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EXHIBIT 10.9

AMENDMENT
TO
SENIOR SECURED SUBORDINATED NOTES
 
This Amendment to Senior Secured Subordinated Notes (this “Amendment”) is made
effective as of May 16, 2011 (the “Amendment Date”) and is entered into by and
among Paradigm Holdings, Inc., a Nevada corporation (the “Company”), Hale
Capital Partners, LP, a Delaware limited partnership (“Hale Capital”), and EREF
PARA, LLC (“EREF PARA” and, collectively with Hale Capital, the “Purchasers”).
  
WHEREAS, the Company has previously issued to Hale Capital that certain Senior
Secured Subordinated Note in the original principal amount of $2,018,047.05 (the
“Hale Capital Note”) and the Company has previously issued to EREF PARA that
certain Senior Secured Subordinated Note in the original principal amount of
$1,981,952.95 (the “EREF PARA Note” and together with the Hale Capital Note, the
“Notes”);
 
WHEREAS, the Notes mature on May 26, 2011 and the Company and the Purchasers
desire to extend the maturity date of the Notes with respect to a portion of the
principal amount due under the Notes; and
 
WHEREAS, the Notes provide that the written consent of the Company and the
written consent without a meeting of the Required Holders (as defined in the
Notes) shall be required for any change or amendment to the Notes.
 
NOW, THEREFORE, in consideration of the mutual covenants and obligations set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Purchasers and the Company
hereby agree as follows:
 
1.             Amendment of the Notes
 
The parties hereby agree to amend the terms of each of the Notes as of the
Amendment Date as provided below:
 
1.1           Amendment of Section (1) of the Hale Capital Note.  Section (1) of
the Hale Capital Note is hereby amended and restated in its entirety to read as
follows:
 
“(1)           MATURITY.  On the Maturity Date, the Holder shall surrender this
Note to the Company and the Company shall pay to the Holder an amount in cash
representing all outstanding Principal, accrued and unpaid Interest and accrued
and unpaid Late Charges, if any.  The “Maturity Date” shall be November 25,
2011.  Notwithstanding the foregoing, on or before May 26, 2011, the Company
shall pay to the Holder Seven Hundred Fifty Six Thousand Seven Hundred Sixty-Six
and 60/100 Dollars ($756,766.60) as a pre-payment of the Principal amount then
outstanding on this Note.  Without limiting the foregoing, the Company may
prepay this Note without penalty.”
 
1.2           Amendment of Section (1) of the EREF PARA Note.  Section (1) of
the EREF PARA Note is hereby amended and restated in its entirety to read as
follows:

 
 

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“(1)           MATURITY.  On the Maturity Date, the Holder shall surrender this
Note to the Company and the Company shall pay to the Holder an amount in cash
representing all outstanding Principal, accrued and unpaid Interest and accrued
and unpaid Late Charges, if any.  The “Maturity Date” shall be November 25,
2011.  Notwithstanding the foregoing, on or before May 26, 2011, the Company
shall pay to the Holder Seven Hundred Forty Three Thousand Two Hundred
Thirty-Three and 41/100 Dollars ($743,233.41) as a pre-payment of the Principal
amount then outstanding on this Note.  Without limiting the foregoing, the
Company may prepay this Note without penalty.”

1.3           Amendment of Section (2)(a) of the EREF PARA Note.  Section (2)(a)
of the EREF PARA Note is hereby amended to add the following:

In addition to any Interest and other amounts payable hereunder, the Company
may, from time to time, elect to pay additional interest (the “Additional
Interest”) to the Holder on this Note in connection with a waiver or amendment
to this Note, which Additional Interest shall be paid to the Holder in such
amounts, in such form and manner and at such times as set forth in such waiver
or amendment.

1.4           Amendment of Section (2)(a) of the Hale Capital Note.  Section
(2)(a) of the Hale Capital Note is hereby amended to add the following:

In addition to any Interest and other amounts payable hereunder, the Company
may, from time to time, elect to pay additional interest (the “Additional
Interest”) to the Holder on this Note in connection with a waiver or amendment
to this Note, which Additional Interest shall be paid to the Holder in such
amounts, in such form and manner and at such times as set forth in such waiver
or amendment.

2.             Additional Interest.  In consideration of the Purchasers’
execution of this Amendment, on the Amendment Date the Company shall pay to each
Purchaser the Additional Interest (as defined in the Note, as amended hereby)
set forth opposite such Purchaser’s name on Schedule I hereto. Such Additional
Interest shall be paid to each Purchaser on the Amendment Date in shares of the
Company’s common stock.  The number of shares of common stock issuable to each
Purchaser on the Amendment Date with respect such Additional Interest is set
forth opposite such Purchaser’s name on Schedule I hereto (the “Shares”).  No
later than the third business day after the Amendment Date, the Company shall
deliver to each Purchaser a stock certificate with respect to the Shares issued
to such Purchaser pursuant to this Amendment.
 
3.             Purchaser Representations and Warranties.

Each Purchaser hereby, as to itself only and for no other Purchaser, represents
and warrants to the Company as follows:
 
3.1           Investment Intent.  Such Purchaser is acquiring the Shares as
principal for its own account for investment purposes and not with a view to
distributing or reselling such Shares or any part thereof in violation of
applicable securities laws, without prejudice, however, to such Purchaser’s
right at all times to sell or otherwise dispose of all or any part of such
Shares in compliance with applicable federal and state securities laws.  Nothing
contained herein shall be deemed a representation or warranty by such Purchaser
to hold the Shares for any period of time.  Such Purchaser understands that the
Shares have not been registered under the Securities Act of 1933, as amended
(the “Securities Act”), and therefore the Shares may not be sold, assigned or
transferred unless pursuant to (i) an effective registration statement under the
Securities Act with respect thereto or (ii) an available exemption from the
registration requirements of the Securities Act.
 

 
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3.2           Purchaser Status.  At the time such Purchaser was offered the
Shares, it was, and at the date hereof it is, an “accredited investor” as
defined in Rule 501(a) under the Securities Act.  Such Purchaser is not a
registered broker-dealer under Section 15 of the Securities Exchange Act of
1934, as amended.
 
3.3           Experience of such Purchaser.  Such Purchaser, either alone or
together with its representatives, has such knowledge, sophistication and
experience in business and financial matters so as to be capable of evaluating
the merits and risks of the prospective investment in the Shares, and has so
evaluated the merits and risks of such investment.  Such Purchaser is able to
bear the economic risk of an investment in the Shares and, at the present time,
is able to afford a complete loss of such investment.
 
3.4           Access to Data.  Such Purchaser has received and reviewed
information about the Company and has had an opportunity to discuss the
Company’s business, management and financial affairs with its management and to
review the Company’s facilities.  The foregoing, however, does not limit or
modify any provision in this Amendment or the right of the Purchasers to rely
thereon.
 
4.             Company Representations and Warranties.

Except as set forth on Schedule 1 delivered to the Purchasers with this
Amendment and substituting (where appropriate) the Company for Paradigm
Holdings, Inc., a Wyoming corporation (“Paradigm Wyoming”), the Company hereby
reaffirms as of the Amendment Date (except for representations and warranties
that speak as of a specific date) the representations and warranties, as
qualified by the disclosure schedule delivered to the Purchasers by Paradigm
Wyoming on May 26, 2010 (the “Disclosure Schedule”), made by Paradigm Wyoming to
the Purchasers in Article III of that certain Securities Purchase Agreement
dated May 26, 2010 among Paradigm Wyoming and the Purchasers (the “Securities
Purchase Agreement”).  For the avoidance of doubt, for purposes of this
Amendment, the “Notes” referenced in the definition of “Transaction Documents”
set forth in the Securities Purchase Agreement shall refer (if appropriate) to
the Notes (as defined in the recitals of this Amendment).  In addition, the
Company hereby further represents and warrants to the Purchasers as follows:

4.1           Organization and Qualification.  Each of the Company and the
Subsidiaries (as defined in the Securities Purchase Agreement as modified by
Schedule 1) is an entity duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, with the
requisite power and authority to own and use its properties and assets and to
carry on its business as currently conducted.  Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its respective
certificate or articles of incorporation or bylaws or other organizational or
charter documents.  Each of the Company and the Subsidiaries is duly qualified
to conduct business and is in good standing as a foreign corporation in each
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary, except where the failure to be so
qualified or in good standing, as the case may be, could not reasonably be
expected to, individually or in the aggregate, (i) adversely affect the
legality, validity or enforceability of any Transaction Document (as defined in
the Securities Purchase Agreement and which, for purposes of this Amendment
only, include this Amendment), (ii) have or result in a material adverse effect
on the results of operations, assets, prospects, business or condition
(financial or otherwise) of the Company and the Subsidiaries, taken as a whole,
or (iii) adversely impair the Company’s or any Subsidiary’s ability to perform
fully on a timely basis its obligations under any Transaction Document (any of
(i), (ii) or (iii), a “Material Adverse Effect”) and no Proceeding (as defined
in the Securities Purchase Agreement) has been instituted in any such
jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or
curtail such power and authority or qualification.

 
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4.2           Authorization; Enforcement.  The Company has the requisite
corporate power and authority to enter into and to consummate the transactions
contemplated by this Amendment and otherwise to carry out its obligations
hereunder.  The execution and delivery by the Company of this Amendment and the
consummation by it of the transactions contemplated hereunder have been duly
authorized by all necessary action on the part of the Company and no further
consent or action is required by the Company or its  Board of Directors or
shareholders.  This Amendment has been (or upon delivery will have been) duly
executed by the Company and when delivered in accordance with the terms hereof,
will constitute the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to (i) laws of general
application relating to bankruptcy, insolvency and the relief of debtors, or
(ii) rules of law governing specific performance, injunctive relief or other
equitable remedies.

4.3           No Conflicts.  Except as set forth on Schedule 1, the execution,
delivery and performance of the Amendment by the Company and the consummation by
it of the transactions contemplated hereby does not and will not (i) conflict
with or violate any provision of the Company’s or any Subsidiary’s articles of
incorporation or bylaws or other organizational or charter documents,
(ii) conflict with, or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, result in the creation of
any Lien (as defined in the Securities Purchase Agreement) upon any of the
properties or assets of the Company or any Subsidiary, or give to others any
rights of termination, amendment, acceleration or cancellation (with or without
notice, lapse of time or both) of, any agreement, credit facility, debt or other
instrument (evidencing a Company or Subsidiary debt or otherwise) or other
understanding to which the Company or any Subsidiary is a party or by which any
property or asset of the Company or any Subsidiary is bound or affected, or
(iii) result in a violation of any law, rule, regulation, order, judgment,
injunction, decree or other restriction of any Governmental Authority (as
defined in the Securities Purchase Agreement) to which the Company or a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of clause (i) or (ii) above, as could
not, reasonably be expected to have or result in, individually or in the
aggregate, a Material Adverse Effect.

4.4           Issuance of the Securities.  Assuming the accuracy of each
Purchaser’s representations and warranties set forth in this Amendment, as of
the date of issuance of the Shares, the Shares shall be duly authorized, validly
issued, fully paid and nonassessable and free of preemptive or similar rights. 
Assuming the accuracy of each Purchaser’s representations and warranties set
forth in this Amendment, as of the date of issuance of the Shares, (i) the
Shares shall have been issued in compliance with applicable securities laws,
rules and regulations and (ii) the issuance of the Shares contemplated hereby
shall not conflict with or violate any rules or regulations of the Trading
Market (as defined in the Securities Purchase Agreement).

5.             Other Agreements.

5.1           Transfer Restrictions

(a)           The Shares may only be disposed of pursuant to an effective
registration statement under the Securities Act or pursuant to an available
exemption from the registration requirements of the Securities Act, and in
compliance with any applicable state securities laws.  In connection with any
transfer of Shares other than pursuant to an effective registration statement or
to the Company, except as otherwise set forth herein, the Company may require
the transferor to provide to the Company an opinion of counsel selected by the
transferor, the form and substance of which opinion shall be reasonably
satisfactory to the Company, to the effect that such transfer does not require
registration under the Securities Act.  Notwithstanding the foregoing, the
Company hereby consents to and agrees to register on the books of the Company
and with its transfer agent, without any such legal opinion, any transfer of
Shares by a Purchaser to an Affiliate (as defined in the Securities Purchase
Agreement) of such Purchaser, provided that the transferee certifies to the
Company that it is an “accredited investor” as defined in Rule 501(a) under the
Securities Act.  As a condition of transfer, any such transferee shall agree in
writing to be bound by the terms of this Amendment (and any other applicable
Transaction Document) and shall have the rights of a Purchaser under this
Amendment.
 
 
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(b)           The Purchasers agree to the imprinting on any certificate
evidencing Shares, except as otherwise permitted by Section 5.1(c), of a
restrictive legend in substantially the form as follows, together with any
additional legend required by (i) any applicable state securities laws and
(ii) any securities exchange upon which such Shares may be listed:

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.  NOTWITHSTANDING THE
FOREGOING, THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.

(c)           Certificates evidencing Shares shall not be required to contain
the legend set forth in Section 5.1(b) (i) following any sale of such Shares
pursuant to an effective registration statement covering the resale of such
Shares under the Securities Act, (ii) following any sale of such Shares in
compliance with Rule 144, (iii) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the Staff of the Securities and Exchange Commission). 
The Company shall cause its counsel to issue a legal opinion to the Company’s
transfer agent promptly after the Effective Date (as defined in the Amended
Preferred Purchase Agreement (as defined in the Securities Purchase Agreement))
if required by the Company’s transfer agent to effect the removal of the legend
hereunder.  Following the Effective Date or at such earlier time as a legend is
no longer required for certain Shares, the Company will no later than three (3)
Trading Days (as defined in the Securities Purchase Agreement) following the
delivery by a Purchaser to the Company or the Company’s transfer agent of a
legended certificate representing such Shares, deliver or cause to be delivered
to such Purchaser a certificate representing such Shares that is free from all
restrictive and other legends.  The Company may not make any notation on its
records or give instructions to any transfer agent of the Company that enlarge
the restrictions on transfer set forth in Section 5.1(b).  For so long as any
Purchaser owns Shares, the Company will not effect or publicly announce its
intention to effect any exchange, recapitalization or other transaction that
effectively requires or rewards physical delivery of certificates evidencing the
shares of the Company’s common stock.
 
(d)           The Company acknowledges and agrees that a Purchaser may from time
to time pledge or grant a security interest in some or all of the Shares in
connection with a bona fide margin agreement secured by the Shares and, if
required under the terms of such agreement, such Purchaser may transfer pledged
or secured Shares to the pledgees or secured parties.  Such a pledge or transfer
would not be subject to approval of the Company and no legal opinion of the
pledgee, secured party or pledgor shall be required in connection therewith. 
Further, no notice shall be required of such pledge.  At the appropriate
Purchaser’s expense, the Company will execute and deliver such reasonable
documentation as a pledgee or secured party of Shares may reasonably request in
connection with a pledge or transfer of the Shares, including the preparation
and filing of any required prospectus supplement under Rule 424(b)(3) of the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of selling shareholders thereunder.

 
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6.             Ratification of IP Security Agreements

(a)           Each of the Company, Paradigm Solutions Corporation, Caldwell
Technology Solutions, LLC and Trinity Information Management Services hereby
ratify, confirm and reaffirm, all and singular, the terms and conditions of the
Copyright Security Agreement dated as of May 26, 2010 by the Grantors (as
defined therein) in favor of the Secured Parties (as defined in the Security
Agreement dated as of May 26, 2010 among the grantors listed on the signature
pages thereto and the secured parties listed on the signature pages thereto)
(the “Copyright Security Agreement”) and acknowledge, confirm and agree that the
Copyright Security Agreement contains an accurate and complete listing of all
Copyright Collateral as defined therein.
 
(b)           Each of the Company, Paradigm Solutions Corporation, Caldwell
Technology Solutions, LLC and Trinity Information Management Services hereby
ratify, confirm and reaffirm, all and singular, the terms and conditions of the
Patent Security Agreement dated as of May 26, 2010 by the Grantors (as defined
therein) in favor of the Secured Parties (the “Patent Security Agreement”) and
acknowledge, confirm and agree that the Patent Security Agreement contains an
accurate and complete listing of all Patent Collateral as defined therein.

(c)           Each of the Company, Paradigm Solutions Corporation, Caldwell
Technology Solutions, LLC and Trinity Information Management Services hereby
ratify, confirm and reaffirm, all and singular, the terms and conditions of the
Trademark Security Agreement dated as of May 26, 2010 by the Grantors (as
defined therein) in favor of the Secured Parties the “Trademark Security
Agreement”) and acknowledge, confirm and agree that the Trademark Security
Agreement contains an accurate and complete listing of all Trademark Collateral
as defined therein.

7.             Ratification of Perfection Certificate

The Company hereby ratifies, confirms and reaffirms, all and singular, the terms
and disclosures contained in a certain Perfection Certificate dated as of May 6,
2011 between the Company and the Purchasers, and acknowledges, confirms and
agrees the disclosures and information the Company provided to the Purchasers in
such Perfection Certificate have not changed, as of the date hereof, except that
the reference in Section 5(a) therein to “May 25, 2011” shall be deemed to be
updated to refer to “November 25, 2011”.  In addition, upon the making of the
payments described in Section 4(b) of that certain Sixth Loan Modification
Agreement among Silicon Valley Bank, the Company, Paradigm Solutions
Corporation, Caldwell Technology Solutions, LLC and Trinity Information
Management Services, the Purchasers acknowledge that such Perfection Certificate
shall be automatically amended such that the second reference in Section 5(a) to
$4,000,000 shall be deemed to be a reference to an amount equal to $4,000,000
minus the amount of such payments.

 
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8.             Miscellaneous.
 
8.1            Ratification.  The Company hereby ratifies, confirms, and
reaffirms all terms and conditions of all security or other collateral granted
to the Purchasers, and confirms that the indebtedness secured thereby includes,
without limitation, the principal and accrued but unpaid interest under the
Notes.

8.2           Continuing Validity.  The Company understands and agrees that in
modifying the Notes, the Purchasers are relying upon the Company’s
representations, warranties, and agreements, as set forth in the Notes.  Except
as expressly modified pursuant to this Amendment, the terms of the Notes remain
unchanged and in full force and effect.  Purchasers’ agreement to modifications
to the Notes pursuant to this Amendment in no way shall obligate the Purchasers
to make any future modifications to the Notes.  Nothing in this Amendment shall
constitute a satisfaction of the Notes.  

8.3           No Other Changes.  All terms of the Notes shall remain in full
force and effect as amended hereby.
 
8.4           Consent.  Each of the Purchasers consents to the amendment of that
certain Loan and Security Agreement dated March 13, 2007 among the Company,
Paradigm Solutions Corporation, Caldwell Technology Solutions, LLC, Trinity
Information Management Services and Silicon Valley Bank (the “Silicon Valley
Bank Loan Agreement”) as modified by that certain First Loan Modification
Agreement dated April 11, 2008, that certain Second Loan Modification Agreement
dated March 18, 2009, that certain Third Loan Modification Agreement dated May
4, 2009, that certain Fourth Loan Modification Agreement dated July 2, 2009,
that certain Fifth Loan Modification Agreement dated June 11, 2010 and that
certain Assumption Agreement dated May 6, 2011 to amend the definition of
“Maturity Date” in the Silicon Valley Bank Loan Agreement to be November 11,
2011.
  
8.5           Governing Law.   This Amendment shall be governed in all respects
by the internal laws of the State of New York as applied to agreements entered
into among New York residents to be performed entirely within the State of New
York, without regard to principles of conflicts of law.

8.6           Severability.  If any provision of this Amendment is held to be
invalid or unenforceable in any respect, the validity and enforceability of the
remaining terms and provisions of this Amendment shall not in any way be
affected or impaired thereby and the parties will attempt in good faith to agree
upon a valid and enforceable provision that is a reasonable substitute therefor,
and upon so agreeing, shall incorporate such substitute provision in this
Amendment.
 
            8.7          Counterparts.  This Amendment may be executed in any
number of counterparts and signatures may be delivered by facsimile or other
electronic means, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
 
[Signature Page Follows]

 
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IN WITNESS WHEREOF, the parties have caused this Amendment to Senior Secured
Subordinated Notes to be executed effective as of the date first set forth
above.
 

 
PARADIGM HOLDINGS, INC.
       
By:
/s/ Richard Sawchak
   
Richard Sawchak
   
Chief Financial Officer
       
HALE CAPITAL PARTNERS, LP
       
By:
/s/ Martin M. Hale, Jr.
   
Martin M. Hale, Jr.
   
Chief Executive Officer
       
EREF PARA, LLC
       
By:   Hale Fund Management, LLC, its Managing
 
Member
         
By:
/s/ Martin M. Hale, Jr.
   
Martin M. Hale, Jr.
   
Chief Executive Officer

 
 
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SCHEDULE I
 

Name Additional Interest Shares           Hale Capital Partners, LP $46,487
185,207 shares           EREF PARA, LLC $45,656 181,896 shares  

  
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