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

Exhibit 10.4

RATIFICATION OF SUBORDINATION AGREEMENT

May 6, 2011

Silicon Valley Bank
275 Grove Street, Suite 2-200
Newton, Massachusetts 02466

 
Re:
Loan arrangement with Paradigm Holdings, Inc., Paradigm Solutions Corporation,
Caldwell Technology Solutions, LLC and Trinity Information Management Services

To Whom It May Concern:

Reference is made to a certain loan arrangement entered into 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 275 Grove Street, Suite 2-200, Newton,
Massachusetts 02466 (“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 9715 Key West Avenue, Rockville, Maryland 20850 (“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 “Existing Borrower”), as evidenced
by, among other documents, a certain Loan and Security Agreement (working
capital line of credit) dated as of March 13, 2007, among Existing Borrower and
Bank, as affected by a certain Joinder Agreement dated as of July 5, 2007, as
further affected by a certain Joinder Agreement dated as of September 5, 2007,
as amended by a certain First Loan Modification Agreement dated as of August 11,
2008, as further amend by a certain Second Loan Modification Agreement dated as
of March 18, 2009, as further amended by a certain Third Loan Modification
Agreement dated as of May 4, 2009, as further amended by a certain Fourth Loan
Modification Agreement dated as of July 2, 2009, and as further amended by a
certain Fifth Loan Modification Agreement dated as of June 11, 2010 (together
with all documents executed in connection therewith or related thereto, as
affected and amended, collectively referred to herein as the “Loan
Agreement”).  Capitalized terms used but not otherwise defined herein shall have
the same meaning as in the Loan Agreement.

PARADIGM HOLDINGS, INC., a Nevada corporation (“New Borrower”), has merged with
Holdings and is the surviving legal entity of such merger.  Consequently,
Solutions, Caldwell, Trinity, New Borrower and Bank have entered into a certain
Assumption Agreement dated as of May 6, 2011 (the “Assumption Agreement”),
pursuant to which New Borrower assumes the rights and obligations of Holdings as
a co-borrower under the Loan Agreement.

Reference is further made to a certain Subordination Agreement dated as of May
26, 2010, by and among (a) Existing Borrower, (b) Bank and (c) Hale Capital
Partners, LP and EREF PARA, LLC (the parties referenced in (c) are collectively
referred to as the “Creditors”) (as amended, the “Subordination Agreement”).

In order to induce Bank to enter into the Assumption Agreement, the Creditors
hereby:
 

(a)            ratify, confirm and reaffirm, all and singular, the terms and
conditions of the Subordination Agreement;

(b)            consent to the terms of the Assumption Agreement;

(c)            acknowledge, confirm and agree that: (i) the Subordination
Agreement shall remain in full force and effect and shall in no way be limited
by the execution of the Assumption Agreement, or any other documents,
instruments and/or agreements executed and/or delivered in connection therewith,
and (ii) the Obligations under the Loan Agreement, as affected by the Assumption
Agreement, shall continue to constitute Senior Debt (as defined in the
Subordination Agreement);

 
 

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

 

(d)            acknowledge, confirm and agree that all references in the
Subordination Agreement to “Borrower” shall mean and include, collectively,
Solutions, Caldwell, Trinity and New Borrower; and

(e)            acknowledge, confirm and agree that (i) that certain Senior
Secured Subordinated Note issued by New Borrower to Hale Capital Partners, LP
dated as of May 26, 2010, and (ii) that certain Senior Secured Subordinated Note
issued by New Borrower to EREF PARA, LLC dated as of May 26, 2010, shall each be
deemed to be Transaction Documents (as defined in the Subordination Agreement).

In addition, on the date hereof, Creditors, New Borrower, Solutions, Caldwell
and Trinity are entering into a certain Assumption and Reaffirmation Agreement
(the “Creditor Assumption Agreement”).  In order to induce Creditors to enter
into the Creditor Assumption Agreement, Bank hereby:

(a)            ratifies, confirms and reaffirms, all and singular, the terms and
conditions of the Subordination Agreement;

(b)            consents to the terms of the Creditor Assumption Agreement;

(c)            acknowledges, confirms and agrees that the Subordination
Agreement shall remain in full force and effect and shall in no way be limited
by the execution of the Creditor Assumption Agreement, or any other documents,
instruments and/or agreements executed and/or delivered in connection therewith;
and

(d)            acknowledges, confirms and agrees that all references in the
Subordination Agreement to “Borrower” shall mean and include, collectively,
Solutions, Caldwell, Trinity and New Borrower.

 
 

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

 

 
Very truly yours,
       
HALE CAPITAL PARTNERS, LP
       
By:
s/Martin Hale
       
Name:
         
Title:
               
EREF PARA, LLC
       
By:
Hale Fund Management, LLC, its Managing Member
       
By:
s/Martin Hale
       
Name:
         
Title:
 

ACKNOWLEDGED AND AGREED:
       
PARADIGM HOLDINGS, INC.
       
By:
/s/Peter B. LaMontagne
       
Name:
Peter B. LaMontagne
       
Title:
President and CEO
             
PARADIGM SOLUTIONS CORPORATION
       
By:
/s/Peter B. LaMontagne
       
Name:
 Peter B. LaMontagne
       
Title:
 President and CEO
             
CALDWELL TECHNOLOGY SOLUTIONS LLC
       
By:
 /s/Peter B. LaMontagne
       
Name:
Peter B. LaMontagne
       
Title:
 Manager
             
TRINITY INFORMATION MANAGEMENT SERVICES
       
By:
/s/Peter B. LaMontagne
       
Name:
Peter B. LaMontagne
       
Title:
President and CEO
 

 
 

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

 

SILICON VALLEY BANK
       
By:
/s/Christine Egitto
       
Name:
Christine Egitto
       
Title:
Vice President
 

 
 

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