SECOND LOAN MODIFICATION AGREEMENT
 
 
This Second Loan Modification Agreement (this “Loan Modification Agreement”) is
entered into as of March 18, 2009, by and among (a) SILICON VALLEY BANK, a
California corporation, with its principal place of business at 3003 Tasman
Drive, Santa Clara, California 95054 and with a loan production office located
at One Newton Executive Park, Suite 200, 2221 Washington Street, Newton,
Massachusetts  02462 (“Bank”) and (b) PARADIGM HOLDINGS, INC., a Wyoming
corporation, with offices at 9715 Key West Avenue, Rockville, Maryland  20850
(“Holdings”), PARADIGM SOLUTIONS CORPORATION, a Maryland corporation, with
offices at 9715 Key West Avenue, Rockville, Maryland  20850 (“Solutions”),
CALDWELL TECHNOLOGY SOLUTIONS LLC, a Maryland limited liability company, with
offices at 17001 Science Drive, Suite 100, Bowie, Maryland 20715 (“Caldwell”)
and TRINITY INFORMATION MANAGEMENT SERVICES, a Nevada corporation, with offices
at 9715 Key West Avenue, Rockville, Maryland 20850 (“Trinity”) (hereinafter,
Holdings, Solutions, Caldwell and Trinity are jointly and severally,
individually and collectively, referred to as “Borrower”).
 
1.     DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS. Among other
indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of March 13, 2007,
evidenced by, among other documents, a certain Loan and Security Agreement
(working capital line of credit) dated as of March 13, 2007, among Borrower and
Bank, as amended by a certain First Loan Modification Agreement dated as of
August 11, 2008 (as amended, the “Loan Agreement”).  Capitalized terms used but
not otherwise defined herein shall have the same meaning as in the Loan
Agreement.
 
2.     DESCRIPTION OF COLLATERAL.  Repayment of the Obligations is secured by
(a) the Collateral as described in the Loan Agreement, (b) the Intellectual
Property Collateral as described in a certain Intellectual Property Security
Agreement dated as of March 13, 2007 between Bank and Holdings (the “Holdings IP
Security Agreement”), (c) the Intellectual Property Collateral as described in a
certain Intellectual Property Security Agreement dated as of March 13, 2007
between Bank and Solutions (the “Solutions IP Security Agreement”), (d) the
Intellectual Property Collateral as described in a certain Intellectual Property
Security Agreement dated as of July 5, 2007 between Bank and Caldwell (the
“Caldwell IP Security Agreement”), and (e) the Intellectual Property Collateral
as described in a certain Intellectual Property Security Agreement dated as of
September 5, 2007 between Bank and Trinity (the “Trinity IP Security Agreement”)
(together with any other collateral security granted to Bank, the  “Security
Documents”).  Hereinafter, the Security Documents, together with all other
documents evidencing or securing the Obligations shall be referred to as the
“Existing Loan Documents”.
 
3.     DESCRIPTION OF CHANGE IN TERMS.
 
A.  
Modifications to Loan Agreement.

 
1      
The Loan Agreement shall be amended by deleting the following, appearing as
Section 2.1.1(b)(i):

 
“           (i)           The aggregate face amount of all Financed Receivables
outstanding at any time based upon Federal Agency Accounts, Subcontractor
Accounts and Unbilled Accounts may not exceed the Facility Amount.  In addition,
the aggregate amount of all Federal Agency Account Advances, Subcontractor
Account Advances, and Unbilled Account Advances outstanding at any time may not
exceed Ten Million Dollars ($10,000,000.00).”
 
and inserting in lieu thereof the following:
 
 
 

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“           (i)           The aggregate face amount of all Financed Receivables
outstanding at any time based upon Federal Agency Accounts, Subcontractor
Accounts and Unbilled Accounts may not exceed the Facility Amount.  In addition
and notwithstanding the foregoing, the aggregate amount of all Federal Agency
Account Advances, Subcontractor Account Advances, and Unbilled Account Advances
outstanding at any time may not exceed Four Million Five Hundred Thousand
Dollars ($4,500,000.00).”
 
2      
The Loan Agreement shall be amended by deleting the following, appearing as
Section 2.1.1(b)(iii):

 
“           (iii)           The aggregate amount of all Unbilled Account
Advances outstanding at any time may not exceed Two Million Dollars
($2,000,000.00), provided, however, such amount shall be Three Million Dollars
($3,000,000.00) at such time as when all HUD Account Advances are repaid and
Borrower has no ability to request that Bank make any additional HUD Account
Advances hereunder.”
 
and inserting in lieu thereof the following:
 
“           (iii)           The aggregate amount of all Unbilled Account
Advances outstanding at any time may not exceed Two Million Dollars
($2,000,000.00).”
 
3      
The Loan Agreement shall be amended by deleting the following, appearing as
Section 2.1.1(b)(iv):

 
“           (iv)            The aggregate amount of all Federal Agency Account
Advances, Subcontractor Account Advances, Unbilled Account Advances, and HUD
Account Advances outstanding at any time may not exceed Twelve Million Dollars
($12,000,000.00).”
 
and inserting in lieu thereof the following:
 
“           (iv)            Intentionally omitted.”
 
4      
The Loan Agreement shall be amended by deleting the following text appearing in
Section 6.2(c):

 
“Allow Bank to audit Borrower’s Collateral, including, but not limited to,
Borrower’s Accounts at Borrower’s expense, upon reasonable notice to Borrower;
provided, however, prior to the occurrence of an Event of Default, Borrower
shall be obligated to pay for not more than one (1) audit per year.”
 
and inserting in lieu thereof the following:
 
  “Allow Bank to audit Borrower’s Collateral, including, but not limited to,
Borrower’s Accounts at Borrower’s expense, upon reasonable notice to Borrower;
provided, however, prior to the occurrence of an Event of Default, Borrower
shall be obligated to pay for not more than two (2) audits per year.”
 
 
 

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5      
The Loan Agreement shall be amended by deleting the following definitions
appearing in Section 13.1 thereof:

 
“           “Facility Amount” is Twelve Million Five Hundred Thousand Dollars
($12,500,000.00).”
 
“           “Maturity Date” is two (2) years from the Closing Date, subject to
Section 12.11 hereunder.”
 
“           “Minimum Finance Charge” is an amount equal to the amount of Finance
Charges and Collateral Handling Fees Bank would have earned in any
Reconciliation Period if Borrower’s Federal Agency Account Advances,
Subcontractor Account Advances and Unbilled Account Advances outstanding during
such Reconciliation period averaged Four Million Dollars ($4,000,000.00).”
 
and inserting in lieu thereof the following:
 
“           “Facility Amount” is Five Million Six Hundred Twenty-Five Thousand
Dollars ($5,625,000.00).”
 
“           “Maturity Date” is May 12, 2009.”
 
“           “Minimum Finance Charge” is an amount equal to the amount of Finance
Charges and Collateral Handling Fees Bank would have earned in any
Reconciliation Period if Borrower’s Federal Agency Account Advances,
Subcontractor Account Advances and Unbilled Account Advances outstanding during
such Reconciliation period averaged One Million Eight Hundred Thousand Dollars
($1,800,000.00).”
 
4.     FEES.  Borrower shall pay to Bank a modification fee equal to Nine
Thousand Dollars ($9,000.00) which fee shall be due on the date hereof and shall
be deemed fully earned as of the date hereof.  Borrower shall also reimburse
Bank for all reasonable legal fees and expenses incurred in connection with this
amendment to the Existing Loan Documents.
 
5.     RATIFICATION OF IP SECURITY AGREEMENTS.
 
(a)           Holdings hereby ratifies, confirms and reaffirms, all and
singular, the terms and conditions of the Holdings IP Security Agreement and
acknowledges, confirms and agrees that the Holdings IP Security Agreement
contains an accurate and complete listing of all Intellectual Property
Collateral as defined therein.
 
(b)           Solutions hereby ratifies, confirms and reaffirms, all and
singular, the terms and conditions of the Solutions IP Security Agreement and
acknowledges, confirms and agrees that the Solutions IP Security Agreement
contains an accurate and complete listing of all Intellectual Property
Collateral as defined therein.
 
(c)           Caldwell hereby ratifies, confirms and reaffirms, all and
singular, the terms and conditions of the Caldwell IP Security Agreement and
acknowledges, confirms and agrees that the Caldwell IP Security Agreement
contains an accurate and complete listing of all Intellectual Property
Collateral as defined therein.
 
 
 

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(d)           Trinity hereby ratifies, confirms and reaffirms, all and singular,
the terms and conditions of the Trinity IP Security Agreement and acknowledges,
confirms and agrees that the Trinity IP Security Agreement contains an accurate
and complete listing of all Intellectual Property Collateral as defined therein.
 
6.     RATIFICATIONS OF PERFECTION CERTIFICATES.
 
(a)           Holdings hereby ratifies, confirms and reaffirms, all and
singular, the terms and disclosures contained in a certain Perfection
Certificate dated as of March 13, 2007 between Holdings and Bank, and
acknowledges, confirms and agrees the disclosures and information Holdings
provided to Bank in the Perfection Certificate have not changed, as of the date
hereof.
 
(b)           Solutions hereby ratifies, confirms and reaffirms, all and
singular, the terms and disclosures contained in a certain Perfection
Certificate dated as of March 13, 2007 between Solutions and Bank, and
acknowledges, confirms and agrees the disclosures and information Solutions
provided to Bank in the Perfection Certificate have not changed, as of the date
hereof.
 
(c)           Caldwell hereby ratifies, confirms and reaffirms, all and
singular, the terms and disclosures contained in a certain Perfection
Certificate dated as of July 5, 2007 between Caldwell and Bank, and
acknowledges, confirms and agrees the disclosures and information Caldwell
provided to Bank in the Perfection Certificate have not changed, as of the date
hereof.
 
(d)           Trinity hereby ratifies, confirms and reaffirms, all and singular,
the terms and disclosures contained in a certain Perfection Certificate dated as
of September 5, 2007 between Trinity and Bank, and acknowledges, confirms and
agrees the disclosures and information Trinity provided to Bank in the
Perfection Certificate have not changed, as of the date hereof.
 
7.     CONSISTENT CHANGES.  The Existing Loan Documents are hereby amended
wherever necessary to reflect the changes described above.
 
8.     RATIFICATION OF LOAN DOCUMENTS.  Borrower hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Bank, and confirms that the indebtedness secured thereby includes,
without limitation, the Obligations.
 
9.     NO DEFENSES OF BORROWER.  Borrower hereby acknowledges and agrees that
Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever
did have, any offsets, defenses, claims, or counterclaims against Bank, whether
known or unknown, at law or in equity, all of them are hereby expressly WAIVED
and Borrower hereby RELEASES Bank from any liability thereunder.
 
10.     CONTINUING VALIDITY.  Borrower understands and agrees that in modifying
the existing Obligations, Bank is relying upon Borrower’s representations,
warranties, and agreements, as set forth in the Existing Loan Documents.  Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and
effect.  Bank’s agreement to modifications to the existing Obligations pursuant
to this  Loan Modification Agreement in no way shall obligate Bank to make any
future modifications to the Obligations.  Nothing in this Loan Modification
Agreement shall constitute a satisfaction of the Obligations.  It is the
intention of Bank and Borrower to retain as liable parties all makers of
Existing Loan Documents, unless the party is expressly released by Bank in
writing.  No maker will be released by virtue of this Loan Modification
Agreement.
 
11.     COUNTERSIGNATURE.  This Loan Modification Agreement shall become
effective only when it shall have been executed by Borrower and Bank.
 
 
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This Loan Modification Agreement is executed as of the date first written above.
 
BORROWER:
BANK:
   
PARADIGM HOLDINGS, INC.
SILICON VALLEY BANK
   
By:____________________________________
By:___________________________________
   
Name: Richard Sawchak
Name:_________________________________
   
Title: SVP and CFO
Title:__________________________________

 

PARADIGM SOLUTIONS CORPORATION
 
By:____________________________________
 
Name:  Richard Sawchak
 
Title:   SVP and CFO
 

 
CALDWELL TECHNOLOGY SOLUTIONS LLC
 
By:____________________________________
 
Name:  Richard Sawchak
 
Title:   SVP and CFO
 

 
TRINITY INFORMATION MANAGEMENT SERVICES
 
By:____________________________________
 
Name:  Richard Sawchak
 
Title:   SVP and CFO