“Collateral”), including, without limitation, such Grantor’s right, title, and
interest in and to the following, whether now owned or hereafter acquired or
arising and wherever located:
 
 
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(a)           all of such Grantor’s Accounts;
 
(b)           all of such Grantor’s Books;
 
(c)           all of such Grantor’s Chattel Paper;
 
(d)           all of such Grantor’s Deposit Accounts;
 
(e)           all of such Grantor’s Equipment and fixtures;
 
(f)           all of such Grantor’s General Intangibles;
 
(g)           all of such Grantor’s Inventory;
 
(h)           all of such Grantor’s Investment Related Property;
 
(i)            all of such Grantor’s Negotiable Collateral;
 
(j)            all of such Grantor’s rights in respect of Supporting
Obligations;
 
(k)           all of such Grantor’s Commercial Tort Claims;
 
(l)            all of such Grantor’s money, cash, cash equivalents, or other
assets of each such Grantor that now or hereafter come into the possession,
custody, or control of any Secured Party;
 
(m)           all of the proceeds and products, whether tangible or intangible,
of any of the foregoing, including proceeds of insurance or Commercial Tort
Claims covering or relating to any or all of the foregoing, and any and all
Accounts, Books, Chattel Paper, Deposit Accounts, Equipment, General
Intangibles, Inventory, Investment Related Property, Negotiable Collateral,
Supporting Obligations, money, or other tangible or intangible property
resulting from the sale, lease, license, exchange, collection, or other
disposition of any of the foregoing, the proceeds of any award in condemnation
with respect to any of the foregoing, any rebates or refunds, whether for taxes
or otherwise, and all proceeds of any such proceeds, or any portion thereof or
interest therein, and the proceeds thereof, and all proceeds of any loss of,
damage to, or destruction of the above, whether insured or not insured, and, to
the extent not otherwise included, any indemnity, warranty, or guaranty payable
by reason of loss or damage to, or otherwise with respect to any of the
foregoing (the “Proceeds”). Without limiting the generality of the foregoing,
the term “Proceeds” includes whatever is receivable or received when Investment
Related Property or proceeds are sold, exchanged, collected, or otherwise
disposed of, whether such disposition is voluntary or involuntary, and includes
proceeds of any indemnity or guaranty payable to any Grantor or any Secured
Party from time to time with respect to any of the Investment Related Property.
 
 
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Notwithstanding anything herein to the contrary, the term "Collateral" shall not
include, in the case of a Subsidiary (as defined in the Securities Purchase
Agreements) of such Grantor organized under the laws of a jurisdiction other
than the United States, any of the states thereof or the District of Columbia (a
"Foreign Subsidiary"), more than 65% (or such greater percentage that, due to a
change in applicable law after the date hereof, (i) would not reasonably be
expected to cause the undistributed earnings of such Foreign Subsidiary as
determined for United States federal income tax purposes to be treated as a
deemed dividend to such Foreign Subsidiary's United States parent and (ii) would
not reasonably be expected to cause any material adverse tax consequences) of
the issued and outstanding shares of Capital Stock entitled to vote (within the
meaning of Treas. Reg. Section 1.956-2(c)(2)) (it being understood and agreed
that the Collateral shall include 100% of the issued and outstanding shares of
Capital Stock not entitled to vote (within the meaning of Treas. Reg. Section
1.956-2(c)(2)) or other equity interest of such Foreign Subsidiary).
 
The Grantors agree that the pledge of the shares of Stock acquired by a Grantor
of any and all Persons now or hereafter existing who is a Foreign Subsidiary may
be supplemented by one or more separate pledge agreements, deeds of pledge,
share charges, or other similar agreements or instruments, executed and
delivered by the relevant Grantors in favor of the Secured Parties, which pledge
agreements will provide for the pledge of such shares of Stock in accordance
with the laws of the applicable foreign jurisdiction.  With respect to such
shares of Stock, any Secured Party may, at any time and from time to time, in
its sole discretion, take actions in such foreign jurisdictions that will result
in the perfection of the Lien created in such shares of Stock.
 
3.            Security for Obligations. This Agreement and the Security
Interests created hereby secure the payment and performance of the Secured
Obligations, whether now existing or arising hereafter.  Without limiting the
generality of the foregoing, this Agreement secures the payment of all amounts
which constitute part of the Secured Obligations and would be owed by Grantors,
or any of them, to Secured Parties, or any of them, but for the fact that they
are unenforceable or not allowable due to the existence of an Insolvency
Proceeding involving any Grantor.
 
4.            Grantors Remain Liable.  Anything herein to the contrary
notwithstanding, (a) each of the Grantors shall remain liable under the
contracts and agreements included in the Collateral, including the Pledged
Operating Agreements and the Pledged Partnership Agreements, to perform all of
the duties and obligations thereunder to the same extent as if this Agreement
had not been executed, (b) the exercise by Secured Parties, or any of them, of
any of the rights hereunder shall not release any Grantor from any of its duties
or obligations under such contracts and agreements included in the Collateral,
and (c) no Secured Party shall have any obligation or liability under such
contracts and agreements included in the Collateral by reason of this Agreement,
nor shall any Secured Party be obligated to perform any of the obligations or
duties of any Grantor thereunder or to take any action to collect or enforce any
claim for payment assigned hereunder.  Until an Event of Default shall occur and
be continuing, except as otherwise provided in this Agreement or any other
Transaction Document, Grantors shall have the right to possession and enjoyment
of the Collateral for the purpose of conducting the ordinary course of their
respective businesses, subject to and upon the terms hereof and the other
Transaction Documents.  Without limiting the generality of the foregoing, it is
the intention of the parties hereto that record and beneficial ownership of the
Pledged Interests, including all voting, consensual, and dividend rights, shall
remain in the applicable Grantor until the occurrence of an Event of Default and
until any Secured Party shall notify the applicable Grantor of such Secured
Party’s exercise of voting, consensual, or dividend rights with respect to the
Pledged Interests pursuant to Section 15 hereof.
 
 
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5.             Representations and Warranties.  Each Grantor hereby represents
and warrants as follows:
 
(a)           The exact legal name of each of the Grantors is set forth on the
signature pages of this Agreement.
 
(b)           Schedule 7 attached hereto sets forth (i) all Real Property owned
or leased by Grantors, together with all other locations of Collateral, as of
the date hereof, and (ii) the chief executive office of each Grantor as of the
date hereof.
 
(c)           As of the date hereof, no Grantor has any interest in, or title
to, any  Copyrights, Intellectual Property Licenses, Patents, or Trademarks
except as set forth on Schedules 2, 3, 4, and 6, respectively, attached
hereto.  This Agreement is effective to create a valid and continuing Lien on
such Copyrights, Intellectual Property Licenses, Patents and Trademarks and,
upon filing of the Copyright Security Agreement with the United States Copyright
Office and filing of the Patent Security Agreement and the Trademark Security
Agreement with the United States Patent and Trademark Office, and the filing of
appropriate financing statements in the jurisdictions listed on Schedule 8
hereto, all action necessary or desirable to protect and perfect the Security
Interests in and to each Grantor’s Patents, Trademarks, or Copyrights has been
taken and such perfected Security Interests are enforceable as such as against
any and all creditors of and purchasers from any Grantor.  No Grantor has any
interest in any Copyright that is necessary in connection with the operation of
such Grantor’s business, except for those Copyrights identified on Schedule 2
attached hereto which have been registered with the United States Copyright
Office.
 
(d)           This Agreement creates a valid security interest in all of the
Collateral of each Grantor, to the extent a security interest therein can be
created under the Code securing the payment of the Secured Obligations. Except
to the extent a security interest in the Collateral cannot be perfected by the
filing of a financing statement under the Code, all filings and other actions
necessary or desirable to perfect and protect such security interest have been
duly taken or will have been taken upon the filing of financing statements
listing each applicable Grantor, as a debtor, and Secured Parties, as secured
parties, in the jurisdictions listed next to such Grantor’s name on Schedule 8
attached hereto. Upon the making of such filings, subject to Permitted Liens,
Secured Parties shall each have a first priority (or second priority, to the
extent such Collateral is subject to a Permitted Lien (as defined in the Notes)
with respect to the Senior Indebtedness (as defined in the Notes)) perfected
security interest in all of the Collateral of each Grantor to the extent such
security interest can be perfected by the filing of a financing statement .  All
action by any Grantor necessary to protect and perfect such security interest on
each item of Collateral has been duly taken.  Notwithstanding anything to the
contrary in this Agreement or any other Transaction Document (as defined in the
Securities Purchase Agreement), the parties hereto acknowledge that on September
7, 2006 a UCC 3 termination statement was filed in the State of Wyoming with
respect to a previously filed UCC Financing Statement by SunTrust Bank (the
“Suntrust Lien”) and that on January 7, 2010 a UCC 3 continuation statement (the
“Continuation Statement”) was filed in error with respect the SunTrust
Lien.  Grantors agree to use reasonable commercial efforts to promptly cause the
withdrawal or termination of  the Continuation Statement and the  parties hereto
acknowledge and agree that references to the priority  of the Secured Parties’
security interest in the Collateral is subject to the withdrawal or termination
of the Continuation Statement.
 
 
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(e)           (i) Except for the Security Interests created hereby, such Grantor
is and will at all times be the sole holder of record and the legal and
beneficial owner, free and clear of all Liens other than Permitted Liens, of the
Pledged Interests indicated on Schedule 5 as being owned by such Grantor and,
when acquired by such Grantor, any Pledged Interests acquired after the date
hereof; (ii) all of the Pledged Interests are duly authorized, validly issued,
fully paid and nonassessable and the Pledged Interests constitute or will
constitute the percentage of the issued and outstanding Stock of the Pledged
Companies of such Grantor identified on Schedule 5 hereto; (iii) such Grantor
has the right and requisite authority to pledge all Investment Related Property
pledged by such Grantor to each Secured Party as provided herein; (iv) all
actions necessary or desirable, subject to Permitted Liens, to perfect,
establish the first priority (or second priority, to the extent such Collateral
is subject to a Permitted Lien  with respect to the Senior Indebtedness ) of, or
otherwise protect, Secured Parties’ respective Liens in the Investment Related
Property pledged hereunder, and the proceeds thereof, have been duly taken, (A)
upon the execution and delivery of this Agreement; (B) upon the taking of
possession by any Secured Party of any certificates constituting the Pledged
Interests, to the extent such Pledged Interests are represented by certificates,
together with undated powers endorsed in blank by the applicable Grantor; (C)
upon the filing of financing statements in the applicable jurisdiction set forth
on Schedule 8 attached hereto for such Grantor with respect to the Pledged
Interests of such Grantor that are not represented by certificates, and (D) with
respect to any Securities Accounts, upon the delivery of Control Agreements with
respect thereto; and (v) subject to the terms and conditions of the
Subordination Agreement, each Grantor has delivered to and deposited with any
Secured Party (or, with respect to any Pledged Interests created or obtained
after the date hereof, will deliver and deposit in accordance with Sections 6(a)
and 8 hereof) all certificates representing the Pledged Interests now or
hereafter owned by such Grantor to the extent such Pledged Interests are
represented by certificates, and undated powers endorsed in blank with respect
to such certificates. None of the Pledged Interests owned or held by such
Grantor has been issued or transferred in violation of any securities
registration, securities disclosure, or similar laws of any jurisdiction to
which such issuance or transfer may be subject.
 
(f)           Other than the Senior Lender and Hale Capital (as defined in the
Securities Purchase Agreement), no consent, approval, authorization, or other
order or other action by, and no notice to or filing with, any Governmental
Authority or any other Person is required (i) for the grant of a Security
Interest by such Grantor in and to the Collateral pursuant to this Agreement or
for the execution, delivery, or performance of this Agreement by such Grantor,
or (ii) for the exercise by any Secured Party of the voting or other rights
provided in this Agreement with respect to Investment Related Property pledged
hereunder or the remedies in respect of the Collateral pursuant to this
Agreement, except (A) as may be required in connection with such disposition of
Investment Related Property by laws affecting the offering and sale of
securities generally and (B) for any consent that may be required for the
assignment of any Intellectual Property License.
 
 
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6.            Covenants.  Subject to the terms and conditions of the
Subordination Agreement, each Grantor, jointly and severally, covenants and
agrees with each Secured Party that from and after the date of this Agreement
and until the date of termination of this Agreement in accordance with Section
24 hereof (but only to the extent the particular assets described in this
Section 6 constitute Collateral hereunder):
 
(a)           Possession of Collateral.  In the event that any Collateral,
including proceeds, is evidenced by or consists of Negotiable Collateral,
Investment Related Property, or Chattel Paper, and if and to the extent that
perfection or priority of Secured Parties’ respective Security Interests is
dependent on or enhanced by possession, the applicable Grantor, immediately upon
the request of any Secured Party, shall execute such other documents and
instruments as shall be reasonably requested by such Secured Party or, if
applicable, endorse and deliver physical possession of such Negotiable
Collateral, Investment Related Property, or Chattel Paper to such Secured Party,
together with such undated powers endorsed in blank as shall be requested by
such Secured Party.
 
(b)           Chattel Paper.
 
(i)         Each Grantor shall take all steps reasonably necessary to grant each
Secured Party control of all Chattel Paper in accordance with the Code and all
“transferable records” as that term is defined in Section 16 of the Uniform
Electronic Purchase Act and Section 201 of the federal Electronic Signatures in
Global and National Commerce Act as in effect in any relevant jurisdiction; and
 
(ii)         If any Grantor retains possession of any Chattel Paper or
instruments (which retention of possession shall be subject to the extent
permitted hereby and by the Securities Purchase Agreement), promptly upon the
request of any Secured Party, such Chattel Paper and instruments shall be marked
with the following legend: “This writing and the obligations evidenced or
secured hereby are subject to the Security Interests of [names of Secured
Parties].”
 
(c)           Control Agreements.
 
(i)         Promptly upon the request of any Secured Party (but in no event
later than five (5) days following the date of such request), each Grantor shall
obtain an authenticated Control Agreement from each bank maintaining a Deposit
Account for such Grantor; and
 
(ii)         Promptly upon the request of any Secured Party (but in no event
later than five (5) days following the date of such request), each Grantor shall
obtain authenticated Control Agreements from each issuer of uncertificated
securities, securities intermediary, or commodities intermediary issuing or
holding any financial assets or commodities to or for such Grantor.
 
 
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(d)           Letter-of-Credit Rights.  Each Grantor that is or becomes the
beneficiary of a letter of credit shall promptly (and in any event within 2
Business Days after becoming a beneficiary) notify Secured Parties thereof and,
upon the request by any Secured Party, enter into a multi-party agreement with
Secured Parties and the issuing or confirming bank with respect to
letter-of-credit rights assigning such letter-of-credit rights to Secured
Parties and directing all payments thereunder to Secured Parties, all in form
and substance satisfactory to Secured Parties.
 
(e)           Commercial Tort Claims.  Each Grantor shall promptly (and in any
event within 2 Business Days of receipt thereof) notify Secured Parties in
writing upon incurring or otherwise obtaining a Commercial Tort Claim after the
date hereof and, upon request of any Secured Party, promptly amend Schedule 1 to
this Agreement to describe such after-acquired Commercial Tort Claim in a manner
that reasonably identifies such Commercial Tort Claim, and hereby authorizes the
filing of additional financing statements or amendments to existing financing
statements describing such Commercial Tort Claims, and agrees to do such other
acts or things deemed necessary or desirable by any Secured Party to, subject to
Permitted Liens, give Secured Parties a first priority (or second priority, to
the extent such Collateral is subject to a Permitted Lien with respect to the
Senior Indebtedness ) , perfected security interest in any such Commercial Tort
Claim.
 
(f)            Government Contracts.  If any Account or Chattel Paper arises out
of a contract or contracts with the United States of America, or any department,
agency, or instrumentality thereof, Grantors shall promptly (and in any event
within 2 Business Days of the creation thereof) notify Secured Parties thereof
in writing and execute any instruments or take any steps reasonably required by
any Secured Party in order that all moneys due or to become due under such
contract or contracts shall be assigned to Secured Parties, and shall provide
written notice thereof and take all other appropriate actions under the
Assignment of Claims Act or other applicable law to provide each Secured Party,
subject to Permitted Liens, a first-priority (or second priority, to the extent
such Collateral is subject to a Permitted Lien with respect to the Senior
Indebtedness ) perfected security interest in such contract.
 
(g)           Intellectual Property.
 
(i)         Upon request of any Secured Party, in order to facilitate filings
with the United States Patent and Trademark Office and the United States
Copyright Office or any other applicable Governmental Authority, each Grantor
shall execute and deliver to Secured Parties one or more Copyright Security
Agreements, Trademark Security Agreements, or Patent Security Agreements to
further evidence Secured Parties’ respective Liens on such Grantor’s Copyrights,
Trademarks or Patents.

 
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(ii)         Each Grantor shall have the duty (unless waived by Hale Capital)
(A) to promptly sue for infringement, misappropriation, or dilution, after
obtaining knowledge of the same, with respect to its rights in Intellectual
Property and to recover any and all damages for such infringement,
misappropriation, or dilution, (B) to prosecute diligently any trademark
application or service mark application that is part of the Trademarks pending
as of the date hereof or hereafter until the termination of this Agreement, (C)
to prosecute diligently any patent application that is part of the Patents
pending as of the date hereof or hereafter until the termination of this
Agreement, and (D) to take all reasonable and necessary action to preserve and
maintain all of each Grantor’s Trademarks, Patents, Copyrights, Intellectual
Property Licenses, and its rights therein, including the filing of applications
for renewal, affidavits of use, affidavits of noncontestability and opposition
and interference and cancellation proceedings.  Each Grantor shall promptly file
an application with the United States Copyright Office for any Copyright that
has not been registered with the United States Copyright Office. Each Grantor
shall promptly file an application with the United States Patent and Trademark
Office for any Patent or Trademark that has not been registered with the United
States Patent and Trademark Office. Any expenses incurred in connection with the
foregoing shall be borne by Grantors.  Each Grantor further agrees not to
abandon any Trademark, Patent, Copyright or Intellectual Property License
without the prior written consent of Hale Capital.
 
(iii)        Grantors acknowledge and agree that Secured Parties shall have no
duties with respect to the Trademarks, Patents, Copyrights, or Intellectual
Property Licenses.  Without limiting the generality of this Section 6(g),
Grantors acknowledge and agree that no Secured Party shall be under any
obligation to take any steps necessary to preserve rights in the Trademarks,
Patents, Copyrights, or Intellectual Property Licenses against any other Person,
but any Secured Party may do so at its option from and after the occurrence and
during the continuance of an Event of Default, and all expenses incurred in
connection therewith (including fees and expenses of attorneys and other
professionals) shall be for the sole account of the Grantors and shall be deemed
to be Secured Obligations.
 
(h)           Investment Related Property.
 
(i)         If any Grantor shall receive or become entitled to receive any
Pledged Interests after the date hereof, it shall promptly (and in any event
within 2 Business Days of receipt thereof) identify such Pledged Interests in a
written notice to Secured Parties;
 
(ii)         Subject to the terms and conditions of the Subordination Agreement,
all sums of money and property paid or distributed in respect of the Investment
Related Property pledged hereunder which are received by any Grantor shall be
held by the Grantors in trust for the benefit of Secured Parties segregated from
such Grantor’s other property, and such Grantor shall deliver it forthwith to
the Secured Parties in the exact form received;
 
(iii)       Each Grantor shall promptly deliver to Secured Parties a copy of
each notice or other communication received by it in respect of any Pledged
Interests;
 
 
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(iv)       Unless Grantor receives the prior written consent of Hale Capital, no
Grantor shall make or consent to any material amendment or other modification or
waiver with respect to any Pledged Interests, Pledged Operating Agreement, or
Pledged Partnership Agreement, or enter into any agreement or, subject to the
terms and conditions of the Subordination Agreement, permit to exist any
restriction with respect to any Pledged Interests;
 
(v)       Each Grantor agrees that it will cooperate with Secured Parties in
obtaining all necessary approvals and making all necessary filings under
federal, state, local, or foreign law in connection with the Security Interests
on the Investment Related Property pledged hereunder or any sale or transfer
thereof; and
 
(vi)       As to all limited liability company or partnership interests issued
under any Pledged Operating Agreement or Pledged Partnership Agreement, each
Grantor hereby represents, warrants and covenants that the Pledged Interests
issued pursuant to such agreement (A) are not and shall not be dealt in or
traded on securities exchanges or in securities markets, (B) do not and will not
constitute investment company securities, and (C) are not and will not be held
by such Grantor in a securities account.  In addition, none of the Pledged
Operating Agreements, the Pledged Partnership Agreements, or any other
agreements governing any of the Pledged Interests issued under any Pledged
Operating Agreement or Pledged Partnership Agreement, provide or shall provide
that such Pledged Interests are securities governed by Article 8 of the Uniform
Commercial Code as in effect in any relevant jurisdiction.
 
(i)           Transfers and Other Liens.  Except for the transactions
contemplated by the Reincorporation Agreement, Grantors shall not (i) sell,
lease, license, assign (by operation of law or otherwise), transfer or otherwise
dispose of, or grant any option with respect to, any of the Collateral, except
as expressly permitted by this Agreement and the other Transaction Documents, or
(ii) create or permit to exist any Lien upon or with respect to any of the
Collateral of any of Grantors, except for Permitted Liens.  The inclusion of
Proceeds in the Collateral shall not be deemed to constitute consent by any
Secured Party to any sale or other disposition of any of the Collateral except
as expressly permitted in this Agreement or the other Transaction Documents.
 
(j)           Preservation of Existence.  Except for the transactions
contemplated by the Reincorporation Agreement, each Grantor shall maintain and
preserve its existence, rights and privileges, and become or remain duly
qualified and in good standing in each jurisdiction in which the character of
the properties owned or leased by it or in which the transaction of its business
makes such qualification necessary.
 
(k)           Maintenance of Properties. Each Grantor shall maintain and
preserve in all material respects all of its properties which are necessary or
useful in the proper conduct of its business in good working order and
condition, ordinary wear and tear excepted, and comply at all times with the
provisions in all material respects of all leases to which it is a party as
lessee or under which it occupies property, so as to prevent any loss or
forfeiture thereof or thereunder.
 
 
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(l)           Maintenance of Insurance. Each Grantor shall maintain insurance
with responsible and reputable insurance companies or associations (including,
without limitation, comprehensive general liability, hazard, rent and business
interruption insurance) with respect to its properties (including all real
properties leased or owned by it) and business, in such amounts and covering
such risks as is required by any governmental authority having jurisdiction with
respect thereto or as is carried generally in accordance with sound business
practice by companies in similar businesses similarly situated.
 
(m)           Other Actions as to Any and All Collateral.  Each Grantor shall
promptly (and in any event within 2 Business Days of acquiring or obtaining such
Collateral) notify Secured Parties in writing upon (i) acquiring or otherwise
obtaining any Collateral after the date hereof consisting of Trademarks,
Patents, registered Copyrights, material Intellectual Property Licenses,
Investment Related Property, Chattel Paper (electronic, tangible or otherwise),
documents (as defined in Article 9 of the Code), promissory notes (as defined in
the Code, or instruments (as defined in the Code) or (ii) any amount payable
under or in connection with any of the Collateral being or becoming evidenced
after the date hereof by any Chattel Paper, documents, promissory notes, or
instruments and, in each such case upon the request of any Secured Party,
promptly execute such other documents, or if applicable, deliver such Chattel
Paper, other documents or certificates evidencing any Investment Related
Property and do such other acts or things deemed necessary or desirable by any
Secured Party to protect Secured Parties’ respective Security Interests therein.
 
7.            Relation to Other Transaction Documents.  The provisions of this
Agreement shall be read and construed with the Transaction Documents referred to
below in the manner so indicated.
 
(a)           Securities Purchase Agreement and Notes. In the event of any
conflict between any provision in this Agreement and any provision in the
Securities Purchase Agreement or Notes, such provision of the Securities
Purchase Agreement or Notes shall control, except to the extent the applicable
provision in this Agreement is more restrictive with respect to the rights of
Grantors or imposes more burdensome or additional obligations on Grantors, in
which event the applicable provision in this Agreement shall control.
 
(b)           Patent, Trademark, Copyright Security Agreements.  The provisions
of the Copyright Security Agreements, Trademark Security Agreements, and Patent
Security Agreements are supplemental to the provisions of this Agreement, and
nothing contained in the Copyright Security Agreements, Trademark Security
Agreements or the Patent Security Agreements shall limit any of the rights or
remedies of any Secured Party hereunder.
 
 
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8.             Further Assurances.
 
(a)           Subject to the terms and conditions of the Subordination
Agreement, each Grantor agrees that from time to time, at its own expense, such
Grantor will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or that any Secured Party may
reasonably request, in order to perfect and protect the Security Interests
granted or purported to be granted hereby or to enable any Secured Party to
exercise and enforce its rights and remedies hereunder with respect to any of
the Collateral.
 
(b)           Each Grantor authorizes the filing by any Secured Party of
financing or continuation statements, or amendments thereto, and such Grantor
will execute and deliver to such Secured Party such other instruments or
notices, as may be necessary or as such Secured Party may reasonably request, in
order to perfect and preserve the Security Interests granted or purported to be
granted hereby.
 
(c)           Each Grantor authorizes any Secured Party at any time and from
time to time to file, transmit, or communicate, as applicable, financing
statements and amendments (i) describing the Collateral as “all personal
property of debtor” or “all assets of debtor” or words of similar effect, (ii)
describing the Collateral as being of equal or lesser scope or with greater
detail, or (iii) that contain any information required by part 5 of Article 9 of
the Code for the sufficiency or filing office acceptance.  Each Grantor also
hereby ratifies any and all financing statements or amendments previously filed
by any Secured Party in any jurisdiction.
 
(d)           Subject to Section 24 of this Agreement, each Grantor acknowledges
that it is not authorized to file any financing statement or amendment or
termination statement with respect to any financing statement filed in
connection with this Agreement without the prior written consent of each Secured
Party affected thereby, subject to such Grantor’s rights under Section
9-509(d)(2) of the Code.
 
(e)           Subject to the restrictions and limitations set forth under
Section 4.17 of the Amended Preferred Purchase Agreement (as defined in the
Securities Puchase Agreement), each Grantor shall permit each Secured Party or
its employees, accountants, attorneys or agents, to examine and inspect any
Collateral or any other property of such Grantor at any time during ordinary
business hours.
 
9.            Secured Parties’ Right to Perform Contracts, Exercise Rights,
etc.  Subject to the terms and conditions of the Subordination Agreement, upon
the occurrence and during the continuance of an Event of Default, any Secured
Party (a) may proceed to perform any and all of the obligations of any Grantor
contained in any contract, lease, or other agreement and exercise any and all
rights of any Grantor therein contained as fully as such Grantor itself could,
(b) shall have the right to use any Grantor’s rights under Intellectual Property
Licenses in connection with the enforcement of the Secured Party’s rights
hereunder, including the right to prepare for sale and sell any and all
Inventory and Equipment now or hereafter owned by any Grantor and now or
hereafter covered by such licenses, and (c) shall have the right to request that
any Stock that is pledged hereunder be registered in the name of such Secured
Party or any of its nominees.
 
 
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10.           Secured Parties Appointed Attorney-in-Fact. Each Grantor, on
behalf of itself and each New Subsidiary of such Grantor, hereby irrevocably
appoints each Secured Party as the attorney-in-fact of such Grantor and each
such New Subsidiary to exercise the powers granted pursuant to this Section 10.
In the event any Grantor or any New Subsidiary fails to execute or deliver in a
timely manner any Transaction Document or other agreement, document, certificate
or instrument which such Grantor or New Subsidiary now or at any time hereafter
is required to execute or deliver pursuant to the terms of the Securities
Purchase Agreement or any other Transaction Document, each Secured Party shall
have full authority in the place and stead of such Grantor or New Subsidiary,
and in the name of such Grantor, such New Subsidiary or otherwise, to execute
and deliver each of the foregoing. Without limitation of the foregoing, each
Secured Party shall have full authority in the place and stead of each Grantor
and each New Subsidiary, and in the name of any such Grantor, any such New
Subsidiary or otherwise, at such time as an Event of Default has occurred and is
continuing, to take any action and to execute any instrument which such Secured
Party may reasonably deem necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation:
 
(a)           to ask, demand, collect, sue for, recover, compromise, receive and
give acquittance and receipts for moneys due and to become due under or in
connection with any Collateral of such Grantor or New Subsidiary;
 
(b)           to receive and open all mail addressed to such Grantor or New
Subsidiary and to notify postal authorities to change the address for the
delivery of mail to such Grantor or New Subsidiary to that of such Secured
Party;
 
(c)           to receive, indorse, and collect any drafts or other instruments,
documents, Negotiable Collateral or Chattel Paper;
 
(d)           to file any claims or take any action or institute any proceedings
which such Secured Party may deem necessary or desirable for the collection of
any of the Collateral of such Grantor or New Subsidiary or otherwise to enforce
the rights of any Secured Party with respect to any of the Collateral;
 
(e)           to repair, alter, or supply goods, if any, necessary to fulfill in
whole or in part the purchase order of any Person obligated to such Grantor or
New Subsidiary in respect of any Account of such Grantor or New Subsidiary;
 
(f)           to use any labels, Patents, Trademarks, trade names, URLs, domain
names, industrial designs, Copyrights, customer lists, advertising matter or
other industrial or intellectual property rights, in advertising for sale and
selling Inventory and other Collateral and to collect any amounts due under
Accounts, contracts or Negotiable Collateral of such Grantor or New Subsidiary;
and
 
(g)           such Secured Party shall have the right, but shall not be
obligated, to bring suit in its own name to enforce the Trademarks, Patents,
Copyrights and Intellectual Property Licenses and, if such Secured Party shall
commence any such suit, the appropriate Grantor or New Subsidiary shall, at the
request of such Secured Party, do any and all lawful acts and execute any and
all proper documents reasonably required by such Secured Party in aid of such
enforcement.
 
 
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To the extent permitted by law, each Grantor hereby ratifies, for itself and
each of its New Subsidiaries, all that such attorney-in-fact shall lawfully do
or cause to be done by virtue hereof.  This power-of-attorney granted pursuant
to this Section 10 is coupled with an interest and shall be irrevocable until
this Agreement is terminated.
 
11.           Secured Parties May Perform.  If any Grantor fails to perform any
agreement contained herein, any Secured Party may itself perform, or cause
performance of, such agreement, and the reasonable expenses of such Secured
Party incurred in connection therewith shall be payable, jointly and severally,
by Grantors.
 
12.           Secured Parties’ Duties; Bailee for Perfection.  The powers
conferred on Secured Parties hereunder are solely to protect the Secured
Parties’ respective interests in the Collateral and shall not impose any duty
upon any Secured Party in favor of any Grantor or any other Secured Party to
exercise any such powers.  Except for the safe custody of any Collateral in its
actual possession and the accounting for moneys actually received by it
hereunder, no Secured Party shall have any duty to any Grantor or any other
Secured Party as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral.  A Secured Party shall be deemed to have exercised reasonable care
in the custody and preservation of any Collateral in its actual possession if
such Collateral is accorded treatment substantially equal to that which such
Secured Party accords its own property.  Each Secured Party agrees that, with
respect to any Collateral at any time or times in its possession and in which
any other Secured Party has a Lien, the Secured Party in possession of any such
Collateral shall be the bailee of each other Secured Party solely for purposes
of perfecting (to the extent not otherwise perfected) each other Secured Party’s
Lien in such Collateral, provided that no Secured Party shall be obligated to
obtain or retain possession of any such Collateral.  Without limiting the
generality of the foregoing, Secured Parties and Grantors hereby agree that any
Secured Party that is in possession of any Collateral at such time as the
Secured Obligations owing to such Secured Party have been paid in full shall
re-deliver such Collateral to the applicable Grantor or, if requested by any
Secured Party, if there are any Secured Obligations owed by such Grantor to such
Secured Party, prior to such re-delivery, may deliver such Collateral (unless
otherwise restricted by applicable law or court order and subject in all events
to the receipt of an indemnification of all liabilities arising from such
delivery) to the requesting Secured Party, without recourse to or representation
or warranty by the Secured Party in such possession.
 
13.           Collection of Accounts, General Intangibles and Negotiable
Collateral.  At any time upon the occurrence and during the continuation of an
Event of Default, any Secured Party may (a) notify Account Debtors of any
Grantor that the Accounts, General Intangibles, Chattel Paper or Negotiable
Collateral have been assigned to such Secured Party or that such Secured Party
has a security interest therein, and (b) collect the Accounts, General
Intangibles and Negotiable Collateral directly, and any collection costs and
expenses shall constitute part of the Secured Obligations.
 
 
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14.           Disposition of Pledged Interests by Secured Party.  None of the
Pledged Interests existing as of the date of this Agreement are, and none of the
Pledged Interests hereafter acquired on the date of acquisition thereof will be,
registered or qualified under the various federal, state or other securities
laws of the United States or any other jurisdiction, and disposition thereof
after an Event of Default may be restricted to one or more private (instead of
public) sales in view of the lack of such registration.  Each Grantor
understands that in connection with such disposition, any Secured Party may
approach only a restricted number of potential purchasers and further
understands that a sale under such circumstances may yield a lower price for the
Pledged Interests than if the Pledged Interests were registered and qualified
pursuant to federal, state and other securities laws and sold on the open
market.  Each Grantor, therefore, agrees that:  (a) if a Secured Party  shall,
pursuant to the terms of this Agreement, sell or cause the Pledged Interests or
any portion thereof to be sold at a private sale, such Secured Party shall have
the right to rely upon the advice and opinion of any nationally recognized
brokerage or investment firm (but shall not be obligated to seek such advice and
the failure to do so shall not be considered in determining the commercial
reasonableness of such action) as to the best manner in which to offer the
Pledged Interest or any portion thereof for sale and as to the best price
reasonably obtainable at the private sale thereof; and (b) such reliance shall
be conclusive evidence that such Secured Party has handled the disposition in a
commercially reasonable manner.
 
15.           Voting Rights.
 
(a)           Subject to terms and conditions of the Subordination Agreement,
upon the occurrence and during the continuation of an Event of Default, (i) any
Secured Party may, at its option, and with 2 Business Days prior notice to any
Grantor, and in addition to all rights and remedies available to Secured Parties
under any other agreement, at law, in equity, or otherwise, exercise all voting
rights, and all other ownership or consensual rights in respect of the Pledged
Interests owned by such Grantor, but under no circumstances is any Secured Party
obligated by the terms of this Agreement to exercise such rights, and (ii) if
such Secured Party duly exercises its right to vote any of such Pledged
Interests, each Grantor hereby appoints such Secured Party as such Grantor’s
true and lawful attorney-in-fact and IRREVOCABLE PROXY to vote such Pledged
Interests in any manner that such Secured Party deems advisable for or against
all matters submitted or which may be submitted to a vote of shareholders,
partners or members, as the case may be.  This power-of-attorney granted
pursuant to this Section 15 is coupled with an interest and shall be irrevocable
until this Agreement is terminated.
 
(b)           For so long as any Grantor shall have the right to vote the
Pledged Interests owned by it, such Grantor covenants and agrees that it will
not, without the prior written consent of Secured Parties, vote or take any
consensual action with respect to such Pledged Interests which would materially
or adversely affect the rights of Secured Parties exercising the voting rights
owned by such Grantor or the value of the Pledged Interests.
 
16.           Remedies.  Subject to the terms and conditions of the
Subordination Agreement, upon the occurrence and during the continuance of an
Event of Default:
 
 
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(a)           Any Secured Party may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein, in the other
Transaction Documents, or otherwise available to it, all the rights and remedies
of a secured party on default under the Code or any other applicable
law.  Without limiting the generality of the foregoing, each Grantor expressly
agrees that, in any such event, any Secured Party without any demand,
advertisement, or notice of any kind (except a notice specified below of time
and place of public or private sale) to or upon any Grantor or any other Person
(all and each of which demands, advertisements and notices are hereby expressly
waived to the maximum extent permitted by the Code or by any other applicable
law), may take immediate possession of all or any portion of the Collateral and
(i) require Grantors to, and each Grantor hereby agrees that it will at its own
expense and upon request of such Secured Party forthwith, assemble all or part
of the Collateral as directed by such Secured Party and make it available to
such Secured Party at one or more locations where such Grantor regularly
maintains Inventory, and (ii) without notice except as specified below, sell the
Collateral or any part thereof in one or more parcels at public or private sale,
at any of such Secured Party’s offices or elsewhere, for cash, on credit, and
upon such other terms as such Secured Party may deem commercially
reasonable.  Each Grantor agrees that, to the extent notice of sale shall be
required by law, at least 10 days notice to any Grantor of the time and place of
any public sale or the time after which any private sale is to be made shall
constitute reasonable notification and specifically such notice shall constitute
a reasonable “authenticated notification of disposition” within the meaning of
Section 9-611 of the Code.  No Secured Party shall be obligated to make any sale
of Collateral regardless of notice of sale having been given.  Any Secured Party
may adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
 
(b)           Each Secured Party is hereby granted a license or other right to
use, without liability for royalties or any other charge, each Grantor’s labels,
Patents, Copyrights, rights of use of any name, trade secrets, trade names,
Trademarks, service marks and advertising matter, URLs, domain names, industrial
designs, other industrial or intellectual property or any property of a similar
nature, whether owned by any Grantor or with respect to which any Grantor has
rights under license, sublicense, or other agreements (but only to the extent
(i) such license, sublicense or agreement does not prohibit such use by such
Secured Party and (ii) such Grantor will not be in default under such license,
sublicense, or other agreement as a result of such use by such Secured Party),
as it pertains to the Collateral, in preparing for sale, advertising for sale
and selling any Collateral, and each Grantor’s rights under all licenses and all
franchise agreements shall inure to the benefit of such Secured Party.
 
(c)           Any cash held by any Secured Party as Collateral and all proceeds
received by any Secured Party in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral shall be applied
against the Secured Obligations in the order set forth in Section 17 hereof. In
the event the proceeds of Collateral are insufficient for the Satisfaction in
Full of the Secured Obligations (as defined below), each Grantor shall remain
jointly and severally liable for any such deficiency.

 
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(d)           Each Grantor hereby acknowledges that the Secured Obligations
arose out of a commercial transaction, and agrees that if an Event of Default
shall occur and be continuing any Secured Party shall have the right to an
immediate writ of possession without notice of a hearing.  Each Secured Party
shall have the right to the appointment of a receiver for the properties and
assets of each Grantor, and each Grantor hereby consents to such rights and such
appointment and hereby waives any objection such Grantor may have thereto or the
right to have a bond or other security posted by any Secured Party.
 
(e)           Notwithstanding anything in this Agreement to the contrary, each
Secured Party agrees that it will not exercise any remedy provided for under
this Agreement with respect to all or any portion of the Collateral unless such
Secured Party is a Permitted Secured Party (provided that the foregoing shall
not prevent any Secured Party from commencing or participating in any Insolvency
Proceeding or taking any action (other than with respect to the Collateral) to
enforce the payment or performance of any Grantors’ obligations under any of the
Notes, Guaranties or other Transaction Documents).  This Section 16(e) is not
intended to confer any rights or benefits upon Grantors, or any of them, or any
other Person except Secured Parties, and no Person (including any or all
Grantors) other than Secured Parties shall have any right to enforce any of the
provisions of this Section 16(e). As between Grantors, or any of them, and any
Secured Party, any action that such Secured Party may take under this Agreement
shall be conclusively presumed to have been authorized and approved by the other
Secured Parties.
 
17.           Priority of Liens; Application of Proceeds of Collateral.  Each
Secured Party hereby acknowledges and agrees that, notwithstanding the time or
order of the filing of any financing statement or other registration or document
with respect to the Collateral and the Security Interests, or any provision of
this Agreement, any other Security Document, the Code or other applicable law,
solely as amongst the Secured Parties, the separate Security Interests of the
Secured Parties shall have the same rank and priority; provided, that, the
foregoing shall not apply to any Security Interest of a Secured Party that is
void or voidable as  a matter of law.  In furtherance thereof, all proceeds of
Collateral received by any Secured Party shall be applied as follows:
 
(a)           first, ratably to pay any expenses due to any of the Secured
Parties (including, without limitation, the reasonable costs and expenses paid
or incurred by any Secured Party to correct any default under or enforce any
provision of the Transaction Documents, or after the occurrence of any Event of
Default in gaining possession of, maintaining, handling, preserving, storing,
shipping, selling, preparing for sale, or advertising to sell the Collateral, or
any portion thereof, irrespective of whether a sale is consummated) or
indemnities then due to any of the Secured Parties under the Transaction
Documents, until paid in full;
 
(b)           second, ratably to pay any fees or premiums then due to any of the
Secured Parties under the Transaction Documents, until paid in full;
 
(c)           third, ratably to pay interest due in respect of the Secured
Obligations then due to any of the Secured Parties, until paid in full;

 
22

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(d)           fourth, ratably to pay the principal amount of all Secured
Obligations then due to any of the Secured Parties, until paid in full;
 
(e)           fifth, ratably to pay any other Secured Obligations then due to
any of the Secured Parties; and
 
(f)           sixth, to Grantors or such other Person entitled thereto under
applicable law.
 
18.           Remedies Cumulative.  Each right, power, and remedy of any Secured
Party as provided for in this Agreement or in any other Transaction Document or
now or hereafter existing at law or in equity or by statute or otherwise shall
be cumulative and concurrent and shall be in addition to every other right,
power, or remedy provided for in this Agreement or in the other Transaction
Documents or now or hereafter existing at law or in equity or by statute or
otherwise, and the exercise or beginning of the exercise by any Secured Party,
of any one or more of such rights, powers, or remedies shall not preclude the
simultaneous or later exercise by such Secured Party of any or all such other
rights, powers, or remedies.
 
19.           Marshaling. No Secured Party shall be required to marshal any
present or future collateral security (including but not limited to the
Collateral) for, or other assurances of payment of, the Secured Obligations or
any of them or to resort to such collateral security or other assurances of
payment in any particular order, and all of its rights and remedies hereunder
and in respect of such collateral security and other assurances of payment shall
be cumulative and in addition to all other rights and remedies, however existing
or arising.  To the extent that it lawfully may, each Grantor hereby agrees that
it will not invoke any law relating to the marshaling of collateral which might
cause delay in or impede the enforcement of any Secured Party’s rights and
remedies under this Agreement or under any other instrument creating or
evidencing any of the Secured Obligations or under which any of the Secured
Obligations is outstanding or by which any of the Secured Obligations is secured
or payment thereof is otherwise assured, and, to the extent that it lawfully
may, each Grantor hereby irrevocably waives the benefits of all such laws.
 
 
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20.           Acknowledgment.
 
(a)           Each Secured Party hereby agrees and acknowledges that no other
Secured Party has agreed to act for it as an administrative or collateral agent,
and each Secured Party is and shall remain solely responsible for the
attachment, perfection and priority of all Liens created by this Agreement or
any other Security Document in favor of such Secured Party.  No Secured Party
shall have by reason of this Agreement or any other Transaction Document an
agency or fiduciary relationship with any other Secured Party.  No Secured Party
(which term, as used in this sentence, shall include reference to each Secured
Party’s officers, directors, employees, attorneys, agents and affiliates and to
the officers, directors, employees, attorneys and agents of such Secured Party’s
affiliates) shall: (i) have any duties or responsibilities except those
expressly set forth in this Agreement and the other Security Documents or
(ii) be required to take, initiate or conduct any enforcement action (including
any litigation, foreclosure or collection proceedings hereunder or under any of
the other Security Documents).  Without limiting the foregoing, no Secured Party
shall have any right of action whatsoever against any other Secured Party as a
result of such Secured Party acting or refraining from acting hereunder or under
any of the Security Documents except as a result and to the extent of losses
caused by such Secured Party’s actual gross negligence or willful misconduct (it
being understood and agreed by each Secured Party that the delivery by any
Significant Secured Party of one or more Veto Notices shall not be deemed to be
or construed as gross negligence or willful misconduct on the part of the
Secured Party delivering any such Veto Notice).  No Secured Party assumes any
responsibility for any failure or delay in performance or breach by any Grantor
or any Secured Party of its obligations under this Agreement or any other
Transaction Document.  No Secured Party makes to any other Secured Party any
express or implied warranty, representation or guarantee with respect to any
Secured Obligations, Collateral, Transaction Document or Grantor.  No Secured
Party nor any of its officers, directors, employees, attorneys or agents shall
be responsible to any other Secured Party or any of its officers, directors,
employees, attorneys or agents for: (i) any recitals, statements, information,
representations or warranties contained in any of the Transaction Documents or
in any certificate or other document furnished pursuant to the terms hereof;
(ii) the execution, validity, genuineness, effectiveness or enforceability of
any of the Transaction Documents; (iii) the validity, genuineness,
enforceability, collectability, value, sufficiency or existence of any
Collateral, or the attachment, perfection or priority of any Lien therein; or
(iv) the assets, liabilities, financial condition, results of operations,
business, creditworthiness or legal status of any Grantor or any Account
Debtor.  No Secured Party nor any of its officers, directors, employees,
attorneys or agents shall have any obligation to any other Secured Party to
ascertain or inquire into the existence of any default or Event of Default, the
observance or performance by any Grantor of any of the duties or agreements of
such Grantor under any of the Transaction Documents or the satisfaction of any
conditions precedent contained in any of the Transaction Documents.
 
(b)           Each Secured Party hereby acknowledges and represents that it has,
independently and without reliance upon any other Secured Party, and based upon
such documents, information and analyses as it has deemed appropriate, made its
own credit analysis of each Grantor and its own decision to enter into the
Transaction Documents and to purchase the Notes, and each Secured Party has made
such inquiries concerning the Transaction Documents, the Collateral and each
Grantor as such Secured Party feels necessary and appropriate, and has taken
such care on its own behalf as would have been the case had it entered into the
Transaction Documents without any other Secured Party.  Each Secured Party
hereby further acknowledges and represents that the other Secured Parties have
not made any representations or warranties to it concerning any Grantor, any of
the Collateral or the legality, validity, sufficiency or enforceability of any
of the Transaction Documents.  Each Secured Party also hereby acknowledges that
it will, independently and without reliance upon the other Secured Parties, and
based upon such financial statements, documents and information as it deems
appropriate at the time, continue to make and rely upon its own credit decisions
in taking or refraining to take any other action under this Agreement or the
Transaction Documents.  No Secured Party shall have any duty or responsibility
to provide any other Secured Party with any notices, reports or certificates
furnished to such Secured Party by any Grantor or any credit or other
information concerning the affairs, financial condition, business or assets of
any Grantor (or any of its affiliates) which may come into possession of such
Secured Party.
 
 
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21.           Indemnity and Expenses.
 
(a)           Without limiting any obligations of Parent under the Securities
Purchase Agreement, each Grantor agrees to indemnify all Secured Parties from
and against all claims, lawsuits and liabilities (including reasonable
attorneys’ fees) arising out of or resulting from this Agreement (including
enforcement of this Agreement) or any other Transaction Document, except claims,
losses or liabilities resulting from the gross negligence or willful misconduct
of the party seeking indemnification as determined by a final non-appealable
order of a court of competent jurisdiction. This provision shall survive the
termination of this Agreement and the Transaction Documents and the Satisfaction
in Full of the Secured Obligations.
 
(b)           Grantors, jointly and severally, shall, upon demand, pay to each
Secured Party all of the reasonable costs and expenses which such Secured Party
may incur in connection with (i) the administration of this Agreement, (ii) the
custody, preservation, use or operation of, or, upon an Event of Default, the
sale of, collection from, or other realization upon, any of the Collateral in
accordance with this Agreement and the other Transaction Documents, (iii) the
exercise or enforcement of any of the rights of such Secured Party hereunder or
(iv) the failure by any Grantor to perform or observe any of the provisions
hereof.
 
22.           Merger, Amendments; Etc.  THIS AGREEMENT, TOGETHER WITH THE OTHER
TRANSACTION DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES SOLELY
WITH RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.  THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.  No
waiver of any provision of this Agreement, and no consent to any departure by
any of Grantors herefrom, shall in any event be effective unless the same shall
be in writing and signed by each Secured Party, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given, provided that any party may give a waiver in writing as to
itself. No amendment of any provision of this Agreement shall be effective
unless the same shall be in writing and signed by each Secured Party and each
Grantor to which such amendment applies.
 
23.           Addresses for Notices.  All notices and other communications
provided for hereunder (a) shall be given in the form and manner set forth in
the Securities Purchase Agreement and (b) shall be delivered, (i) in the case of
notice to any Grantor, by delivery of such notice to Parent at Parent’s address
specified in the Securities Purchase Agreement or at such other address as shall
be designated by Parent in a written notice to each of the Secured Parties in
accordance with the provisions thereof, and (ii) in the case of notice to any
Secured Party, by delivery of such notice to such Secured Party at its address
specified in the Securities Purchase Agreement or at such other address as shall
be designated by such Secured Party in a written notice to Parent and each other
Secured Party in accordance with the provisions thereof.  For the avoidance of
doubt, the Foreign Subsidiaries, as Grantors, hereby irrevocably appoint the
Parent as its agent for receipt of service of process and all notices and other
communications in the United States at the address specified below.
 
 
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24.           Separate, Continuing Security Interests; Assignments under
Transaction Documents.  This Agreement shall create a separate, continuing
security interest in the Collateral in favor of each Secured Party and shall (a)
remain in full force and effect until Satisfaction in Full of the Secured
Obligations, (b) be binding upon each of Grantors, and their respective
permitted successors and permitted assigns, and (c) inure to the benefit of, and
be enforceable by, the Secured Parties and their respective successors,
transferees and assigns.  Without limiting the generality of the foregoing
clause (c), any Secured Party may, in accordance with the provisions of the
Transaction Documents, assign or otherwise transfer all or any portion of its
rights and obligations under the Transaction Documents to any other Person, and
such other Person shall thereupon become vested with all the benefits in respect
thereof granted to such Secured Party herein or otherwise. Upon Satisfaction in
Full of the Secured Obligations, the Security Interests granted hereby and
pursuant to the other Security Documents shall terminate and all rights to the
Collateral shall revert to Grantors or any other Person entitled thereto. At
such time, each Secured Party will authorize the filing of appropriate
termination statements to terminate such Security Interests.  No transfer or
renewal, extension, assignment, or termination of this Agreement or any other
Transaction Document, or any other instrument or document executed and delivered
by any Grantor to any Secured Party nor any additional loans made by any Secured
Party to any Grantor, nor the taking of further security, nor the retaking or
re-delivery of the Collateral to Grantors, or any of them, by any Secured Party,
nor any other act of Secured Parties, or any of them, shall release any of
Grantors from any obligation, except a release or discharge executed in writing
by all Secured Parties.  No Secured Party shall by any act, delay, omission or
otherwise, be deemed to have waived any of its rights or remedies hereunder,
unless such waiver is in writing and signed by such Secured Party and then only
to the extent therein set forth.  A waiver by any Secured Party of any right or
remedy on any occasion shall not be construed as a bar to the exercise of any
such right or remedy which such Secured Party would otherwise have had on any
other occasion.
 
25.           Governing Law; Jurisdiction; Service of Process; Jury Trial. All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
York, without giving effect to any choice of law or conflict of law provision or
rule (whether of the State of New York or any other jurisdictions) that would
cause the application of the laws of any jurisdictions other than the State of
New York. Each party hereby irrevocably submits to the exclusive 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 brought in an
inconvenient forum or that the venue of such suit, action or proceeding is
improper; provided, however, that any suit seeking enforcement against any
Collateral or other property may be brought, at any Secured Party’s option, in
the courts of any jurisdiction where such Secured Party elects to bring such
action or where such Collateral or other property may be found.  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 for such notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Without limitation of the foregoing, each Grantor other than
Parent hereby irrevocably appoints Parent as such Grantor’s agent for purposes
of receiving and accepting any service of process hereunder or under any of the
other Security Documents.  Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law. EACH PARTY
HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A
JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH
OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
 
 
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26.           Miscellaneous.
 
(a)           This Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event that any signature is delivered by
facsimile transmission or by an e-mail which contains a portable document format
(.pdf) file of an executed signature page, such signature page shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such signature page
were an original thereof. Any party delivering an executed counterpart of this
Agreement by facsimile or other electronic method of transmission also shall
deliver an original executed counterpart of this Agreement but the failure to
deliver an original executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement. The foregoing shall apply
to each other Security Document mutatis mutandis.
 
(b)           Any provision of this Agreement which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof in that
jurisdiction or affecting the validity or enforceability of such provision in
any other jurisdiction.
 
(c)           Headings used in this Agreement are for convenience only and shall
not be used in connection with the interpretation of any provision hereof.
 
(d)           The pronouns used herein shall include, when appropriate, either
gender and both singular and plural, and the grammatical construction of
sentences shall conform thereto.
 
(e)           The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent, and no rules of
strict construction will be applied against any party. For clarification
purposes, the Recitals are part of this Agreement.
 
 
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(f)           Unless the context of this Agreement or any other Transaction
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the terms “includes”
and  “including” are not limiting, and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase “and/or.” The words
“hereof,” “herein,” “hereby,” “hereunder,” and similar terms in this Agreement
or any other Transaction Document refer to this Agreement or such other
Transaction Document, as the case may be, as a whole and not to any particular
provision of this Agreement or such other Transaction Document, as the case may
be.  Section, subsection, clause, schedule, and exhibit references herein are to
this Agreement unless otherwise specified.  Any reference in this Agreement or
in any other Transaction Document to any agreement, instrument, or document
shall include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, joinders, and supplements, thereto and
thereof, as applicable (subject to any restrictions on such alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements set forth herein). “Satisfaction in
Full of the Secured Obligations” shall mean the indefeasible payment in full in
cash and discharge, or other satisfaction in accordance with the terms of the
Transaction Documents and discharge, of all Secured Obligations in full. Any
reference herein to any Person shall be construed to include such Person’s
permitted successors and permitted assigns. Any requirement of a writing
contained herein or in any other Transaction Document shall be satisfied by the
transmission of a Record and any Record so transmitted shall constitute a
representation and warranty as to the accuracy and completeness of the
information contained therein.
 
(g)           All dollar amounts referred to in this Agreement and the other
Transaction Documents are in United States Dollars (“U.S. Dollars”), and all
amounts owing under this Agreement and all other Transaction Documents shall be
paid in U.S. Dollars. All amounts denominated in other currencies shall be
converted in the U.S. Dollar equivalent amount in accordance with the Exchange
Rate on the date of calculation. “Exchange Rate” means, in relation to any
amount of currency to be converted into U.S. Dollars pursuant to this Agreement,
the U.S. Dollar exchange rate as published in the Wall Street Journal on the
relevant date of calculation.
 
[signature pages follow]
 
 
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IN WITNESS WHEREOF, the undersigned parties hereto have executed this Agreement
by and through their duly authorized officers, as of the day and year first
above written.
 
GRANTORS:
PARADIGM HOLDINGS, INC., a Wyoming corporation
     
By:
/s/Peter B. LaMontagne
   
Peter B. LaMontagne
   
President and Chief Executive Officer
     
PARADIGM HOLDINGS, INC., a Nevada corporation
     
By:
/s/Peter B. LaMontagne
   
Peter B. LaMontagne
   
President and Chief Executive Officer
     
PARADIGM SOLUTIONS CORPORATION
     
By:
/s/Peter B. LaMontagne
   
Peter B. LaMontagne
   
President and Chief Executive Officer
     
CALDWELL TECHNOLOGY SOLUTIONS LLC
     
By:
/s/Peter B. LaMontagne
   
Peter B. LaMontagne
   
Manager

 
 

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TRINITY INFORMATION MANAGEMENT SERVICES
     
By:
/s/Peter B. LaMontagne
   
Peter B. LaMontagne
   
President and Chief Executive Officer

 

--------------------------------------------------------------------------------

 
 
SECURED PARTIES:
HALE CAPITAL PARTNERS, LP
     
By:
/s/Martin Hale
   
Name:  Martin M. Hale, Jr.
   
Title:  Chief Executive Officer
     
EREF PARA, LLC
     
By:  Hale Fund Management, LLC, its
 
Managing Member
     
By:
/s/Martin Hale
   
Name:  Martin M. Hale, Jr.
   
Title:  Chief Executive Officer

 
 

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SCHEDULE 1
 
COMMERCIAL TORT CLAIMS

 
N/A
 
 

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SCHEDULE 2
 
COPYRIGHTS
 
Grantor may be entitled to certain “common law” copyright rights.

 

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SCHEDULE 3
 
INTELLECTUAL PROPERTY LICENSES
 
N/A

 

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SCHEDULE 4
 
PATENTS
 
N/A
 
 

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SCHEDULE 5
 
PLEDGED COMPANIES

 
Name of Pledgor
 
Name of Pledged Company
 
Percentage of Class
Owned
             
Paradigm Holdings, Inc., a Wyoming corporation
 
Caldwell Technology Solutions, LLC
    100 %              
Paradigm Holdings, Inc., a Wyoming corporation
 
Paradigm Solutions Corporation
    100 %              
Paradigm Holdings, Inc., a Wyoming corporation
 
Trinity Information Management Services
    100 %              
Paradigm Holdings, Inc., a Wyoming corporation
 
Paradigm Holdings, Inc., a Nevada corporation
    100 %              
Paradigm Solutions Corporation
 
Unified Solutions LLC
    49 %

 
 

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SCHEDULE 6
 
TRADEMARKS
 
Grantors may be entitled to certain “common law” trademark and similar rights.

 

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SCHEDULE 7
 
REAL PROPERTY
 
Owned Real Property
 
N/A
 
Leased Real Property

 
Grantor
 
Location
 
Lessor
 
Lease Terms
Paradigm Solutions Corporation
 
9715 Key West Avenue, Rockville, MD 20850
 
Manugistics, Inc
 
6/2/06 - 5/31/12
Paradigm Solutions Corporation
 
2600 Tower Oaks Blvd, Rockville, MD 20852
 
Legato Systems, Inc.
 
7/15/03 - 5/31/11
Trinity Information Management Services, Inc.
  
2424 Vista Way, Oceanside, CA 92054
  
Jaeger Vineyards Commercial Investments Series
  
12/1/05 - 11/30/10

 
Chief Executive Office
 
Grantor
 
Chief Executive Office
 
Books and Records
 
Inventory, Equipment,
Etc.
Paradigm Holdings, Inc., a Wyoming corporation
 
9715 Key West Avenue, Rockville, MD 20850
 
9715 Key West Avenue, Rockville, MD 20850
 
9715 Key West Avenue, Rockville, MD 20850
             
Paradigm Solutions Corporation
 
9715 Key West Avenue, Rockville, MD 20850
 
9715 Key West Avenue, Rockville, MD 20850
 
9715 Key West Avenue, Rockville, MD 20850
             
Trinity Information Management Services, Inc.
 
9715 Key West Avenue, Rockville, MD 20850
 
9715 Key West Avenue, Rockville, MD 20850
 
9715 Key West Avenue, Rockville, MD 20850
             
Caldwell Technology Solutions, LLC
 
9715 Key West Avenue, Rockville, MD 20850
 
9715 Key West Avenue, Rockville, MD 20850
 
9715 Key West Avenue, Rockville, MD 20850
             
Paradigm Holdings, Inc., a Nevada corporation
  
9715 Key West Avenue, Rockville, MD 20850
  
9715 Key West Avenue, Rockville, MD 20850
  
9715 Key West Avenue, Rockville, MD 20850

 
 

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SCHEDULE 8
 
LIST OF UNIFORM COMMERCIAL CODE FILING JURISDICTIONS
 
Grantor
 
Jurisdictions
     
Paradigm Holdings, Inc., a Wyoming corporation
 
Wyoming
     
Paradigm Holdings, Inc., a Nevada corporation
 
Nevada
     
Paradigm Solutions Corporation
 
Maryland
     
Trinity Information Management Services
 
Nevada
     
Caldwell Technology Solutions LLC.
 
Maryland

 
 

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EXHIBIT A
 
COPYRIGHT SECURITY AGREEMENT
 
This COPYRIGHT SECURITY AGREEMENT (this “Copyright Security Agreement”) is made
this 26th day of May 2010, by the Grantors listed on the signature pages hereof
(collectively, jointly and severally, “Grantors” and each individually
“Grantor”), in favor of the Secured Parties under and as defined in the
below-described Security Agreement.
 
RECITALS
 
WHEREAS, pursuant to that certain Securities Purchase Agreement, dated as of May
26, 2010 (as may be amended, restated, supplemented, or otherwise modified from
time to time, including all schedules thereto, collectively, the “Securities
Purchase Agreement”), by and among Paradigm Holdings, Inc., a Wyoming
corporation (“Parent”), and each of the Secured Parties, Parent has agreed to
sell, and each of the Secured Parties have each agreed to purchase, severally
and not jointly, certain Notes; and
 
WHEREAS, in order to induce each of the Secured Parties to purchase, severally
and not jointly, the Notes as provided for in the Securities Purchase Agreement,
Grantors have executed and delivered to each of the Secured Parties that certain
Security Agreement of even date herewith (including all annexes, exhibits or
schedules thereto, as from time to time amended, restated, supplemented or
otherwise modified, the “Security Agreement”); and
 
WHEREAS, pursuant to the Security Agreement, Grantors are required to execute
and deliver to each of the Secured Parties this Copyright Security Agreement.
 
AGREEMENTS
 
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as follows:
 
1.             DEFINED TERMS.  All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Security Agreement.
 
2.             GRANT OF SECURITY INTEREST IN COPYRIGHT COLLATERAL.  Each Grantor
hereby grants to each Secured Party, subject to Permitted Liens, a continuing
first priority (or second priority, to the extent such Collateral is subject to
a Permitted Lien with respect to the Senior Indebtedness ) security interest in
all of such Grantor’s right, title and interest in, to and under the following,
whether presently existing or hereafter created or acquired (collectively, the
“Copyright Collateral”):
 
(a)           all of each Grantor’s Copyrights and Copyright Intellectual
Property Licenses to which it is a party including those referred to on Schedule
I hereto;
 
(b)           all reissues, continuations or extensions of the foregoing; and

 

--------------------------------------------------------------------------------

 
 
(c)           all products and proceeds of the foregoing, including any claim by
such Grantor against third parties for past, present or future infringement or
dilution of any Copyright or any Copyright licensed under any Intellectual
Property License.
 
3.            SECURITY FOR OBLIGATIONS.  This Copyright Security Agreement and
the Security Interests created hereby secures the payment and performance of all
the Secured Obligations, whether now existing or arising hereafter.  Without
limiting the generality of the foregoing, this Copyright Security Agreement
secures the payment of all amounts which constitute part of the Secured
Obligations and would be owed by Grantors, or any of them, to Secured Parties,
or any of them, whether or not they are unenforceable or not allowable due to
the existence of an Insolvency Proceeding involving any Grantor.
 
4.            SECURITY AGREEMENT.  The security interests granted pursuant to
this Copyright Security Agreement are granted in conjunction with the security
interests granted to Secured Parties pursuant to the Security Agreement.  Each
Grantor hereby acknowledges and affirms that the rights and remedies of Secured
Parties with respect to their respective security interests in the Copyright
Collateral made and granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.
 
5.             AUTHORIZATION TO SUPPLEMENT.  To the extent required under the
Security Agreement, Grantors shall give Secured Parties prompt notice in writing
of any additional copyright registrations or applications therefor after the
date hereof. Grantors hereby authorize Secured Parties unilaterally to modify
this Agreement by amending Schedule I to include any future registered
copyrights or applications therefor of Grantors.  Notwithstanding the foregoing,
no failure to so modify this Copyright Security Agreement or amend Schedule I
shall in any way affect, invalidate or detract from any Secured Party’s
continuing security interest in all Collateral, whether or not listed on
Schedule I.
 
6.             COUNTERPARTS.  This Copyright Security Agreement may be executed
in two or more identical counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party. In the event that any signature
is delivered by facsimile transmission or by an e-mail which contains a portable
document format (.pdf) file of an executed signature page, such signature page
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
signature page were an original thereof.  In proving this Copyright Security
Agreement or any other Transaction Document in any judicial proceedings, it
shall not be necessary to produce or account for more than one such counterpart
signed by the party against whom such enforcement is sought.
 
 
2

--------------------------------------------------------------------------------

 

7.             CONSTRUCTION.  Unless the context of this Copyright Security
Agreement or any other Transaction Document clearly requires otherwise,
references to the plural include the singular, references to the singular
include the plural, the terms “includes” and  “including” are not limiting, and
the term “or” has, except where otherwise indicated, the inclusive meaning
represented by the phrase “and/or.” The words “hereof,” “herein,” “hereby,”
“hereunder,” and similar terms in this Copyright Security Agreement or any other
Transaction Document refer to this Copyright Security Agreement or such other
Transaction Document, as the case may be, as a whole and not to any particular
provision of this Copyright Security Agreement or such other Transaction
Document, as the case may be.  Section, subsection, clause, schedule, and
exhibit references herein are to this Copyright Security Agreement unless
otherwise specified. Any reference in this Copyright Security Agreement or in
any other Transaction Document to any agreement, instrument, or document shall
include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, joinders, and supplements, thereto and
thereof, as applicable (subject to any restrictions on such alterations,
amendments, changes, extensions, modifications, renewals, replacements,
substitutions, joinders, and supplements set forth herein).  Any reference
herein to any Person shall be construed to include such Person’s permitted
successors and permitted assigns.  Any requirement of a writing contained herein
or in any other Transaction Document shall be satisfied by the transmission of a
Record and any Record so transmitted shall constitute a representation and
warranty as to the accuracy and completeness of the information contained
therein. The language used in this Copyright Security Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.  For
clarification purposes, the Recitals are part of this Copyright Security
Agreement.
 
[signature page follows]
 
 
3

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, each Grantor has caused this Copyright Security Agreement to
be executed and delivered by its duly authorized officer as of the date first
set forth above.
 
GRANTORS:
PARADIGM HOLDINGS, INC., a Wyoming corporation
     
By:
    
 
Name:
    
 
Title:
    
     
PARADIGM HOLDINGS, INC., a Nevada corporation
     
By:
    
 
Name:
    
 
Title:
    
     
PARADIGM SOLUTIONS CORPORATION
     
By:
    
 
Name:
    
 
Title:
    
     
CALDWELL TECHNOLOGY SOLUTIONS LLC
     
By:
    
 
Name:
    
 
Title:
    

 
 

--------------------------------------------------------------------------------

 
 

 
TRINITY INFORMATION MANAGEMENT SERVICES
     
By:
    
 
Name:
    
 
Title:
    

 

--------------------------------------------------------------------------------

 
 
SCHEDULE I
to
COPYRIGHT SECURITY AGREEMENT
 
Copyright Registrations
 
N/A
 
Grantor
 
Country
 
Copyright
 
Registration No.
 
Registration
Date
                                                     

 
Copyright Licenses

 
N/A
 
 

--------------------------------------------------------------------------------

 
 
EXHIBIT B
 
PATENT SECURITY AGREEMENT
 
This PATENT SECURITY AGREEMENT (this “Patent Security Agreement”) is made this
26th day of May 2010, by the Grantors listed on the signature pages hereof
(collectively, jointly and severally, “Grantors” and each individually
“Grantor”), in favor of the Secured Parties under and as defined in the
below-described Security Agreement.
 
RECITALS
 
WHEREAS, pursuant to that certain Securities Purchase Agreement, dated as of May
26, 2010 (as may be amended, restated, supplemented, or otherwise modified from
time to time, including all schedules thereto, collectively, the “Securities
Purchase Agreement”), by and among Paradigm Holdings, Inc., a Wyoming
corporation (“Parent”), and each of the Secured Parties, Parent has agreed to
sell, and each of the Secured Parties have each agreed to purchase, severally
and not jointly, certain Notes; and
 
WHEREAS, in order to induce each of the Secured Parties to purchase, severally
and not jointly, the Notes as provided for in the Securities Purchase Agreement,
Grantors have executed and delivered to each of the Secured Parties that certain
Security Agreement of even date herewith (including all annexes, exhibits or
schedules thereto, as from time to time amended, restated, supplemented or
otherwise modified, the “Security Agreement”); and
 
WHEREAS, pursuant to the Security Agreement, Grantors are required to execute
and deliver to each of the Secured Parties this Patent Security Agreement.
 
AGREEMENTS
 
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as follows:
 
8.             DEFINED TERMS.  All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Security Agreement.
 
9.             GRANT OF SECURITY INTEREST IN PATENT COLLATERAL.  Each Grantor
hereby grants to each Secured Party, subject to Permitted Liens, a continuing
first priority (or second priority, to the extent such Collateral is subject to
a Permitted Lien with respect to the Senior Indebtedness ) security interest in
all of such Grantor’s right, title and interest in, to and under the following,
whether presently existing or hereafter created or acquired (collectively, the
“Patent Collateral”):
 
(a)           all of its Patents and Patent Intellectual Property Licenses to
which it is a party including those referred to on Schedule I hereto;
 
(b)           all reissues, continuations or extensions of the foregoing; and

 

--------------------------------------------------------------------------------

 
 
(c)           all products and proceeds of the foregoing, including any claim by
such Grantor against third parties for past, present or future infringement or
dilution of any Patent or any Patent licensed under any Intellectual Property
License.
 
10.           SECURITY FOR OBLIGATIONS.  This Patent Security Agreement and the
Security Interests created hereby secures the payment and performance of all the
Secured Obligations, whether now existing or arising hereafter.  Without
limiting the generality of the foregoing, this Patent Security Agreement secures
the payment of all amounts which constitute part of the Secured Obligations and
would be owed by Grantors, or any of them, to Secured Parties, or any of them,
whether or not they are unenforceable or not allowable due to the existence of
an Insolvency Proceeding involving any Grantor.
 
11.           SECURITY AGREEMENT.  The security interests granted pursuant to
this Patent Security Agreement are granted in conjunction with the security
interests granted to Secured Parties pursuant to the Security Agreement.  Each
Grantor hereby acknowledges and affirms that the rights and remedies of Secured
Parties with respect to their respective security interests in the Patent
Collateral made and granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.
 
12.           AUTHORIZATION TO SUPPLEMENT.  If any Grantor shall obtain rights
to any new patentable inventions or become entitled to the benefit of any patent
application or patent for any reissue, division, or continuation, of any patent,
the provisions of this Patent Security Agreement shall automatically apply
thereto. To the extent required under the Security Agreement, Grantors shall
give prompt notice in writing to Secured Parties with respect to any such new
patent rights.  Without limiting each Grantor’s obligations under this Section
5, Grantors hereby authorize Secured Parties unilaterally to modify this
Agreement by amending Schedule I to include any such new patent rights of
Grantors.  Notwithstanding the foregoing, no failure to so modify this Patent
Security Agreement or amend Schedule I shall in any way affect, invalidate or
detract from any Secured Party’s continuing security interest in all Collateral,
whether or not listed on Schedule I.
 
13.           COUNTERPARTS.  This Patent Security Agreement may be executed in
two or more identical counterparts, all of which shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each party and delivered to the other party. In the event that any signature is
delivered by facsimile transmission or by an e-mail which contains a portable
document format (.pdf) file of an executed signature page, such signature page
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
signature page were an original thereof. In proving this Patent Security
Agreement or any other Transaction Document in any judicial proceedings, it
shall not be necessary to produce or account for more than one such counterpart
signed by the party against whom such enforcement is sought.
 
 
2

--------------------------------------------------------------------------------

 
 
14.           CONSTRUCTION.  Unless the context of this Patent Security
Agreement or any other Transaction Document clearly requires otherwise,
references to the plural include the singular, references to the singular
include the plural, the terms “includes” and  “including” are not limiting, and
the term “or” has, except where otherwise indicated, the inclusive meaning
represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,”
“hereunder,” and similar terms in this Patent Security Agreement or any other
Transaction Document refer to this Patent Security Agreement or such other
Transaction Document, as the case may be, as a whole and not to any particular
provision of this Patent Security Agreement or such other Transaction Document,
as the case may be. Section, subsection, clause, schedule, and exhibit
references herein are to this Patent Security Agreement unless otherwise
specified.  Any reference in this Patent Security Agreement or in any other
Transaction Document to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). Any reference herein to any Person
shall be construed to include such Person’s permitted successors and permitted
assigns. Any requirement of a writing contained herein or in any other
Transaction Document shall be satisfied by the transmission of a Record and any
Record so transmitted shall constitute a representation and warranty as to the
accuracy and completeness of the information contained therein. The language
used in this Patent Security Agreement will be deemed to be the language chosen
by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party. For clarification purposes, the
Recitals are part of this Patent Security Agreement.
 
[signature pages follow]

 
3

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, each Grantor has caused this Patent Security Agreement to be
executed and delivered by its duly authorized officer as of the date first set
forth above.
 
GRANTORS:
PARADIGM HOLDINGS, INC., a Wyoming corporation
     
By:
    
 
Name:
    
 
Title:
    
     
PARADIGM HOLDINGS, INC., a Nevada corporation
     
By:
    
 
Name:
    
 
Title:
    
     
PARADIGM SOLUTIONS CORPORATION
     
By:
    
 
Name:
    
 
Title:
    
     
CALDWELL TECHNOLOGY SOLUTIONS LLC
     
By:
    
 
Name:
    
 
Title:
    

 
 

--------------------------------------------------------------------------------

 
 

 
TRINITY INFORMATION MANAGEMENT SERVICES
     
By:
    
 
Name:
    
 
Title:
    

 

--------------------------------------------------------------------------------

 
 
EXHIBIT C

TRADEMARK SECURITY AGREEMENT
 
This TRADEMARK SECURITY AGREEMENT (this “Trademark Security Agreement”) is made
this 26th day of May 2010, by the Grantors listed on the signature pages hereof
(collectively, jointly and severally, “Grantors” and each individually
“Grantor”), in favor of the Secured Parties under and as defined in the
below-described Security Agreement.
 
RECITALS
 
WHEREAS, pursuant to that certain Securities Purchase Agreement, dated as of May
26, 2010 (as may be amended, restated, supplemented, or otherwise modified from
time to time, including all schedules thereto, collectively, the “Securities
Purchase Agreement”), by and among Paradigm Holdings, Inc., a Wyoming
corporation (“Parent”), and each of the Secured Parties, Parent has agreed to
sell, and each of the Secured Parties have each agreed to purchase, severally
and not jointly, certain Notes ; and
 
WHEREAS, in order to induce each of the Secured Parties to purchase, severally
and not jointly, the Notes as provided for in the Securities Purchase Agreement,
Grantors have executed and delivered to each of the Secured Parties that certain
Security Agreement of even date herewith (including all annexes, exhibits or
schedules thereto, as from time to time amended, restated, supplemented or
otherwise modified, the “Security Agreement”); and
 
WHEREAS, pursuant to the Security Agreement, Grantors are required to execute
and deliver to each of the Secured Parties this Trademark Security Agreement.
 
AGREEMENTS
 
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as follows:
 
15.           DEFINED TERMS.  All capitalized terms used but not otherwise
defined herein have the meanings given to them in the Security Agreement.
 
16.           GRANT OF SECURITY INTEREST IN TRADEMARK COLLATERAL.  Each Grantor
hereby grants to each Secured Party, subject to Permitted Liens, a continuing
first priority (or second priority, to the extent such Collateral is subject to
a Permitted Lien with respect to the Senior Indebtedness ) security interest in
all of such Grantor’s right, title and interest in, to and under the following,
whether presently existing or hereafter created or acquired (collectively, the
“Trademark Collateral”):
 
 

--------------------------------------------------------------------------------

 
 
(a)           all of its Trademarks and Trademark Intellectual Property Licenses
to which it is a party including those referred to on Schedule I hereto;
 
(b)           all goodwill, trade secrets, proprietary or confidential
information, technical information, procedures, formulae, quality control
standards, designs, operating and training manuals, customer lists, and other
General Intangibles with respect to the foregoing;
 
(c)           all reissues, continuations or extensions of the foregoing;
 
(d)           all goodwill of the business connected with the use of, and
symbolized by, each Trademark and each Trademark Intellectual Property License;
and
 
(e)           all products and proceeds of the foregoing, including any claim by
such Grantor against third parties for past, present or future (i) infringement
or dilution of any Trademark or any Trademark licensed under any Intellectual
Property License or (ii) injury to the goodwill associated with any Trademark or
any Trademark licensed under any Intellectual Property License.
 
17.           SECURITY FOR OBLIGATIONS.  This Trademark Security Agreement and
the Security Interests created hereby secures the payment and performance of all
the Secured Obligations, whether now existing or arising hereafter.  Without
limiting the generality of the foregoing, this Trademark Security Agreement
secures the payment of all amounts which constitute part of the Secured
Obligations and would be owed by Grantors, or any of them, to Secured Parties,
or any of them, whether or not they are unenforceable or not allowable due to
the existence of an Insolvency Proceeding involving any Grantor.
 
18.           SECURITY AGREEMENT.  The security interests granted pursuant to
this Trademark Security Agreement are granted in conjunction with the security
interests granted to Secured Parties pursuant to the Security Agreement.  Each
Grantor hereby acknowledges and affirms that the rights and remedies of Secured
Parties with respect to their respective security interests in the Trademark
Collateral made and granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.
 
19.           AUTHORIZATION TO SUPPLEMENT.  If any Grantor shall obtain rights
to any new trademarks, the provisions of this Trademark Security Agreement shall
automatically apply thereto. To the extent required under the Security
Agreement, Grantors shall give prompt notice in writing to Secured Parties with
respect to any such new trademarks or renewal or extension of any trademark
registration.   Without limiting each Grantor’s obligations under this Section
12, Grantors hereby authorize Secured Parties unilaterally to modify this
Agreement by amending Schedule I to include any such new trademark rights of
Grantors.  Notwithstanding the foregoing, no failure to so modify this Trademark
Security Agreement or amend Schedule I shall in any way affect, invalidate or
detract from any Secured Party’s continuing security interest in all Collateral,
whether or not listed on Schedule I.
 
 
2

--------------------------------------------------------------------------------

 
 
20.           COUNTERPARTS.  This Trademark Security Agreement may be executed
in two or more identical counterparts, all of which shall be considered one and
the same agreement and shall become effective when counterparts have been signed
by each party and delivered to the other party. In the event that any signature
is delivered by facsimile transmission or by an e-mail which contains a portable
document format (.pdf) file of an executed signature page, such signature page
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
signature page were an original thereof. In proving this Trademark Security
Agreement or any other Transaction Document in any judicial proceedings, it
shall not be necessary to produce or account for more than one such counterpart
signed by the party against whom such enforcement is sought.
 
21.           CONSTRUCTION.  Unless the context of this Trademark Security
Agreement or any other Transaction Document clearly requires otherwise,
references to the plural include the singular, references to the singular
include the plural, the terms “includes” and  “including” are not limiting, and
the term “or” has, except where otherwise indicated, the inclusive meaning
represented by the phrase “and/or.”  The words “hereof,” “herein,” “hereby,”
“hereunder,” and similar terms in this Trademark Security Agreement or any other
Transaction Document refer to this Trademark Security Agreement or such other
Transaction Document, as the case may be, as a whole and not to any particular
provision of this Trademark Security Agreement or such other Transaction
Document, as the case may be.  Section, subsection, clause, schedule, and
exhibit references herein are to this Agreement unless otherwise specified. Any
reference in this Trademark Security Agreement or in any other Transaction
Document to any agreement, instrument, or document shall include all
alterations, amendments, changes, extensions, modifications, renewals,
replacements, substitutions, joinders, and supplements, thereto and thereof, as
applicable (subject to any restrictions on such alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements set forth herein). Any reference herein to any Person
shall be construed to include such Person’s permitted successors and permitted
assigns. Any requirement of a writing contained herein or in any other
Transaction Document shall be satisfied by the transmission of a Record and any
Record so transmitted shall constitute a representation and warranty as to the
accuracy and completeness of the information contained therein. The language
used in this Trademark Security Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party. For clarification purposes, the
Recitals are part of this Trademark Security Agreement.
 
[signature pages follow]
 
 
3

--------------------------------------------------------------------------------

 
 
IN WITNESS WHEREOF, each Grantor has caused this Trademark Security Agreement to
be executed and delivered by its duly authorized officer as of the date first
set forth above.
 
GRANTORS:
Paradigm Holdings, Inc., a Wyoming corporation
     
By:
    
 
Name:
    
 
Title:
    
     
PARADIGM HOLDINGS, INC., a Nevada corporation
     
By:
    
 
Name:
    
 
Title:
    
     
PARADIGM SOLUTIONS CORPORATION
     
By:
    
 
Name:
    
 
Title:
    
     
CALDWELL TECHNOLOGY SOLUTIONS LLC
     
By:
    
 
Name:
    
 
Title:
    

 
 

--------------------------------------------------------------------------------

 
 

 
TRINITY INFORMATION MANAGEMENT SERVICES
     
By:
    
 
Name:
    
 
Title:
    

 
 

--------------------------------------------------------------------------------

 

SCHEDULE I
to
TRADEMARK SECURITY AGREEMENT

 
Trademark Registrations/Applications
 
N/A
 
Grantor
 
Country
 
Mark
 
Application/
Registration No.
 
App/Reg Date
                                                     

 
Trade Names
 
N/A
 
Common Law Trademarks
 
Grantors may be entitled to certain “common law” trademarks and similar rights.
 
Trademarks Not Currently In Use
 
Grantors may be entitled to certain “common law” trademarks and similar rights,
some or which trademarks and similar rights may not presently be in use by
Grantors.
 
Trademark Licenses
 
N/A
 
 

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