(Working
      Capital Line of Credit)

    


    LOAN
      AND SECURITY AGREEMENT

    


    This
      LOAN
      AND SECURITY AGREEMENT
      (this
“Agreement”) dated as of March 13, 2007, among (i) SILICON
      VALLEY BANK,
      a
      California chartered bank, 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 (FAX 617-969-5965) (“Bank”) and (ii) PARADIGM
      HOLDINGS, INC.,
      a
      Wyoming corporation, with offices at 9715 Key West Avenue, Rockville, Maryland
      20850 (FAX (240) 235-4380) (“Holdings”) and PARADIGM
      SOLUTIONS CORPORATION,
      a
      Maryland corporation, with offices at 9715 Key West Avenue, Rockville, Maryland
      20850 (FAX (240) 235-4380) (“Solutions”) (hereinafter,
      Holdings and Solutions are jointly and severally, individually and collectively,
      referred to as “Borrower”),
      provides the terms on which Bank shall lend to Borrower and Borrower shall
      repay
      Bank. The parties agree as follows:

    


    1 ACCOUNTING
      AND OTHER TERMS

    


    Accounting
      terms not defined in this Agreement shall be construed following GAAP.
      Calculations and determinations must be made following GAAP. The term “financial
      statements” includes the notes and schedules. The terms “including” and
“includes” always mean “including (or includes) without limitation,” in this or
      any Loan Document. Capitalized terms in this Agreement shall have the meanings
      set forth in Section 13. All other terms contained in this Agreement, unless
      otherwise indicated, shall have the meanings provided by the Code, to the extent
      such terms are defined therein.

    


    2 LOAN
      AND TERMS OF PAYMENT

    


    2.1 Promise
      to Pay.
      Borrower hereby unconditionally promises to pay Bank the unpaid principal amount
      of all Advances hereunder with all interest, fees and finance charges due
      thereon as and when due in accordance with this Agreement.

    


    2.1.1 Financing
      of Accounts.

    


    (a) Availability.
      Subject
      to the terms of this Agreement, Borrower may request that Bank finance specific
      Federal Agency Accounts, Subcontractor Accounts, Unbilled Accounts and HUD
      Accounts. Bank may, in its good faith business discretion in each instance,
      finance such Federal Agency Accounts, Subcontractor Accounts, Unbilled Accounts
      and HUD Accounts by extending credit to Borrower in an amount equal to the
      result of the Advance Rate multiplied by the face amount of the Federal Agency
      Account (a “Federal Agency Account Advance”), Subcontractor Account (a
“Subcontractor Account Advance”), Unbilled Account (an “Unbilled Account
      Advance”), and/or HUD Account (a “HUD Account Advance”) (any
      Federal Agency Account Advance, Subcontractor Account Advance, Unbilled Account
      Advance, or HUD Account Advance shall be referred to as an
“Advance”).
      Bank
      may, in its sole discretion, change the percentage of the Advance Rate for
      a
      particular Federal Agency Account, Subcontractor Account, Unbilled Account,
      or
      HUD Account on a case by case basis. When Bank makes an Advance, the Federal
      Agency Account, Subcontractor Account, Unbilled Account and/or HUD Account
      becomes a “Financed Receivable.”

    


    (b) Maximum
      Advances; Sublimits; Overadvance.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (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).

    


    (ii) The
      aggregate face amount of all Financed Receivables outstanding at any time based
      upon HUD Accounts may not exceed the HUD Facility Amount. Accordingly, the
      aggregate amount of all HUD Account Advances outstanding at any time may not
      exceed Five Million Dollars ($5,000,000.00). In addition, the aggregate amount
      of all Unbilled HUD Account Advances outstanding at any time may not exceed
      Four
      Million Dollars ($4,000,000.00); provided, that, after June 30, 2007, the
      aggregate amount of all Unbilled HUD Account Advances outstanding at any time
      may not exceed One Million Dollars ($1,000,000.00). On and after July 31, 2007,
      the aggregate amount of all HUD Account Advances outstanding at any time may
      not
      exceed Two Million Dollars ($2,000,000.00).

    


    (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.

    


    (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). 

    


    (v) Overadvances.
      If,
      at
      any time, Borrower’s Obligations exceed what is permitted by this Section
      2.1.1(b), then Borrower shall immediately pay to Bank such excess, and Borrower
      hereby irrevocably authorizes Bank to debit any of Borrower’s accounts for such
      payment.

    


    (c) Borrowing
      Procedure.
      Borrower will deliver an Invoice Transmittal for each Federal Agency Account,
      Subcontractor Account, Unbilled Account and HUD Accounts it offers. Bank may
      rely on information set forth in or provided with the Invoice Transmittal.
      

    


    (d) Credit
      Quality; Confirmations.
      Bank
      may, at its option, conduct a credit check of the Account Debtor for each
      Account requested by Borrower for financing hereunder in order to approve any
      such Account Debtor’s credit before agreeing to finance such Account. Bank may
      also, after consultation with Borrower, verify directly with the respective
      Account Debtors the validity, amount and other matters relating to the Accounts
      (including confirmations of Borrower’s representations in Sections 5.3, 5.4
      and/or 5.5) by means of mail, telephone or otherwise, either in the name of
      Borrower or Bank from time to time in its sole discretion. 

    


    (e) Accounts
      Notification/Collection.
      Bank
      may notify any Person owing Borrower money of Bank’s security interest in the
      funds and verify and/or collect the amount of the Account.

    


    (f) Early
      Termination.
      This
      Agreement may be terminated prior to the Maturity Date as follows: (i) by
      Borrower, effective three Business Days after written notice of termination
      is
      given to Bank; or (ii) by Bank at any time after the occurrence of an Event
      of
      Default, without notice, effective immediately. If this Agreement is terminated
      on or prior to the Anniversary Date (as hereinafter defined) (A) by Bank in
      accordance with clause (ii) in the foregoing sentence, or (B) by Borrower for
      any reason, Borrower shall pay to Bank a termination fee in an amount equal
      to
      One Hundred Thousand Dollars ($100,000.00) (the “Early Termination Fee”). The
      Early Termination Fee shall be due and payable on the effective date of such
      termination and thereafter shall bear interest at a rate equal to the highest
      rate applicable to any of the Obligations. Notwithstanding the foregoing, Bank
      agrees to waive the Early Termination Fee if Bank agrees to refinance and
      redocument this Agreement under another division of Bank (in its sole and
      exclusive discretion) prior to the Maturity Date.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    (g) Maturity.
      This
      Agreement shall terminate and all Obligations outstanding hereunder shall be
      immediately due and payable on the Maturity Date. In addition, Borrower’s
      ability to request HUD Account Advances shall terminate on the HUD Maturity
      Date, and all Obligations outstanding hereunder pertaining to HUD Account
      Advances shall be immediately due and payable on the HUD Maturity Date. In
      addition, Borrower’s ability to request Advances based upon Unbilled IRS
      Accounts shall terminate on September 30, 2007, and all Obligations outstanding
      hereunder pertaining to such Advances shall be immediately due and payable
      on
      September 30, 2007.

    


    (h) Suspension
      of Advances.
      Borrower’s ability to request that Bank finance Federal Agency Accounts,
      Subcontractor Accounts, Unbilled Accounts and HUD Accounts hereunder will
      terminate if there has been a material adverse change in the general affairs,
      management, results of operation, condition (financial or otherwise) or the
      prospect of repayment of the Obligations, or there has been any material adverse
      deviation by Borrower from the most recent business plan of Borrower presented
      to and accepted by Bank prior to the execution of this Agreement.

    


    2.2 Collections,
      Finance Charges, Remittances and Fees.
      The
      Obligations shall be subject to the following fees and Finance Charges. Unpaid
      fees and Finance Charges may, in Bank’s discretion, accrue interest and fees as
      described in Section 9.2 hereof.

    


    2.2.1 Collections.
      Collections will be credited to the Financed Receivable Balance for such
      Financed Receivable, but if there is an Event of Default, Bank may apply
      Collections to the Obligations in any order it chooses. If Bank receives a
      payment for both a Financed Receivable and a non-Financed Receivable, the funds
      will first be applied to the Financed Receivable and, if there is no Event
      of
      Default then existing, the excess will be remitted to Borrower, subject to
      Section 2.2.7. 

    


    2.2.2 Loan
      Fees.

    


    (a) A
      fully
      earned, non-refundable facility fee of Seventy Five Thousand Dollars
      ($75.000.00) is due upon execution of this Agreement (the “Facility
      Fee”).

    


    (b) A
      fully
      earned, non-refundable anniversary fee of Seventy
      Five Thousand Dollars ($75.000.00) (the
      “Anniversary Fee”) shall be earned as of the date hereof, and shall be payable
      on the earlier to occur of (i) the date that is one year from the Closing Date
      (the “Anniversary Date”), (ii) the occurrence of an Event of Default, or (iii)
      the early termination of this Agreement.

    


    (c) A
      fully
      earned, non-refundable success fee of Seventy
      Five Thousand Dollars ($75.000.00)
      (the
“Success Fee”) shall be earned as of the date hereof, and shall be payable on
      the earlier to occur of (i) July 31, 2007, (ii) the occurrence of an Event
      of
      Default, (iii) the early termination of this Agreement, or (iv) the prepayment
      of all outstanding HUD Account Advances.

    


    The
      Facility Fee, Anniversary Fee and the Success Fee are hereinafter collectively
      referred to as the “Loan Fees”.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    2.2.3 Finance
      Charges.
      In
      computing Finance Charges on the Obligations under this Agreement, all
      Collections received by Bank shall be deemed applied by Bank on account of
      the
      Obligations three (3) Business Days after receipt of the Collections. Borrower
      will pay a finance charge (the “Finance Charge”) on each Financed Receivable
      which is equal to the Applicable Rate divided
      by
      360
multiplied
      by
      the
      number of days each such Financed Receivable is outstanding multiplied
      by
      the
      outstanding Financed Receivable Balance. The Finance Charge is payable when
      the
      Advance made based on such Financed Receivable is payable in accordance with
      Section 2.3 hereof. After an Event of Default, the Applicable Rate will increase
      an additional four percent (4.0%) per annum effective immediately upon the
      occurrence of such Event of Default. In the event that the aggregate amount
      of
      Finance Charges and Collateral Handling Fees earned by Bank in any
      Reconciliation Period based solely upon Federal Agency Account Advances,
      Subcontractor Account Advances and Unbilled Account Advances is less than the
      Minimum Finance Charge, Borrower shall pay to Bank an additional Finance Charge
      equal to (i) the Minimum Finance Charge minus (ii) the aggregate amount of
      all
      Finance Charges and Collateral Handling Fees earned by Bank in such
      Reconciliation Period based solely upon Federal Agency Account Advances,
      Subcontractor Account Advances and Unbilled Account Advances. Such additional
      Finance Charge shall be payable on the first day of the next Reconciliation
      Period.

    


    2.2.4 Collateral
      Handling Fee.
      Borrower will pay to Bank a collateral handling fee equal to (a) 0.125% per
      month of the Financed Receivable Balance for each Financed Receivable
      outstanding based upon Federal Agency Accounts, Subcontractor Accounts and
      Unbilled Accounts based upon a 360 day year, and (b) 0.25% per month of the
      Financed Receivable Balance for Financed Receivables outstanding based upon
      HUD
      Accounts based upon a 360 day year (the “Collateral Handling Fee”). This fee is
      charged on a daily basis which is equal to the Collateral Handling Fee divided
      by 30, multiplied by the number of days each such Financed Receivable is
      outstanding, multiplied by the outstanding Financed Receivable Balance. The
      Collateral Handling Fee is payable when the Advance made based on such Financed
      Receivable is payable in accordance with Section 2.3 hereof. In computing
      Collateral Handling Fees under this Agreement, all Collections received by
      Bank
      shall be deemed applied by Bank on account of Obligations three (3) Business
      Days after receipt of the Collections. After an Event of Default, the Collateral
      Handling Fee will increase an additional 0.50% effective immediately upon such
      Event of Default. 

    


    2.2.5 Accounting.
      After
      each Reconciliation Period, Bank will provide an accounting of the transactions
      for that Reconciliation Period, including the amount of all Financed
      Receivables, all Collections, Adjustments, Finance Charges, Collateral Handling
      Fee and the Loan Fees. If Borrower does not object to the accounting in writing
      within thirty (30) days it shall be considered accurate. All Finance Charges
      and
      other interest and fees are calculated on the basis of a 360 day year and actual
      days elapsed.

    


    2.2.6 Deductions.
      Bank
      may deduct fees, Finance Charges, Advances which become due pursuant to Section
      2.3, and other amounts due pursuant to this Agreement from any Advances made
      or
      Collections received by Bank.

    


    2.2.7 Lockbox;
      Account Collection Services.
      

    


    (a) As
      and
      when directed by Bank from time to time, at Bank’s option and at the sole and
      exclusive discretion of Bank (regardless of whether an Event of Default has
      occurred), Borrower shall direct each Account Debtor (and each depository
      institution where proceeds of Accounts are on deposit) to remit payments with
      respect to the Accounts to a lockbox account established with Bank or to wire
      transfer payments to a cash collateral account that Bank controls (collectively,
      the “Lockbox”). It will be considered an immediate Event of Default if the
      Lockbox is not set-up and operational within forty-five (45) days from Bank’s
      request.

    


    (b) Until
      such Lockbox is established, the proceeds of the Accounts shall be paid by
      the
      Account Debtors to an address consented to by Bank. Upon receipt by Borrower
      of
      such proceeds, Borrower shall immediately transfer and deliver same to Bank,
      along with a detailed cash receipts journal. Provided no Event of Default exists
      or an event that with notice or lapse of time will be an Event of Default,
      within three (3) days of receipt of such amounts by Bank, Bank will turn over
      to
      Borrower the proceeds of the Accounts other than Collections with respect to
      Financed Receivables and the amount of Collections in excess of the amounts
      for
      which Bank has made an Advance to Borrower, less any amounts due to Bank, such
      as the Finance Charge, the Loan Fees, payments due to Bank, other fees and
      expenses, or otherwise; provided, however, Bank may hold such excess amount
      with
      respect to Financed Receivables as a reserve until the end of the applicable
      Reconciliation Period if Bank, in its discretion, determines that other Financed
      Receivable(s) may no longer qualify as a Federal Agency Account, Subcontractor
      Account, Unbilled Account, or HUD Account at any time prior to the end of the
      subject Reconciliation Period. This Section does not impose any affirmative
      duty
      on Bank to perform any act other than as specifically set forth herein. All
      Accounts and the proceeds thereof are Collateral and if an Event of Default
      occurs, Bank may apply the proceeds of such Accounts to the
      Obligations.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    2.2.8 Good
      Faith Deposit.
      Borrower has paid to Bank a deposit of Fifty Thousand Dollars ($50,000.00)
      (the
“Good Faith Deposit”) to initiate Bank’s due diligence review process. Any
      portion of the Good Faith Deposit not utilized to pay Bank Expenses will be
      applied to the Facility Fee.

    


    2.3 Repayment
      of Obligations; Adjustments.

    


    2.3.1 Repayment.

    


    (a) Borrower
      will repay each Federal Agency Account Advance and/or Subcontractor Account
      Advance on the earliest of: (i) the date on which payment is received on or
      with
      respect to the Financed Receivable with respect to which the Federal Agency
      Account Advance or Subcontractor Account Advance was made, (ii) the date on
      which the Financed Receivable is no longer a Federal Agency Account or a
      Subcontractor Account, (iii) the date on which any Adjustment is asserted to
      the
      Financed Receivable (but only to the extent of the Adjustment if the Financed
      Receivable remains otherwise a Federal Agency Account or a Subcontractor
      Account), (iv) the date on which there is a breach of any warranty or
      representation set forth in Section 5.3, (v) with respect to Advances made
      based
      upon Unbilled IRS Accounts, September 30, 2007, or (vi) the Maturity Date
      (including any early termination). Each payment will also include all accrued
      Finance Charges and Collateral Handling Fees with respect to such Federal Agency
      Account Advance or Subcontractor Account Advance and all other amounts then
      due
      and payable hereunder.

    


    (b) Borrower
      will repay each Unbilled Account Advance on the earliest of: (i) the date on
      which payment is received on or with respect to the Financed Receivable with
      respect to which the Unbilled Account Advance was made, (ii) the date on which
      the Financed Receivable is no longer an Unbilled Account (including, without
      limitation, as a result of such Unbilled Account not being billed within thirty
      (30) days of the applicable Unbilled Account Advance), (iii) the date on which
      Borrower issues an invoice with respect to such Unbilled Account; (iv) the
      date
      on which any Adjustment is asserted to the Financed Receivable (but only to
      the
      extent of the Adjustment if the Financed Receivable remains otherwise an
      Unbilled Account), (v) the date on which there is a breach of any warranty
      or
      representation set forth in Section 5.4, or (vi) the Maturity Date (including
      any early termination). Each payment will also include all accrued Finance
      Charges and Collateral Handling Fees with respect to such Unbilled Account
      Advance and all other amounts then due and payable hereunder.

    


    (c) Borrower
      will repay each HUD Account
      Advance
      on the earliest of: (i) if
      the
      HUD Account
      Advance
      is an Unbilled HUD Account
      Advance,
      upon Borrower’ s issuance of an invoice based upon such contract, (ii)
the
      date
      on which there is a breach of any warranty or representation set forth in
      Section 5.5 or a breach of any covenant in this Agreement, (iii) the Maturity
      Date (including any early termination), or (iv) the applicable HUD Maturity
      Date
      (including any early termination). Each payment will also include all accrued
      Finance Charges and Collateral Handling Fees with respect to such HUD
Account
      Advance
      and all other amounts then due and payable hereunder.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    2.3.2 Repayment
      on Event of Default.
      When
      there is an Event of Default, Borrower will, if Bank demands (or, upon the
      occurrence of an Event of Default under Section 8.5, immediately without notice
      or demand from Bank) repay all of the Advances. The demand may, at Bank’s
      option, include the Advance for each Financed Receivable then outstanding and
      all accrued Finance Charges, the Early Termination Fee, Collateral Handling
      Fee,
      attorneys’ and professional fees, court costs and expenses, and any other
      Obligations.

    


    2.3.3 Debit
      of Accounts.
      Bank
      may debit any of Borrower’s deposit accounts for payments or any amounts
      Borrower owes Bank hereunder. Bank shall promptly notify Borrower when it debits
      Borrower’s accounts. These debits shall not constitute a set-off.

    


    2.3.4 Adjustments.
      If at
      any time during the term of this Agreement any Account Debtor asserts an
      Adjustment or if Borrower issues a credit memorandum or if any of the
      representations, warranties or covenants set forth in Sections 5.3, 5.4 and
      5.5
      are no longer true in all material respects, Borrower will promptly advise
      Bank.


    


    2.4 Power
      of Attorney.
      Borrower irrevocably appoints Bank and its successors and assigns as
      attorney-in-fact and authorizes Bank, to: (a) following the occurrence of an
      Event of Default, (i) sell, assign, transfer, pledge, compromise, or discharge
      all or any part of the Financed Receivables; (ii) demand, collect, sue, and
      give
      releases to any Account Debtor for monies due and compromise, prosecute, or
      defend any action, claim, case or proceeding about the Financed Receivables,
      including filing a claim or voting a claim in any bankruptcy case in Bank’s or
      Borrower’s name, as Bank chooses; and (iii) prepare, file and sign Borrower’s
      name on any notice, claim, assignment, demand, draft, or notice of or
      satisfaction of lien or mechanics’ lien or similar document; and
      (b) regardless of whether there has been an Event of Default, (i) notify
      all Account Debtors to pay Bank directly; (ii) receive, open, and dispose of
      mail addressed to Borrower; (iii) endorse Borrower’s name on checks or other
      instruments (to the extent necessary to pay amounts owed pursuant to this
      Agreement); and (iv) execute on Borrower’s behalf any instruments, documents,
      financing statements to perfect Bank’s interests in the Financed Receivables and
      Collateral and do all acts and things necessary or expedient, as determined
      solely and exclusively by Bank, to protect or preserve, Bank’s rights and
      remedies under this Agreement, as directed by Bank.

    


    3 CONDITIONS
      OF LOANS

    


    3.1 Conditions
      Precedent to Initial Advance.
      Bank’s
      agreement to make the initial Advance is subject to the condition precedent
      that
      each Borrower shall consent to or shall have delivered, in form and substance
      satisfactory to Bank, such documents, and completion of such other matters,
      as
      Bank may reasonably deem necessary or appropriate, including, without
      limitation:

    


    (a) a
      certificate of the Secretary of Borrower with respect to articles, bylaws,
      incumbency and resolutions authorizing the execution and delivery of this
      Agreement;

    


    (b) an
      Intellectual Property Security Agreement;

    


    (c) subordination
      agreements/intercreditor agreements by certain Persons;

    


    (d) Perfection
      Certificate by Borrower;

    


    (e) a
      legal
      opinion of Borrower’s counsel (authority/enforceability), in form and substance
      acceptable to Bank;

    


    (f) Trigger
      Event Agreement;

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (g) completion
      of the Initial Audit;

    


    (h) Account
      Control Agreement/ Investment Account Control Agreement;

    


    (i) evidence
      satisfactory to Bank that the insurance policies required by Section 6.5 hereof
      are in full force and effect, together with appropriate evidence showing lender
      loss payable and/or additional insured clauses or endorsements in favor of
      Bank;

    


    (j) payoff
      letter from Chevy Chase Bank;

    


    (k) payment
      of the fees and Bank Expenses then due and payable;

    


    (l) Certificates
      of Foreign Qualification (as applicable); 

    


    (m) Certificate
      of Good Standing/Legal Existence; and

    


    (n) such
      other documents, and completion of such other matters, as Bank may reasonably
      deem necessary or appropriate.

    


    3.2 Conditions
      Precedent to all Advances.
      Bank’s
      agreement to make each Advance, including the initial Advance, is subject to
      the
      following:

    


    (a) receipt
      of the Invoice Transmittal;

    


    (b) Bank
      shall have (at its option) conducted the confirmations and verifications as
      described in Section 2.1.1(d); and

    


    (c) each
      of
      the representations and warranties in Section 5 shall be true on the date of
      the
      Invoice Transmittal and on the effective date of each Advance and no Event
      of
      Default shall have occurred and be continuing, or result from the Advance.
      Each
      Advance is Borrower’s representation and warranty on that date that the
      representations and warranties in Section 5 remain true.

    


    4 CREATION
      OF SECURITY INTEREST

    


    4.1 Grant
      of Security Interest.
      Borrower hereby grants Bank, to secure the payment and performance in full
      of
      all of the Obligations and the performance of each of Borrower’s duties under
      the Loan Documents, a continuing security interest in, and pledges and assigns
      to Bank, the Collateral, wherever located, whether now owned or hereafter
      acquired or arising, and all proceeds and products thereof. Borrower warrants
      and represents that the security interest granted herein shall be a first
      priority security interest in the Collateral. 

    


    If
      the
      Agreement is terminated, Bank’s lien and security interest in the Collateral
      shall continue until Borrower fully satisfies its Obligations. If Borrower
      shall
      at any time, acquire a commercial tort claim, Borrower shall promptly notify
      Bank in a writing signed by Borrower of the brief details thereof and grant
      to
      Bank in such writing a security interest therein and in the proceeds thereof,
      all upon the terms of this Agreement, with such writing to be in form and
      substance satisfactory to Bank.

    


    4.2 Authorization
      to File Financing Statements.
      Borrower hereby authorizes Bank to file financing statements, without notice
      to
      Borrower, with all appropriate jurisdictions in order to perfect or protect
      Bank’s interest or rights hereunder, which financing statements may indicate the
      Collateral as “all assets of the Debtor” or words of similar effect, or as being
      of an equal or lesser scope, or with greater detail, all in Bank’s discretion,
      and may include a notice that any disposition of the Collateral, by Borrower
      or
      any other Person, shall be deemed to violate the rights of Bank under the
      Code.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    5 REPRESENTATIONS
      AND WARRANTIES

    


    Borrower
      represents and warrants as follows: 

    


    5.1 Due
      Organization and Authorization.
      Borrower and each of its Subsidiaries are duly existing and in good standing
      as
      Registered Organizations in their respective jurisdictions of formation and
      are
      qualified and licensed to do business and are in good standing in any
      jurisdiction in which the conduct of their respective business or ownership
      of
      property requires that they be qualified except where the failure to do so
      could
      not reasonably be expected to have a material adverse effect on Borrower’s
      business. In connection with this Agreement, Borrower has delivered to Bank
      completed certificates signed by each Borrower (the “Perfection Certificate”).
      Borrower represents and warrants to Bank that: (a) Borrower’s exact legal name
      is that indicated on the Perfection Certificate and on the signature page
      hereof; (b) Borrower is an organization of the type and is organized in the
      jurisdiction set forth in the Perfection Certificate; (c) the Perfection
      Certificate accurately sets forth Borrower’s organizational identification
      number or accurately states that Borrower has none; (d) the Perfection
      Certificate accurately sets forth Borrower’s place of business, or, if more than
      one, its chief executive office as well as Borrower’s mailing address (if
      different than its chief executive office); (e) except as set forth on the
      Perfection Certificate, Borrower (and each of its predecessors) has not, in
      the
      past five (5) years, changed its jurisdiction of formation, organizational
      structure or type, or any organizational number assigned by its jurisdiction;
      and (f) all other information set forth on the Perfection Certificate pertaining
      to Borrower and each of its Subsidiaries is accurate and complete (it being
      understood and agreed that Borrower may from time to time update certain
      information in the Perfection Certificate after the Closing Date to the extent
      permitted by one or more specific provisions in this Agreement). If Borrower
      is
      not now a Registered Organization but later becomes one, Borrower shall promptly
      notify Bank of such occurrence and provide Bank with Borrower’s organizational
      identification number.

    


    The
      execution, delivery and performance by Borrower of the Loan Documents to which
      it is a party have been duly authorized, and do not (i) conflict with any of
      Borrower’s organizational documents, (ii) contravene, conflict with,
      constitute a default under or violate any material Requirement of Law,
      (iii) contravene, conflict or violate any applicable order, writ, judgment,
      injunction, decree, determination or award of any Governmental Authority by
      which Borrower or any its Subsidiaries or any of their property or assets may
      be
      bound or affected, (iv) require any action by, filing, registration, or
      qualification with, or approval from any Governmental Authority (except such
      approvals which have already been obtained and are in full force and effect),
      or
      (v) constitute an event of default under any material agreement by which
      Borrower is bound. Borrower is not in default under any agreement to which
      it is
      a party or by which it is bound in which the default could have a material
      adverse effect on Borrower’s business.

    


    5.2 Collateral.
      Borrower has good title, has rights in, and the power to transfer each item
      of
      the Collateral upon which it purports to grant a Lien hereunder, free and clear
      of any and all Liens except Permitted Liens. Borrower has no deposit accounts
      other than the deposit accounts with Bank, the deposit accounts, if any,
      described in the Perfection Certificate delivered to Bank in connection
      herewith, or of which Borrower has given Bank notice and taken such actions
      as
      are necessary to give Bank a perfected security interest therein. The Accounts
      are bona fide, existing obligations of the Account Debtors.

    


    The
      Collateral is not in the possession of any third party bailee (such as a
      warehouse) except as otherwise provided in the Perfection Certificate. None
      of
      the components of the Collateral shall be maintained at locations other than
      as
      provided in the Perfection Certificate or as Borrower has given Bank notice
      pursuant to Section 7.2. In the event that Borrower, after the date hereof,
      intends to store or otherwise deliver any portion of the Collateral to a bailee,
      then Borrower will first receive the written consent of Bank and such bailee
      must execute and deliver a bailee agreement in form and substance satisfactory
      to Bank in its sole discretion. 

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    All
      Inventory is in all material respects of good and marketable quality, free
      from
      material defects.

    


    Borrower
      is the sole owner of its intellectual property, except for non-exclusive
      licenses granted to its customers in the ordinary course of business. Each
      patent is valid and enforceable, and no part of the intellectual property has
      been judged invalid or unenforceable, in whole or in part, and to the best
      of
      Borrower’s knowledge, no claim has been made that any part of the intellectual
      property violates the rights of any third party except to the extent such claim
      could not reasonably be expected to have a material adverse effect on Borrower’s
      business. Except as noted on the Perfection Certificate, Borrower is not a
      party
      to, nor is bound by, and license or other agreement with respect to which
      Borrower is licensee that prohibits or otherwise restricts Borrower from
      granting a security interest in Borrower’s interest in such license or agreement
      or any other property. Borrower shall provide written notice to Bank within
      ten
      (10) days of entering or becoming bound by any such license or agreement which
      is reasonably likely to have a material impact on Borrower’s business or
      financial condition (other than over-the-counter software that is commercially
      available to the public). Borrower shall take such steps as Bank requests to
      obtain the consent of, or waiver by, any person whose consent or waiver is
      necessary for all such licenses or contract rights to be deemed “Collateral” and
      for Bank to have a security interest in it that might otherwise be restricted
      or
      prohibited by law or by the terms of any such license or agreement (such consent
      or authorization may include a licensor’s agreement to a contingent assignment
      of the license to Bank if Bank determines that is necessary in its good faith
      judgment), whether now existing or entered into in the future.

    


    Without
      prior consent from Bank, Borrower shall not enter into, or become bound by,
      any
      such license or agreement which is reasonably likely to have a material impact
      on Borrower’s business or financial condition. Borrower shall take such steps as
      Bank requests to obtain the consent of, or waiver by, any person whose consent
      or waiver is necessary for all such licenses or contract rights to be deemed
      “Collateral” and for Bank to have a security interest in it that might otherwise
      be restricted or prohibited by law or by the terms of any such license or
      agreement, whether now existing or entered into in the future.

    


    5.3 Representations
      Regarding Financed Receivables Based Upon Federal Agency Accounts and
      Subcontractor Accounts.
      Borrower represents and warrants for each Financed Receivable based upon Federal
      Agency Accounts and Subcontractor Accounts:

    


    (a) Each
      Financed Receivable is an Federal Agency Account or Subcontractor
      Account;

    


    (b) Borrower
      is the owner with legal right to sell, transfer, assign and encumber such
      Financed Receivable;

    


    (c) The
      correct amount is on the Invoice Transmittal and is not disputed;

    


    (d) Payment
      is not contingent on any obligation or contract and Borrower has fulfilled
      all
      its obligations as of the Invoice Transmittal date;

    


    (e) Each
      Financed Receivable is based on an actual sale and delivery of goods and/or
      services rendered, is due to Borrower, is not past due or in default, has not
      been previously sold, assigned, transferred, or pledged and is free of any
      liens, security interests and encumbrances other than Permitted
      Liens;

    


    (f) There
      are
      no defenses, offsets, counterclaims or agreements for which the Account Debtor
      may claim any deduction or discount;

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (g) Borrower
      reasonably believes no Account Debtor is insolvent or subject to any Insolvency
      Proceedings; 

    


    (h) Borrower
      has not filed or had filed against it Insolvency Proceedings and does not
      anticipate any filing;

    


    (i) Bank
      has
      the right to endorse and/ or require Borrower to endorse all payments received
      on Financed Receivables and all proceeds of Collateral; and

    


    (j) No
      representation, warranty or other statement of Borrower in any certificate
      or
      written statement given to Bank contains any untrue statement of a material
      fact
      or omits to state a material fact necessary to make the statement contained
      in
      the certificates or statement not misleading.

    


    5.4 Representations
      Regarding Financed Receivables Based Upon Unbilled
      Accounts.
      Borrower represents and warrants for each Financed Receivable based upon
      Unbilled Accounts that
      the
      estimated face value amount determined by Borrower is based upon the best
      information available to Borrower and accurately and fully (considering all
      known discounts available to each such Account Debtor) reflects same. In
      addition, Borrower represents and warrants that there are no discounts, offsets
      or other rights of any Account Debtor under any Unbilled Account.

    


    5.5 Representations
      Regarding Financed Receivables Based Upon HUD Accounts. Borrower
      represents and warrants for each Financed Receivable based upon HUD Accounts
      that
      either
      (a) with respect to Financed Receivables based upon Unbilled HUD Account
      Advances, the estimated face value amount determined by Borrower is based upon
      the best information available to Borrower and accurately and fully (considering
      all known discounts available to each such Account Debtor) reflects same, and
      that there are no discounts, offsets or other rights of any Account Debtor
      under
      any Unbilled Account, and (b) with respect to Financed Receivables based upon
      Billed HUD Account
      Advances,
      such Billed HUD Account is due and owing from the United States Department
      of
      Housing and Urban Development pursuant to a binding contract between Borrower
      and the United States Department of Housing and Urban Development and is an
      Eligible Account hereunder.

    


    5.6 Litigation.
      There
      are no actions or proceedings pending or, to the knowledge of Borrower’s
      Responsible Officers or legal counsel, threatened by or against Borrower or
      any
      Subsidiary in which an adverse decision could reasonably be expected to cause
      a
      Material Adverse Change.

    


    5.7 No
      Material Deviation in Financial Statements.
      All
      consolidated financial statements for Borrower and any Subsidiary delivered
      to
      Bank fairly present in all material respects Borrower’s consolidated financial
      condition and Borrower’s consolidated results of operations. There has not been
      any material deterioration in Borrower’s consolidated financial condition since
      the date of the most recent financial statements submitted to Bank.

    


    5.8 Solvency.
      The
      fair salable value of Borrower’s assets (including goodwill minus disposition
      costs) exceeds the fair value of its liabilities; Borrower is not left with
      unreasonably small capital after the transactions in this Agreement; and
      Borrower is able to pay its debts (including trade debts) as they
      mature.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    5.9 Regulatory
      Compliance.
      Borrower is not an “investment company” or a company “controlled” by an
“investment company” under the Investment Company Act. Borrower is not engaged
      as one of its important activities in extending credit for margin stock (under
      Regulations X, T and U of the Federal Reserve Board of Governors). Borrower
      has
      complied in all material respects with the Federal Fair Labor Standards Act.
      Borrower has not violated any laws, ordinances or rules, the violation of which
      could reasonably be expected to cause a Material Adverse Change. None of
      Borrower’s or any Subsidiary’s properties or assets has been used by Borrower or
      any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in
      disposing, producing, storing, treating, or transporting any hazardous substance
      other than legally. Borrower and each Subsidiary have timely filed all required
      tax returns and paid, or made adequate provision to pay, all material taxes,
      except those being contested in good faith with adequate reserves under GAAP.
      Borrower and each Subsidiary have obtained all consents, approvals and
      authorizations of, made all declarations or filings with, and given all notices
      to, all government authorities that are necessary to continue its business
      as
      currently conducted except where the failure to obtain or make such consents,
      declarations, notices or filings would not reasonably be expected to cause
      a
      Material Adverse Change. Borrower and each of its Subsidiaries have obtained
      all
      consents, approvals and authorizations of, made all declarations or filings
      with, and given all notices to, all Government Authorities that are necessary
      to
      continue their respective businesses as currently conducted.

    


    No
      certificate, authorization, permit, consent, approval, order, license, exemption
      from, or filing or registration or qualification with, any Governmental
      Authority or any Requirement of Law is or will be required to authorize, or
      is
      otherwise required in connection with Borrower’s performance of its obligations
      under the Loan Documents and the creation of the Liens described in and granted
      by Borrower pursuant to the Loan Documents.

    


    5.10 Subsidiaries.
      Borrower does not own any stock, partnership interest or other equity securities
      except for Permitted Investments.

    


    5.11 Full
      Disclosure.
      No
      written representation, warranty or other statement of Borrower in any
      certificate or written statement given to Bank, as of the date such
      representations, warranties, or other statements were made, taken together
      with
      all such written certificates and written statements given to Bank, contains
      any
      untrue statement of a material fact or omits to state a material fact necessary
      to make the statements contained in the certificates or statements not
      misleading (it being recognized by Bank that projections and forecasts provided
      by Borrower in good faith and based upon reasonable assumptions are not viewed
      as facts and that actual results during the period or periods covered by such
      projections and forecasts may differ from the projected or forecasted
      results).

    


    6 AFFIRMATIVE
      COVENANTS

    


    Borrower
      shall do all of the following:

    


    6.1 Government
      Compliance.
      Maintain its and all its Subsidiaries’ legal existence and good standing in
      their respective jurisdictions of formation and maintain qualification in each
      jurisdiction in which the failure to so qualify would reasonably be expected
      to
      have a material adverse effect on Borrower’s business or operations. Borrower
      shall comply, and have each Subsidiary comply, with all laws, ordinances and
      regulations to which it is subject, noncompliance with which could have a
      material adverse effect on Borrower’s business or operations or would reasonably
      be expected to cause a Material Adverse Change.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    6.2 Financial
      Statements, Reports, Certificates.

    


    (a) Deliver
      to Bank: (i) as soon as available, but no later than thirty (30) days after
      the
      last day of each month, a company prepared consolidated balance sheet and income
      statement covering Borrower’s consolidated operations during the period
      certified by a Responsible Officer and in a form acceptable to Bank; (ii) as
      soon as available, but no later than one hundred twenty (120) days after the
      last day of Borrower’s fiscal year, audited consolidated financial statements
      prepared under GAAP, consistently applied, together with an unqualified opinion
      on the financial statements from an independent certified public accounting
      firm
      reasonably acceptable to Bank; (iii) within five (5) days of filing, copies
      of
      all statements, reports and notices made available to Borrower’s security
      holders or to any holders of Subordinated Debt and all reports on Form 10-K,
      10-Q and 8-K filed with the Securities and Exchange Commission; (iv) a prompt
      report of any legal actions pending or threatened against Borrower or any
      Subsidiary that could result in damages or costs to Borrower or any Subsidiary
      of One Hundred Thousand Dollars ($100,000.00) or more; (v) prompt notice of
      any
      material change in the composition of the Intellectual Property Collateral,
      or
      the registration of any copyright, including any subsequent ownership right
      of
      Borrower in or to any copyright, patent or trademark not shown in the IP
      Agreement or knowledge of an event that materially adversely affects the value
      of the Intellectual Property Collateral;(vi) Board-approved
      financial projections no later than forty-five (45) days after Borrower’s fiscal
      year end, and immediately with respect to any amendments or updates
      thereto;
      and
      (vii) budgets, sales projections, operating plans or other financial
      information reasonably requested by Bank.

    


    (b) Within
      thirty (30) days after the last day of each month, deliver to Bank with the
      monthly financial statements a Compliance Certificate signed by a Responsible
      Officer in the form of Exhibit
      B.
      

    


    (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. As
      set
      forth in Section 3.1, no Advance will occur until the completion of the Initial
      Audit.
      After
      the occurrence of an Event of Default, Bank may audit Borrower’s Collateral,
      including, but not limited to, Borrower’s Accounts and accounts receivable at
      Borrower’s expense and at Bank’s sole and exclusive discretion and without
      notification and authorization from Borrower. The
      charge
      to Borrower for the foregoing inspections and audits shall be $750 per person
      per day (or such higher amount as shall represent Bank’s then-current standard
      charge for the same), plus reasonable out-of-pocket expenses.

    


    (d) Upon
      Bank’s request, provide a written report respecting any Financed Receivable, if
      payment of any Financed Receivable does not occur by its due date and include
      the reasons for the delay.

    


    (e) Provide
      Bank with, as soon as available, but no later than fifteen (15) days following
      each Reconciliation Period, an aged listing of accounts receivable and accounts
      payable by invoice date, in form acceptable to Bank.

    


    (f) Provide
      Bank with, as soon as available, but no later than thirty (30) days following
      each Reconciliation Period, a Deferred Revenue report, in form acceptable to
      Bank.

    


    (g) Provide
      Bank with, as soon as available, but no later than thirty
      (30) days
      following each Reconciliation Period, a schedule of Borrower’s unbilled accounts
      receivable, in form acceptable to Bank.

    


    6.3
      Inventory;
      Returns.
      Keep
      all Inventory in good and marketable condition, free from material defects.
      Returns and allowances between Borrower and its Account Debtors shall follow
      Borrower’s customary practices as they exist at the Closing Date. Borrower must
      promptly notify Bank of all returns, recoveries, disputes and claims that
      involve more than One Hundred Thousand Dollars ($100,000.00).

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    6.4 Taxes.
      Borrower shall make, and cause each Subsidiary to make, timely payment of all
      material federal, state, and local taxes or assessments (other than taxes and
      assessments which Borrower is contesting in good faith, with adequate reserves
      maintained in accordance with GAAP) and will deliver to Bank, on demand,
      appropriate certificates attesting to such payments.

    


    6.5 Insurance.
      Keep
      its business and the Collateral insured for risks and in amounts standard for
      companies in Borrower’s industry and location, and as Bank may reasonably
      request. Insurance policies shall be in a form, with companies, and in amounts
      that are satisfactory to Bank. All property policies shall have a lender’s loss
      payable endorsement showing Bank as lender loss payee and waive subrogation
      against Bank, and all liability policies shall show, or have endorsements
      showing, Bank as an additional insured .All policies (or the loss payable and
      additional insured endorsements) shall provide that the insurer must give Bank
      at least twenty (20) days notice before canceling, amending, or declining to
      renew its policy. At Bank’s request, Borrower shall deliver certified copies of
      policies and evidence of all premium payments. Proceeds payable under any policy
      shall, at Bank’s option, be payable to Bank on account of the Obligations. If
      Borrower fails to obtain insurance as required under this Section 6.5 or to
      pay
      any amount or furnish any required proof of payment to third persons and Bank,
      Bank may make all or part of such payment or obtain such insurance policies
      required in this Section 6.5, and take any action under the policies Bank deems
      prudent.

    


    6.6 Accounts.

    


    (a) To
      permit
      Bank to monitor Borrower’s financial performance and condition, Borrower, and
      all Borrower’s domestic Subsidiaries, shall maintain Borrower’s and such
      domestic Subsidiaries’, depository and operating accounts and securities
      accounts with Bank and Bank’s affiliates. Any Guarantor
      shall maintain all
      depository, operating and securities accounts with Bank, or SVB
      Securities.

    


    (b) Borrower
      shall identify to Bank, in writing, any deposit or securities account opened
      by
      Borrower or Guarantor with any institution other than Bank. In addition, for
      each such account that Borrower or Guarantor at any time opens or maintains,
      Borrower shall, at Bank’s request and option, pursuant to an agreement in form
      and substance acceptable to Bank, cause the depository bank or securities
      intermediary to agree that such account is the collateral of Bank pursuant
      to
      the terms hereunder. The provisions of the previous sentence shall not apply
      to
      deposit accounts exclusively used for payroll, payroll taxes and other employee
      wage and benefit payments to or for the benefit of Borrower’s
      employees.

    


    6.7 Financial
      Covenants.

    


    Borrower
      shall maintain at all times, to be tested as of the last day of each month,
      unless otherwise noted, on
      a
      consolidated basis with respect to Borrower and its Subsidiaries:

    


    (a) EBITDA
      Loss. EBITDA minus unfunded capital expenditures loss as of and for the three
      month periods ending on January 31, 2007 and February 28, 2007 of not more
      than
      $1,000,000.

    


    (b) EBITDA
      Gain. EBITDA minus unfunded capital expenditures as of and for the three month
      period (or periods) ending on (i) March 31, 2007, April 30, 2007 and May 31,
      2007, of at least $1.00, (ii) June 30, 2007, July 31, 2007, August 31, 2007,
      September 30, 2007, October 31, 2007 and November 30, 2007, of at least
      $250,000.00, (iii) December 31, 2007 and as of and for the three month period
      ending of the last day of each month thereafter, of at least
      $500,000.00.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    Notwithstanding
      the foregoing, (a) EBITDA Losses incurred from January 1, 2007 through February
      28, 2007 will be excluded from the EBITDA calculation with respect to the three
      month periods ending on February 28, 2007 and March 31, 2007, and (b) EBITDA
      Losses incurred from February 1, 2007 through February 28, 2007 will be excluded
      from the EBITDA calculation with respect to the three month period ending on
      April 30, 2007. As used herein, “EBITDA Losses” shall be defined as the lesser
      of (i) $275,000.00, and (ii) the actual expenses incurred by the discontinued
      commercial business of Borrower during the period(s) referenced
      above.

    


    6.8 Further
      Assurances.
      Borrower shall execute any further instruments and take further action as Bank
      reasonably requests to perfect or continue Bank’s security interest in the
      Collateral or to effect the purposes of this Agreement.

    


    7 NEGATIVE
      COVENANTS

    


    Borrower
      shall not do any of the following without Bank’s prior written
      consent.

    


    7.1 Dispositions.
      Convey,
      sell, lease, transfer, assign or otherwise dispose of (collectively a
“Transfer”), or permit any of its Subsidiaries to Transfer, all or any part of
      its business or property, except for Transfers (a) of Inventory in the ordinary
      course of business; (b) of worn-out or obsolete Equipment; (c) in connection
      with Permitted Liens and Permitted Investments; and (d) of non-exclusive
      licenses for the use of the property of Borrower or its Subsidiaries in the
      ordinary course of business.

    


    7.2 Changes
      in Business, Ownership, Management or Business
      Locations.
      Engage
      in or permit any of its Subsidiaries to engage in any business other than the
      businesses currently engaged in by Borrower or reasonably related thereto,
      or
      have a material change in its ownership (other than by the sale of Borrower’s
      equity securities in a public offering or to venture capital investors so long
      as Borrower identifies to Bank the venture capital investors prior to the
      closing of the investment), or management. Borrower shall not, without at least
      thirty (30) days prior written notice to Bank: (a) relocate its chief executive
      office, or add any new offices or business locations, including warehouses
      (unless such new offices or business locations contain less than Five Thousand
      Dollars ($5,000.00) in Borrower’s assets or property), or (b) change its
      jurisdiction of organization, or (c) change its organizational structure or
      type, or (d) change its legal name, or (e) change any organizational number
      (if
      any) assigned by its jurisdiction of organization.

    


    7.3 Mergers
      or Acquisitions.
      Merge
      or consolidate, or permit any of its Subsidiaries to merge or consolidate,
      with
      any other Person, or acquire, or permit any of its Subsidiaries to acquire,
      all
      or substantially all of the capital stock or property of another Person. A
      Subsidiary may merge or consolidate into another Subsidiary or into
      Borrower.

    


    7.4 Indebtedness.
      Create,
      incur, assume, or be liable for any Indebtedness, or permit any Subsidiary
      to do
      so, other than Permitted Indebtedness.

    


    7.5 Encumbrance.
      Create,
      incur, or allow any Lien on any of its property, or assign or convey any right
      to receive income, including the sale of any Accounts, or permit any of its
      Subsidiaries to do so, except for Permitted Liens, or permit any Collateral
      not
      to be subject to the first priority security interest granted herein,
or
      enter
      into any agreement, document, instrument or other arrangement (except with
      or in
      favor of Bank) with any Person which directly or indirectly prohibits or has
      the
      effect of prohibiting Borrower or any Subsidiary from assigning, mortgaging,
      pledging, granting a security interest in or upon, or encumbering any of
      Borrower’s or any Subsidiary’s intellectual property, except as is otherwise
      permitted in Section 7.1 hereof and the definition of “Permitted Liens”
herein.
      The
      Collateral may also be subject to Permitted Liens.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    7.6 Distributions;
      Investments.
      (a)
      Directly or indirectly acquire or own any Person, or make any Investment in
      any
      Person, other than Permitted Investments, or permit any of its Subsidiaries
      to
      do so; or (b) pay any dividends or make any distribution or payment or redeem,
      retire or purchase any capital stock.

    


    7.7 Transactions
      with Affiliates.
      Directly or indirectly enter into or permit to exist any material transaction
      with any Affiliate of Borrower, except for transactions that are in the ordinary
      course of Borrower’s business, upon fair and reasonable terms that are no less
      favorable to Borrower than would be obtained in an arm’s length transaction with
      a non-affiliated Person.

    


    7.8 Subordinated
      Debt.
      (a)
      Make or permit any payment on any Subordinated Debt, except under the terms
      of
      the subordination, intercreditor, or other similar agreement to which such
      Subordinated Debt is subject, or (b) amend any provision in any document
      relating to the Subordinated Debt which would increase the amount thereof or
      adversely affect the subordination thereof to Obligations owed to
      Bank.

    


    7.9 Compliance.
      Become
      an “investment company” or a company controlled by an “investment company”,
      under the Investment Company Act of 1940, as amended, or undertake as one of
      its
      important activities extending credit to purchase or carry margin stock (as
      defined in Regulation U of the Board of Governors of the Federal Reserve
      System), or use the proceeds of any Advance for that purpose; fail to meet
      the
      minimum funding requirements of ERISA or permit a Reportable Event or Prohibited
      Transaction, each as defined in ERISA, to occur; fail to comply with the Federal
      Fair Labor Standards Act or violate any other law or regulation, if the
      violation could reasonably be expected to have a material adverse effect on
      Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or
      permit any Subsidiary to withdraw from participation in, permit partial or
      complete termination of, or permit the occurrence of any other event with
      respect to, any present pension, profit sharing and deferred compensation plan
      which could reasonably be expected to result in any liability of Borrower,
      including any liability to the Pension Benefit Guaranty Corporation or its
      successors or any other governmental agency.

    


    8 EVENTS
      OF DEFAULT

    


    Any
      one
      of the following shall constitute an event of default (an “Event of Default”)
      under this Agreement:

    


    8.1 Payment
      Default.
      Borrower fails to pay any of the Obligations when due;

    


    8.2 Covenant
      Default.
      Borrower
      fails or neglects to perform any obligation in Section 6 or violates any
      covenant in Section 7 or fails or neglects to perform, keep, or observe any
      other term, provision, condition, covenant or agreement contained in this
      Agreement, any Loan Documents, and as to any default (other than those specified
      in this Section 8) under such other term, provision, condition, covenant or
      agreement that can be cured, has failed to cure the default within ten (10)
      days
      after the occurrence thereof; provided, however, that if the default cannot
      by
      its nature be cured within the ten (10) day period or cannot after diligent
      attempts by Borrower be cured within such ten (10) day period, and such default
      is likely to be cured within a reasonable time, then Borrower shall have an
      additional period (which shall not in any case exceed thirty (30) days) to
      attempt to sure such default, and within such reasonable time period the failure
      to cure the default shall not be deemed an Event of Default (but no Credit
      Extensions shall be made during such cure period). Grace periods provided under
      this section shall not apply, among other things, to financial covenants or
      any
      other covenants that are required to be satisfied, completed or tested by a
      date
      certain;

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    8.3 Material
      Adverse Change.
      A
      Material Adverse Change occurs;

    


    8.4 Attachment.
      (i) Any
      portion of Borrower’s assets is attached, seized, levied on, or comes into
      possession of a trustee or receiver and the attachment, seizure or levy is
      not
      removed in ten (10) days; (ii) the service of process upon Bank or Borrower
      seeking to attach, by trustee or similar process, any funds of Borrower on
      deposit with Bank, or any entity under the control of Bank (including a
      subsidiary); (iii) Borrower is enjoined, restrained, or prevented by court
      order
      from conducting any part of its business; (iv) a judgment or other claim becomes
      a Lien on a portion of Borrower’s assets; or (v) a notice of lien, levy, or
      assessment is filed against any of Borrower’s assets by any government agency
      and not paid within ten (10) days after Borrower receives notice;

    


    8.5 Insolvency.
      (a)
      Borrower is unable to pay its debts (including trade debts) as they become
      due
      or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding;
      or
      (c) an Insolvency Proceeding is begun against Borrower and not dismissed or
      stayed within thirty (30) days (but no Advances shall be made while of any
      of
      the conditions described in clause (a) exist and/or until any Insolvency
      Proceeding is dismissed);

    


    8.6 Other
      Agreements.
      If
      there is a default in any agreement to which Borrower is a party with a third
      party or parties resulting in a right by such third party or parties, whether
      or
      not exercised, to accelerate the maturity of any Indebtedness in an amount
      in
      excess of One Hundred Thousand Dollars ($100,000) or that could result in a
      Material Adverse Change;

    


    8.7 Judgments.
      A
      judgment or judgments for the payment of money in an amount, individually or
      in
      the aggregate, of at least Fifty Thousand Dollars ($50,000.00) (not covered
      by
      independent third-party insurance as to which liability has been accepted by
      the
      insurance carrier) shall be rendered against Borrower and shall remain
      unsatisfied and unstayed for a period of ten (10) days (provided that no
      Advances will be made prior to the satisfaction or stay of such
      judgment);

    


    8.8 Misrepresentations.
      Borrower or any Person acting for Borrower makes any representation, warranty,
      or other statement now or later in this Agreement, any Loan Document or in
      writing delivered to Bank or to induce Bank to enter this Agreement or any
      Loan
      Document, and such representation, warranty, or other statement is incorrect
      in
      any material respect when made;

    


    8.9 Subordinated
      Debt.
      A
      default or breach occurs under any agreement between Borrower and any creditor
      of Borrower that signed a subordination agreement, intercreditor, or other
      similar agreement with Bank, or any creditor that has signed subordination
      agreement with Bank breaches any terms of the subordination agreement;
      or

    


    8.10 Guaranty.
      (a) Any
      guaranty of any Obligations terminates or ceases for any reason to be in full
      force and effect; or (b) any Guarantor does not perform any obligation or
      covenant under any guaranty of the Obligations; or (c) any material
      misrepresentation or material misstatement exists now or later in any warranty
      or representation in any guaranty of the Obligations or in any certificate
      delivered to Bank in connection with the guaranty; or (iv) any circumstance
      described in Section 7, or Sections 8.3, 8.4, 8.5 or 8.7 occurs with respect
      to
      any Guarantor or in the value of such collateral, or (v) the liquidation,
      winding up, termination of existence, or insolvency of any
      Guarantor.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    9 BANK’S
      RIGHTS AND REMEDIES

    


    9.1 Rights
      and Remedies.
      When an
      Event of Default occurs and continues Bank may, without notice or demand, do
      any
      or all of the following:

    


    (a) Declare
      all Obligations immediately due and payable (but if an Event of Default
      described in Section 8.5 occurs all Obligations are immediately due and payable
      without any action by Bank);

    


    (b) Stop
      advancing money or extending credit for Borrower’s benefit under this Agreement
      or under any other agreement between Borrower and Bank;

    


    (c) Demand
      that Borrower (i) deposit cash with Bank in an amount equal to the aggregate
      amount of any letters of credit that are outstanding but undrawn, as collateral
      security for the repayment of any future drawings under such letters of credit,
      and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in
      advance all letter of credit fees scheduled to be paid or payable over the
      remaining term of any letters of credit;

    


    (d) Settle
      or
      adjust disputes and claims directly with Account Debtors for amounts, on terms
      and in any order that Bank considers advisable and notify any Person owing
      Borrower money of Bank’s security interest in such funds and verify the amount
      of such account. Borrower shall collect all payments in trust for Bank and,
      if
      requested by Bank, immediately deliver the payments to Bank in the form received
      from the Account Debtor, with proper endorsements for deposit; 

    


    (e) Make
      any
      payments and do any acts it considers necessary or reasonable to protect its
      security interest in the Collateral. Borrower shall assemble the Collateral
      if
      Bank requests and make it available as Bank designates. Bank may enter premises
      where the Collateral is located, take and maintain possession of any part of
      the
      Collateral, and pay, purchase, contest, or compromise any Lien which appears
      to
      be prior or superior to its security interest and pay all expenses incurred.
      Borrower grants Bank a license to enter and occupy any of its premises, without
      charge, to exercise any of Bank’s rights or remedies;

    


    (f) Apply
      to
      the Obligations any (i) balances and deposits of Borrower it holds, or (ii)
      any
      amount held by Bank owing to or for the credit or the account of
      Borrower;

    


    (g) Ship,
      reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
      for sale, and sell the Collateral. Bank is hereby granted a non-exclusive,
      royalty-free license or other right to use, without charge, Borrower’s labels,
      patents, copyrights, mask works, rights of use of any name, trade secrets,
      trade
      names, trademarks, service marks, and advertising matter, or any similar
      property as it pertains to the Collateral, in completing production of,
      advertising for sale, and selling any Collateral and, in connection with Bank’s
      exercise of its rights under this Section, Borrower’s rights under all licenses
      and all franchise agreements inure to Bank’s benefit; 

    


    (h) Place
      a
“hold” on any account maintained with Bank and/or deliver a notice of exclusive
      control, any entitlement order, or other directions or instructions pursuant
      to
      any control agreement or similar agreements providing control of any Collateral;
      

    


    (i) Exercise
      all rights and remedies and dispose of the Collateral according to the Code;
      and

    


    (j) Demand
      and receive possession of Borrower’s Books.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    9.2 Bank
      Expenses; Unpaid Fees.
      If
      Borrower fails to obtain insurance called for by Section 6.5 or fails to pay
      any
      premium thereon or fails to pay any other amount which Borrower is obligated
      to
      pay under this Agreement or by any other Loan Document, Bank may obtain such
      insurance or make such payment, and all amounts so paid by Bank are Bank
      Expenses and immediately due and payable, bearing interest at the then highest
      applicable rate, and secured by the Collateral. Bank will make reasonable effort
      to provide Borrower with notice of Bank obtaining such insurance at the time
      it
      is obtained or within a reasonable time thereafter. No payments by Bank are
      deemed an agreement to make similar payments in the future or Bank’s waiver of
      any Event of Default.

    


    9.3 Bank’s
      Liability for Collateral.
      So long
      as Bank complies with reasonable banking practices regarding the safekeeping
      of
      Collateral in possession or under the control of Bank, Bank shall not be liable
      or responsible for: (a) the safekeeping of the Collateral; (b) any loss or
      damage to the Collateral; (c) any diminution in the value of the Collateral;
      or
      (d) any act or default of any carrier, warehouseman, bailee, or other Person.
      Borrower bears all risk of loss, damage or destruction of the
      Collateral.

    


    9.4 Remedies
      Cumulative.
      Bank’s
      rights and remedies under this Agreement, the Loan Documents, and all other
      agreements are cumulative. Bank has all rights and remedies provided under
      the
      Code, by law, or in equity. Bank’s exercise of one right or remedy is not an
      election, and Bank’s waiver of any Event of Default is not a continuing waiver.
      Bank’s delay is not a waiver, election, or acquiescence. No waiver hereunder
      shall be effective unless signed by Bank and then is only effective for the
      specific instance and purpose for which it was given.

    


    9.5 Demand
      Waiver.
      Borrower waives demand, notice of default or dishonor, notice of payment and
      nonpayment, notice of any default, nonpayment at maturity, release, compromise,
      settlement, extension, or renewal of accounts, documents, instruments, chattel
      paper, and guarantees held by Bank on which Borrower is liable.

    


    10 NOTICES.

    


    All
      notices, consents, requests, approvals, demands, or other communication
      (collectively, “Communication”),
      other
      than Advance requests made pursuant to Sections 2.1.1(c) and 3.2, by any party
      to this Agreement or any other Loan Document must be in writing and be delivered
      or sent by facsimile at the addresses or facsimile numbers listed below. Bank
      or
      Borrower may change its notice address by giving the other party written notice
      thereof. Each such Communication shall be deemed to have been validly served,
      given, or delivered: (a) upon the earlier of actual receipt and three (3)
      Business Days after deposit in the U.S. mail, registered or certified mail,
      return receipt requested, with proper postage prepaid; (b) upon transmission,
      when sent by facsimile transmission (with such facsimile promptly confirmed
      by
      delivery of a copy by personal delivery or United States mail as otherwise
      provided in this Section 10); (c) one (1) Business Day after deposit with a
      reputable overnight courier with all charges prepaid; or (d) when delivered,
      if
      hand-delivered by messenger, all of which shall be addressed to the party to
      be
      notified and sent to the address or facsimile number indicated below. Advance
      requests made pursuant to Sections 2.1.1(c) and 3.2 must be in writing and
      may
      be in the form of electronic mail, delivered to Bank by Borrower at the e-mail
      address of Bank provided below and shall be deemed to have been validly served,
      given, or delivered when sent (with such electronic mail promptly confirmed
      by
      delivery of a copy by personal delivery or United States mail as otherwise
      provided in this Section 10). Bank or Borrower may change its address, facsimile
      number, or electronic mail address by giving the other party written notice
      thereof in accordance with the terms of this Section 10.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
            	If
              to Borrower:	
              Paradigm
                Holdings, Inc.

            


    

    9715
      Key
      West Avenue, Third Floor

    Rockville,
      Maryland 20850

    Attn:
      Mr.
      Richard Sawchak

    Fax:
      (240) 235-4380

    Email:
      rsawchak@paradigmsolutions.com

     

    
      	
            	If
              to Bank:	
              Silicon
                Valley Bank

            


    

    One
      Newton Executive Park, Suite 200

    2221
      Washington Street, Newton, MA 02462

    Attn:
      Mr.
      Michael Tramack 

    Fax:
      (617) 969-5962

    Email:
      mtramack@svb.com

     

    
      	
            	with
              a copy to:	
              Riemer
                & Braunstein LLP

            


    

    Three
      Center Plaza

    Boston,
      Massachusetts 02108

    Attn:
      David A. Ephraim, Esquire

    Fax:
      (617) 880-3456

    Email:
      DEphraim@riemerlaw.com

    


    11 CHOICE
      OF LAW, VENUE AND JURY TRIAL WAIVER

    


    California
      law governs the Loan Documents without regard to principles of conflicts of
      law.
      Borrower and Bank each submit to the exclusive jurisdiction of the State and
      Federal courts in California. NOTWITHSTANDING THE FOREGOING, BANK SHALL HAVE
      THE
      RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY IN
      THE
      COURTS OF ANY OTHER JURISDICTION WHICH BANK DEEMS NECESSARY OR APPROPRIATE
      IN
      ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE BANK’S RIGHTS AGAINST
      BORROWER OR ITS PROPERTY. Borrower expressly submits and consents in advance
      to
      such jurisdiction in any action or suit commenced in any such court, and
      Borrower hereby waives any objection that it may have based upon lack of
      personal jurisdiction, improper venue, or forum non conveniens and hereby
      consents to the granting of such legal or equitable relief as is deemed
      appropriate by such court. Borrower hereby waives personal service of the
      summons, complaints, and other process issued in such action or suit and agrees
      that service of such summons, complaints, and other process may be made by
      registered or certified mail addressed to Borrower at the address set forth
      in
      Section 10 of this Agreement and that service so made shall be deemed completed
      upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days
      after deposit in the U.S. mails, proper postage prepaid.

    


    TO
      THE EXTENT PERMITTED BY APPLICABLE LAW,
      BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
      OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR
      ANY
      CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL
      OTHER
      CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO
      THIS
      AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS
      COUNSEL.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    WITHOUT
      INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE
      RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury
      is
      not enforceable, the parties hereto agree that any and all disputes or
      controversies of any nature between them arising at any time shall be decided
      by
      a reference to a private judge, mutually selected by the parties (or, if they
      cannot agree, by the Presiding Judge of the Santa Clara County, California
      Superior Court) appointed in accordance with California Code of Civil Procedure
      Section 638 (or pursuant to comparable provisions of federal law if the dispute
      falls within the exclusive jurisdiction of the federal courts), sitting without
      a jury, in Santa Clara County, California; and the parties hereby submit to
      the
      jurisdiction of such court. The reference proceedings shall be conducted
      pursuant to and in accordance with the provisions of California Code of Civil
      Procedure §§ 638 through 645.1, inclusive. The private judge shall have the
      power, among others, to grant provisional relief, including without limitation,
      entering temporary restraining orders, issuing preliminary and permanent
      injunctions and appointing receivers. All such proceedings shall be closed
      to
      the public and confidential and all records relating thereto shall be
      permanently sealed. If during the course of any dispute, a party desires to
      seek
      provisional relief, but a judge has not been appointed at that point pursuant
      to
      the judicial reference procedures, then such party may apply to the Santa Clara
      County, California Superior Court for such relief. The proceeding before the
      private judge shall be conducted in the same manner as it would be before a
      court under the rules of evidence applicable to judicial proceedings. The
      parties shall be entitled to discovery which shall be conducted in the same
      manner as it would be before a court under the rules of discovery applicable
      to
      judicial proceedings. The private judge shall oversee discovery and may enforce
      all discovery rules and order applicable to judicial proceedings in the same
      manner as a trial court judge. The parties agree that the selected or appointed
      private judge shall have the power to decide all issues in the action or
      proceeding, whether of fact or of law, and shall report a statement of decision
      thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing in
      this paragraph shall limit the right of any party at any time to exercise
      self-help remedies, foreclose against collateral, or obtain provisional
      remedies. The private judge shall also determine all issues relating to the
      applicability, interpretation, and enforceability of this
      paragraph.

    


    12 GENERAL
      PROVISIONS

    


    12.1 Successors
      and Assigns.
      This
      Agreement binds and is for the benefit of the successors and permitted assigns
      of each party. Borrower may not assign this Agreement or any rights or
      Obligations under it without Bank’s prior written consent which may be granted
      or withheld in Bank’s discretion. Bank has the right, without the consent of or
      notice to Borrower, to sell, transfer, negotiate, or grant participation in
      all
      or any part of, or any interest in, Bank’s obligations, rights and benefits
      under this Agreement, the Loan Documents or any related agreement.

    


    12.2 Indemnification.
      Borrower agrees to indemnify, defend, and hold Bank and its officers, directors,
      employees, agents, attorneys or any other Person affiliated with or representing
      Bank harmless against: (a) all obligations, demands, claims, and liabilities
      (collectively, “Claims”) asserted by any other party in connection with the
      transactions contemplated by the Loan Documents; and (b) all losses or Bank
      Expenses incurred, or paid by Bank from, following, or arising from transactions
      between Bank and Borrower (including reasonable attorneys’ fees and expenses),
      except for Claims and/or losses directly caused by Bank’s gross negligence or
      willful misconduct.

    


    12.3 Right
      of Set-Off.
      Borrower hereby grants to Bank, a lien, security interest and right of set-off
      as security for all Obligations to Bank, whether now existing or hereafter
      arising upon and against all deposits, credits, collateral and property, now
      or
      hereafter in the possession, custody, safekeeping or control of Bank or any
      entity under the control of Bank (including a Bank subsidiary) or in transit
      to
      any of them. At any time after the occurrence and during the continuance of
      an
      Event of Default, without demand or notice, Bank may set off the same or any
      part thereof and apply the same to any liability or obligation of Borrower
      even
      though unmatured and regardless of the adequacy of any other collateral securing
      the Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS
      OR
      REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS,
      PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS
      OR OTHER PROPERTY OF BORROWER, ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
      WAIVED.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    12.4 Time
      of Essence.
      Time is
      of the essence for the performance of all Obligations in this
      Agreement.

    


    12.5 Severability
      of Provision.
      Each
      provision of this Agreement is severable from every other provision in
      determining the enforceability of any provision.

    


    12.6 Amendments
      in Writing; Integration.
      All
      amendments to this Agreement must be in writing signed by both Bank and
      Borrower. This Agreement and the Loan Documents represent the entire agreement
      about this subject matter, and supersede prior negotiations or agreements.
      All
      prior agreements, understandings, representations, warranties, and negotiations
      between the parties about the subject matter of this Agreement and the Loan
      Documents merge into this Agreement and the Loan Documents.

    


    12.7 Counterparts.
      This
      Agreement may be executed in any number of counterparts and by different parties
      on separate counterparts, each of which, when executed and delivered, are an
      original, and all taken together, constitute one Agreement.

    


    12.8 Borrower
      Liability.
      Either
      Borrower may, acting singly, request Advances hereunder. Each Borrower hereby
      appoints the other as agent for the other for all purposes hereunder, including
      with respect to requesting Advances hereunder. Each Borrower hereunder shall
      be
      obligated to repay all Advances made hereunder, regardless of which Borrower
      actually receives said Advance, as if each Borrower hereunder directly received
      all
      Advances. Each Borrower waives any right to require Bank to: (i) proceed against
      any Borrower or any other person; (ii) proceed against or exhaust any security;
      or (iii) pursue any other remedy. Bank may exercise or not exercise any right
      or
      remedy it has against any Borrower or any security it holds (including the
      right
      to foreclose by judicial or non-judicial sale) without affecting any Borrower’s
      liability. Notwithstanding any other provision of this Agreement or other
      related document, each Borrower irrevocably waives all rights that it may have
      at law or in equity (including, without limitation, any law subrogating Borrower
      to the rights of Bank under this Agreement) to seek contribution,
      indemnification or any other form of reimbursement from any other Borrower,
      or
      any other Person now or hereafter primarily or secondarily liable for any of
      the
      Obligations, for any payment made by Borrower with respect to the Obligations
      in
      connection with this Agreement or otherwise and all rights that it might have
      to
      benefit from, or to participate in, any security for the Obligations as a result
      of any payment made by Borrower with respect to the Obligations in connection
      with this Agreement or otherwise. Any agreement providing for indemnification,
      reimbursement or any other arrangement prohibited under this Section shall
      be
      null and void. If any payment is made to a Borrower in contravention of this
      Section, such Borrower shall hold such payment in trust for Bank and such
      payment shall be promptly delivered to Bank for application to the Obligations,
      whether matured or unmatured.

    


    12.9 Survival.
      All
      covenants, representations and warranties made in this Agreement continue in
      full force until this Agreement has terminated pursuant to its terms and all
      Obligations (other than inchoate indemnity obligations and any other obligations
      which, by their terms, are to survive the termination of this Agreement) have
      been satisfied. The obligation of Borrower in Section 12.2 to indemnify Bank
      shall survive until the statute of limitations with respect to such claim or
      cause of action shall have run.

    


    12.10 Confidentiality.
      In
      handling any confidential information, Bank shall exercise the same degree
      of
      care that it exercises for its own proprietary information, but disclosure
      of
      information may be made: (a) to Bank’s Subsidiaries or Affiliates; (b) to
      prospective transferees or purchasers of any interest in the Advances (provided,
      however, Bank shall use commercially reasonable efforts to obtain such
      prospective transferee’s or purchaser’s agreement to the terms of this
      provision); (c) as required by law, regulation, subpoena, or other order, (d)
      to
      Bank’s regulators or as otherwise in connection with Bank’s examination or
      audit; and (e) as Bank considers appropriate in exercising remedies under this
      Agreement. Confidential information does not include information that either:
      (i) is in the public domain or in Bank’s possession when disclosed to Bank,
      or becomes part of the public domain after disclosure to Bank; or (ii) is
      disclosed to Bank by a third party, if Bank does not know that the third party
      is prohibited from disclosing the information.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    12.11 Trigger
      Event.
      Upon
      the occurrence of the Trigger Event, this Agreement shall be immediately
      terminated. Any Obligations outstanding related to HUD Account Advances shall
      be
      immediately due and payable. Any Obligations outstanding related to Federal
      Agency Accounts, Subcontractor Accounts and Unbilled Accounts shall be
      refinanced under the Loan and Security Agreement attached hereto as Exhibit
      C
      (the
“Trigger Event Agreement”), which shall only become effective after the Trigger
      Event. To the extent that Borrower does not have sufficient availability under
      the Trigger Event Agreement with respect to such Obligations, Borrower shall
      immediately pay to Bank such excess amount.

    


    12.12 Attorneys’
      Fees, Costs and Expenses.
      In any
      action or proceeding between Borrower and Bank arising out of or related to
      the
      Loan Documents, the prevailing party will be entitled to recover its reasonable
      attorneys’ fees and other reasonable costs and expenses incurred, in addition to
      any other relief to which it may be entitled.

    


    13 DEFINITIONS

    


    13.1 Definitions.
      In this
      Agreement:

    


    “Account”
      is any
“account” as defined in the Code with such additions to such term as may
      hereafter be made, and includes, without limitation, all accounts receivable
      and
      other sums owing to Borrower.

    


    “Account
      Debtor”
      is as
      defined in the Code and shall include, without limitation, any person liable
      on
      any Financed Receivable, such as, a guarantor of the Financed Receivable and
      any
      issuer of a letter of credit or banker’s acceptance.

    


    “Adjusted
      Quick Ratio”
      is the
      ratio of Quick Assets to Current Liabilities minus Deferred
      Revenue.

    


    “Adjustments”
      are all
      discounts, allowances, returns, disputes, counterclaims, offsets, defenses,
      rights of recoupment, rights of return, warranty claims, or short payments,
      asserted by or on behalf of any Account Debtor for any Financed
      Receivable.

    


    “Advance”
      is
      defined in Section 2.1.1.

    


    “Advance
      Rate”
is
      (a)
      with respect to Federal Agency Accounts, ninety percent (90.0%), net of any
      offsets related to each specific Account Debtor, including, without limitation,
      Deferred Revenue, or such other percentage as Bank establishes under Section
      2.1.1, (b) with respect to Subcontractor Accounts, Unbilled Accounts (except
      for
      Unbilled IRS Accounts), and HUD Accounts, eighty percent (80.0%), net of any
      offsets related to each specific Account Debtor, including, without limitation,
      Deferred Revenue, or such other percentage as Bank establishes under Section
      2.1.1, and (c) with respect to Unbilled IRS Accounts, sixty percent (60.0%),
      net
      of any offsets related to each specific Account Debtor, including, without
      limitation, Deferred Revenue, or such other percentage as Bank establishes
      under
      Section 2.1.1.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    “Affiliate”
is
      a
      Person that owns or controls directly or indirectly the Person, any Person
      that
      controls or is controlled by or is under common control with the Person, and
      each of that Person’s senior executive officers, directors, partners and, for
      any Person that is a limited liability company, that Person’s managers and
      members.

    


    “Anniversary
      Date”
is
      defined in Section 2.2.2.

    


    “Anniversary
      Fee”
is
      defined in Section 2.2.2.

    


    “Applicable
      Rate”
      is (a)
      with respect to Financed Receivables based upon Federal Agency Accounts,
      Subcontractor Accounts and Unbilled Accounts, a per annum rate equal to the
      Prime Rate plus one percent (1.0%), and (b) with respect to Financed Receivables
      based upon HUD Accounts, a per annum rate equal to the Prime Rate plus two
      percent (2.0%).

    


    “Bank
      Expenses”
are
      all
      audit fees and expenses and reasonable costs or expenses (including reasonable
      attorneys’ fees and expenses) for preparing, negotiating, administering,
      defending and enforcing the Loan Documents (including appeals or Insolvency
      Proceedings).

    


    “Billed
      HUD Account Advance”
is
      defined in the definition of “HUD Account”.

    


    “Borrower’s
      Books”
are
      all
      Borrower’s books and records including ledgers, records regarding Borrower’s
      assets or liabilities, the Collateral, business operations or financial
      condition and all computer programs or discs or any equipment containing the
      information.

    


    “Business
      Day”
is
      any
      day that is not a Saturday, Sunday or a day on which Bank is
      closed.

    


    “Closing
      Date”
is
      the
      date of this Agreement.

    


    “Code”
is
      the
      Uniform Commercial Code as adopted in California, as amended and as may be
      amended and in effect from time to time.

    


    “Collateral”
is
      any
      and all properties, rights and assets of Borrower granted by Borrower to Bank
      or
      arising under the Code, now, or in the future, in which Borrower obtains an
      interest, or the power to transfer rights, as described on Exhibit A.

    


    “Collateral
      Handling Fee” is
      defined in Section 2.2.4.

    


    “Collections”
      are
      all
      funds received by Bank from or on behalf of an Account Debtor for Financed
      Receivables.

    


    “Compliance
      Certificate”
is
      attached as Exhibit
      B.
      

    


    “Contingent
      Obligation”
is,
      for
      any Person, any direct or indirect liability, contingent or not, of that Person
      for (i) any indebtedness, lease, dividend, letter of credit or other obligation
      of another such as an obligation directly or indirectly guaranteed, endorsed,
      co-made, discounted or sold with recourse by that Person, or for which that
      Person is directly or indirectly liable; (ii) any obligations for undrawn
      letters of credit for the account of that Person; and (iii) all obligations
      from
      any interest rate, currency or commodity swap agreement, interest rate cap
      or
      collar agreement, or other agreement or arrangement designated to protect a
      Person against fluctuation in interest rates, currency exchange rates or
      commodity prices; but “Contingent Obligation” does not include endorsements in
      the ordinary course of business. The amount of a Contingent Obligation is the
      stated or determined amount of the primary obligation for which the Contingent
      Obligation is made or, if not determinable, the maximum reasonably anticipated
      liability for it determined by the Person in good faith; but the amount may
      not
      exceed the maximum of the obligations under the guarantee or other support
      arrangement.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    “Credit
      Extension”
is
      any
      Advance, or any other extension of credit by Bank for Borrower’s
      benefit.

    


    “Deferred
      Revenue”
is
      all
      amounts received or invoiced, as appropriate, in advance of performance under
      contracts and not yet recognized as revenue.

    


    “Early
      Termination Fee”
is
      defined in Section 2.1.1.

    


    “EBITDA”
shall
      mean (a) Net Income, plus (b) Interest Expense, plus (c) to the extent deducted
      in the calculation of Net Income, depreciation expense and amortization expense
      (including FAS123r expenses and goodwill impairments), plus (d) income tax
      expense, plus (e) severance and restructuring expenses not to exceed $250,000.00
      in any calendar year.

    


    “EBITDA
      Losses”
is
      defined in Section 6.7.

    


    “Eligible
      Accounts”
are
      billed Accounts in the ordinary course of Borrower’s business that meet all
      Borrower’s representations and warranties in Section 5.3, have been, at the
      option of Bank, confirmed in accordance with Section 2.1.1(d), and are due
      and
      owing from Account Debtors deemed creditworthy by Bank. Without limiting the
      fact that the determination of which Accounts are eligible hereunder is a matter
      of Bank discretion in each instance, Eligible Accounts shall not include the
      following Accounts (which listing may be amended or changed in Bank’s discretion
      with notice to Borrower):

    


    (a) Accounts
      that the Account Debtor has not paid within ninety (90) days of invoice
      date;

    


    (b) Accounts
      for which the Account Debtor does not have its principal place of business
      in
      the United States, unless agreed to by Bank in writing, in its sole discretion,
      on a case-by-case basis;

    


    (c) Accounts
      for which the Account Debtor is a federal, state or local government entity
      or
      any department, agency, or instrumentality thereof except for Accounts of the
      United States if the payee has assigned its payment rights to Bank and the
      assignment has been acknowledged under the Assignment of Claims Act of 1940
      (31
      U.S.C. 3727);

    


    (d) Accounts
      for which Borrower owes the Account Debtor, but only up to the amount owed
      (sometimes called “contra” accounts, accounts payable, pre-bill, customer
      deposits or credit accounts);

    


    (e) Accounts
      for demonstration or promotional equipment, or in which goods are consigned,
      sales guaranteed, sale or return, sale on approval, bill and hold, or other
      terms if the Account Debtor’s payment may be conditional;

    


    (f) Accounts
      for which the Account Debtor is Borrower’s Affiliate, officer, employee, or
      agent;

    


    (g) Accounts
      in which the Account Debtor disputes liability or makes any claim and Bank
      believes there may be a basis for dispute (but only up to the disputed or
      claimed amount), or if the Account Debtor is subject to an Insolvency
      Proceeding, or becomes insolvent, or goes out of business;

    


    (h) Accounts
      owing from an Account Debtor, including Affiliates, whose total obligations
      to
      Borrower exceed twenty-five percent (25.0%) (thirty-five percent (35.0%) if
      the
      Account Debtor is an agency of the United States government) of all Accounts,
      for the amounts that exceed that percentage, unless Bank approves in
      writing;

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    (i) Accounts
      for which the Account Debtor is the United States Department of Housing and
      Urban Development; and

    


    (j) Accounts
      for which Bank reasonably determines collection to be doubtful or any Accounts
      which are unacceptable to Bank for any reason in its reasonable
      discretion.

    


    “ERISA”
is
      the
      Employee Retirement Income Security Act of 1974, and its
      regulations.

    


    “Events
      of Default”
      are set
      forth in Article 8.

    


    “Facility
      Amount”
      is
      Twelve Million Five Hundred Thousand Dollars ($12,500,000.00).

    


    “Facility
      Fee”
      is
      defined in Section 2.2.2.

    


    “Federal
      Agency Account Advance”
is
      defined in Section 2.1.1(a).

    


    “Federal
      Agency Accounts”
are
      Accounts which satisfy (a), (b), and (c) below, which require such Accounts
      to
      be (a) due and owing from an Account Debtor which is an agency of the United
      States government, and (b) earned by Borrower in connection with Borrower’s
      provision of services as a prime contractor, and (c) Eligible Accounts
      hereunder. Notwithstanding
      the foregoing, Federal Agency Accounts shall not include Unbilled Accounts,
      Subcontractor Accounts, or HUD Accounts.

    


    “Finance
      Charges”
      is
      defined in Section 2.2.3.

    


    “Financed
      Receivables”
      are all
      those Federal Agency Accounts, Subcontractor Accounts, Unbilled Accounts, and
      HUD Accounts, including their proceeds upon which Bank finances and makes an
      Advance, as set forth in Section 2.1.1. A Financed Receivable stops being a
      Financed Receivable (but remains Collateral) when the Advance made for the
      Financed Receivable has been fully paid.

    


    “Financed
      Receivable Balance” is
      the
      total outstanding gross face amount, at any time, of any Financed
      Receivable.

    


    “GAAP”
is
      generally accepted accounting principles.

    


    “Good
      Faith Deposit”
is
      defined in Section 2.2.8.

    


    “Governmental
      Authority”
is
      any
      nation or government, any state or other political subdivision thereof, any
      agency, authority, instrumentality, regulatory body, court, central bank or
      other entity exercising executive, legislative, judicial, taxing, regulatory
      or
      administrative functions of or pertaining to government, any securities exchange
      and any self-regulatory organization.

    


    “Guarantor”
is
      any
      present or future guarantor of the Obligations.

    


    “HUD
      Account”
is
      either (a) the estimated face value amount (as determined by Borrower, subject
      to Section 5.5 hereof) of an invoice for a receivable that will be generated
      (but has not yet been generated) pursuant to a binding contract between Borrower
      and the United States Department of Housing and Urban Development and deemed
      acceptable by Bank in its sole discretion (any HUD Account
      Advance
      made based upon this subsection (a) shall be an “Unbilled HUD Account
      Advance”),
      or (b) an Account due and owing from the United States Department of Housing
      and
      Urban Development pursuant to a binding contract between Borrower and the United
      States Department of Housing and Urban Development which is an Eligible Account
      hereunder and which is (i) with respect to any Advance requested on or prior
      to
      June 30, 2007, in connection with a “statement of work” dated on or prior to
      February 1, 2007, and (ii) with respect to any Advance requested after June
      30,
      2007, in connection with a “statement of work” dated after February 1, 2007 (any
      HUD Account
      Advance
      made based upon this subsection (b) shall be a “Billed HUD Account
      Advance”).
      Notwithstanding the foregoing, HUD Accounts shall not include Federal Agency
      Accounts, Subcontractor Accounts, or Unbilled Accounts.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    “HUD
      Account Advance”
is
      defined in Section 2.1.1(a).

    


    “HUD
      Facility Amount”
is
      Six
      Million Two Hundred Fifty Thousand Dollars ($6,250,000.00).

    


    “HUD
      Maturity Date”
is
      (a)
      with respect to Unbilled HUD Account
      Advances,
      June 30, 2007, provided, however, such date shall be November 30, 2007, if,
      as
      of June 30, 2007, all accounts receivable owing to Borrower in connection with
      any “statement of work” have been billed, and (b) with respect to Billed HUD
Account
      Advances,
      November 30, 2007.

    


    “Indebtedness”
is
      (a)
      indebtedness for borrowed money or the deferred price of property or services,
      such as reimbursement and other obligations for surety bonds and letters of
      credit, (b) obligations evidenced by notes, bonds, debentures or similar
      instruments, (c) capital lease obligations and (d) Contingent
      Obligations.

    


    “Initial
      Audit”
shall
      be the receipt by Bank of the results of a complete audit of Borrower’s
      Collateral, with results satisfactory to Bank in its sole and absolute
      discretion.

    


    “Insolvency
      Proceeding”
is
      any
      proceeding by or against any Person under the United States Bankruptcy Code,
      or
      any other bankruptcy or insolvency law, including assignments for the benefit
      of
      creditors, compositions, extensions generally with its creditors, or proceedings
      seeking reorganization, arrangement, or other relief.

    


    “Intellectual
      Property Collateral”
is
      defined in the IP Agreement.

    


    “Interest
      Expense”
means
      for any fiscal period, interest expense (whether cash or non-cash) determined
      in
      accordance with GAAP for the relevant period ending on such date, including,
      in
      any event, interest expense with respect to any Credit Extension and other
      Indebtedness of Borrower and its Subsidiaries, including, without limitation
      or
      duplication, all commissions, discounts, or related amortization and other
      fees
      and charges with respect to letters of credit and bankers’ acceptance financing
      and the net costs associated with interest rate swap, cap, and similar
      arrangements, and the interest portion of any deferred payment obligation
      (including leases of all types).

    


    “Inventory”
is
      all
“inventory” as defined in the Code in effect on the date hereof with such
      additions to such term as may hereafter be made, and includes without limitation
      all merchandise, raw materials, parts, supplies, packing and shipping materials,
      work in process and finished products, including without limitation such
      inventory as is temporarily out of Borrower’s custody or possession or in
      transit and including any returned goods and any documents of title representing
      any of the above.

    


    “Investment”
is
      any
      beneficial ownership of (including stock, partnership interest or other
      securities) any Person, or any loan, advance or capital contribution to any
      Person.

    


    “Invoice
      Transmittal”
shows
      Federal Agency Accounts, Subcontractor Accounts, Unbilled Accounts, or HUD
      Accounts which Bank may finance and, for each such Account, includes the Account
      Debtor’s, name, address, invoice amount, invoice date and invoice
      number.

    


    “IP
      Agreement”
is
      that
      certain Intellectual Property Security Agreement executed and delivered by
      Borrower to Bank.

    


    “Lien”
is
      a
      mortgage, lien, deed of trust, charge, pledge, security interest or other
      encumbrance.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    “Loan
      Documents”
are,
      collectively, this Agreement, any note, or notes or guaranties executed by
      Borrower or Guarantor, and any other present or future agreement between
      Borrower and/or for the benefit of Bank in connection with this Agreement,
      all
      as amended, extended or restated.

    


    “Loan
      Fees”
is
      defined in Section 2.2.2.

    


    “Lockbox”
      is
      defined in Section 2.2.7.

    


    “Material
      Adverse Change” is:
      (i) A
      material impairment in the perfection or priority of Bank’s security interest in
      the Collateral or in the value of such Collateral; (ii) a material adverse
      change in the business, operations, or condition (financial or otherwise) of
      Borrower; (iii) a material impairment of the prospect of repayment of any
      portion of the Obligations; or (iv) Bank determines, based upon information
      available to it and in its reasonable judgment, that there is a reasonable
      likelihood that Borrower shall fail to comply with one or more of the financial
      covenants in Section 6 during the next succeeding financial reporting
      period.

    


    “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).

    


    “Net
      Income”
means,
      as calculated on a consolidated basis for Borrower and its Subsidiaries for
      any
      period as at any date of determination, the net profit (or loss), after
      provision for taxes, of Borrower and its Subsidiaries for such period taken
      as a
      single accounting period.

    


    “Obligations”
are
      all
      advances, liabilities, obligations, covenants and duties owing, arising, due
      or
      payable by Borrower to Bank now or later under this Agreement or any other
      document, instrument or agreement, account (including those acquired by
      assignment) primary or secondary, such as all Advances, Finance Charges, Loan
      Fees, Early Termination Fee, Collateral Handling Fee, interest, fees, expenses,
      professional fees and attorneys’ fees, or other amounts now or hereafter owing
      by Borrower to Bank.

    


    “Perfection
      Certificate”
is
      defined in Section 5.1.

    


    “Permitted
      Indebtedness”
      is:

    


    (a) Borrower’s
      indebtedness to Bank under this Agreement or the Loan Documents;

    


    (b) Subordinated
      Debt;

    


    (c) Indebtedness
      to trade creditors incurred in the ordinary course of business; and

    


    (d) Indebtedness
      secured by Permitted Liens.

    


    “Permitted
      Investments”
are:
      (i) marketable direct obligations issued or unconditionally guaranteed by the
      United States or its agency or any state maturing within 1 year from its
      acquisition, (ii) commercial paper maturing no more than 1 year after its
      creation and having the highest rating from either Standard & Poor’s
      Corporation or Moody’s Investors Service, Inc., (iii) Bank’s certificates of
      deposit issued maturing no more than 1 year after issue, and (iv) any other
      investments administered through Bank.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    “Permitted
      Liens”
      are:

    


    (a) Liens
      arising under this Agreement or other Loan Documents;

    


    (b) Liens
      for
      taxes, fees, assessments or other government charges or levies, either not
      delinquent or being contested in good faith and for which Borrower maintains
      adequate reserves on its Books, if they have no priority over any of Bank’s
      security interests;

    


    (c) Purchase
      money Liens securing no more than One Hundred Thousand Dollars ($100,000.00)
      in
      the aggregate amount outstanding (i) on equipment acquired or held by Borrower
      incurred for financing the acquisition of the equipment, or (ii) existing
      on equipment when acquired, if
      the Lien
      is confined to the property and improvements and the proceeds of the
      equipment;

    


    (d) Leases
      or
      subleases and non-exclusive licenses or sublicenses granted in the ordinary
      course of Borrower’s business, if
      the
      leases, subleases, licenses and sublicenses permit granting Bank a security
      interest; and

    


    (e) Liens
      incurred in the extension, renewal or refinancing of the indebtedness secured
      by
      Liens described in (a) through (d), but
      any
      extension, renewal or replacement Lien must be limited to the property
      encumbered by the existing Lien and the principal amount of the indebtedness
      may
      not increase.

    


    “Person”
is
      any
      individual, sole proprietorship, partnership, limited liability company, joint
      venture, company, trust, unincorporated organization, association, corporation,
      institution, public benefit corporation, firm, joint stock company, estate,
      entity or government agency.

    


    “Prime
      Rate”
is
      Bank’s most recently announced “prime rate,” even if it is not Bank’s lowest
      rate.

    


    “Reconciliation
      Period”
is
      each
      calendar month.

    


    “Registered
      Organization”
is
      any
“registered organization” as defined in the Code with such additions to such
      term as may hereafter be made.

    


    “Requirement
      of Law”
is
      as
      to any Person, the organizational or governing documents of such Person, and
      any
      law (statutory or common), treaty, rule or regulation or determination of an
      arbitrator or a court or other Governmental Authority, in each case applicable
      to or binding upon such Person or any of its property or to which such Person
      or
      any of its property is subject.

    


    “Responsible Officer”
is
      each
      of the Chief Executive Officer, President, Chief Financial Officer and
      Controller of Borrower.

    


    “Subcontractor
      Account Advance”
is
      defined in Section 2.1.1(a).

    


    “Subcontractor
      Accounts”
are
      Accounts (a) earned by Borrower in connection with Borrower’s provision of
      services as a subcontractor, and (b) that are Eligible Accounts hereunder.
      Notwithstanding
      the foregoing, Subcontractor Accounts shall not include Federal Agency Accounts,
      Unbilled Accounts, or HUD Accounts.

    


    “Subordinated
      Debt”
is
      debt
      incurred by Borrower subordinated to Borrower’s debt to Bank (pursuant to a
      subordination agreement entered into between Bank, Borrower and the subordinated
      creditor), on terms acceptable to Bank.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    “Subsidiary”
is
      any
      Person, corporation, partnership, limited liability company, joint venture,
      or
      any other business entity of which more than 50% of the voting stock or other
      equity interests is owned or controlled, directly or indirectly, by the Person
      or one or more Affiliates of the Person.

    


    “Success
      Fee”
is
      defined in Section 2.2.2.

    


    “Trigger
      Event”
occurs
      when both (a) Borrower fully repays all Obligations related to HUD Account
      Advances, and (b) commencing with the quarter ending on March 31, 2007, Borrower
      has two (2) consecutive quarters of EBITDA minus unfunded capital expenditures
      of at least Five Hundred Thousand Dollars ($500,000.00) during each such
      quarter.

    


    “Trigger
      Event Agreement”
is
      defined in Section 12.11.

    


    “Unbilled
      Account Advance”
is
      defined in Section 2.1.1(a).

    


    “Unbilled
      Accounts”
      is
      (a)
      the estimated face value amount (as determined by Borrower, subject to Section
      5.4 hereof) of an invoice for a receivable that will be generated (but has
      not
      yet been generated) within thirty (30) days of the date of a request for an
      Unbilled Accounts Advance pursuant to a binding contract signed by an Account
      Debtor and deemed acceptable by Bank in its sole discretion, and (b) the
      estimated face value amount (as determined by Borrower, subject to Section
      5.4
      hereof) of an invoice for a receivable that will be generated (but has not
      yet
      been generated) later than thirty (30) days but within sixty (60) days after
      the
      date of a request for an Unbilled Accounts Advance pursuant to a binding
      contract signed by the Internal Revenue Services and deemed acceptable by Bank
      in its sole discretion. Any Account which is an Unbilled Account as described
      in
      subsection (b) of the immediately preceding sentence shall be an “Unbilled IRS
      Account”. Notwithstanding the foregoing, Unbilled Accounts shall not include
      Federal Agency Accounts, Subcontractor Accounts, or HUD Accounts.

    


    “Unbilled
      HUD Account Advance”
is
      defined in the definition of “HUD Account”.

    


    “Unbilled
      IRS Account”
is
      defined in the definition of “Unbilled Accounts”.

    


    [Signature
      pages follows.]

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


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

    


    


    BORROWER:

    


    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

    


    


    BANK:

    


    SILICON
      VALLEY BANK

    


    By:
      /s/ Laura
      Scott                                                


    Name:
      Laura Scott

    Title:

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
      A

    


    The
      Collateral consists of all of Borrower’s right, title and interest in and to the
      following:

    


    All
      goods, equipment, inventory, contract rights or rights to payment of money,
      leases, license agreements, franchise agreements, general intangibles (including
      payment intangibles) accounts (including health-care receivables), documents,
      instruments (including any promissory notes), chattel paper (whether tangible
      or
      electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
      or not the letter of credit is evidenced by a writing), commercial tort claims,
      securities, and all other investment property, supporting obligations, and
      financial assets, whether now owned or hereafter acquired, wherever located;
      and
      any copyright rights, copyright applications, copyright registrations and like
      protections in each work of authorship and derivative work, whether published
      or
      unpublished, now owned or later acquired; any patents, trademarks, service
      marks
      and applications therefor; trade styles, trade names, any trade secret rights,
      including any rights to unpatented inventions, know-how, operating manuals,
      license rights and agreements and confidential information, now owned or
      hereafter acquired; or any claims for damages by way of any past, present and
      future infringement of any of the foregoing; and 

    


    All
      Borrower’s books relating to the foregoing and any and all claims, rights and
      interests in any of the above and all substitutions for, additions, attachments,
      accessories, accessions and improvements to and replacements, products, proceeds
      and insurance proceeds of any or all of the foregoing.

    
       

       

      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
      B

    


    

    


    SPECIALTY
      FINANCE DIVISION

    Compliance
      Certificate

    


    I,
      an
      authorized officer of Paradigm Holdings, Inc. and Paradigm Solutions Corporation
      (individually and collectively, jointly and severally, “Borrower”) certify under
      the Loan and Security Agreement (the “Agreement”) between Borrower and Silicon
      Valley Bank (“Bank”) as follows (all capitalized terms used herein shall have
      the meaning set forth in the Agreement):

    


    Borrower
      represents and warrants for each Financed Receivable based
      upon Federal Agency Accounts and Subcontractor Accounts:

    


    Each
      Financed Receivable is an Eligible Account.

    


    Borrower
      is the owner with legal right to sell, transfer, assign and encumber such
      Financed Receivable;

    


    The
      correct amount is on the Invoice Transmittal and is not disputed;

    


    Payment
      is not contingent on any obligation or contract and Borrower has fulfilled
      all
      its obligations as of the Invoice Transmittal date;

    


    Each
      Financed Receivable is based on an actual sale and delivery of goods and/or
      services rendered, is due to Borrower, is not past due or in default, has not
      been previously sold, assigned, transferred, or pledged and is free of any
      liens, security interests and encumbrances other than Permitted
      Liens;

    


    There
      are
      no defenses, offsets, counterclaims or agreements for which the Account Debtor
      may claim any deduction or discount;

    


    It
      reasonably believes no Account Debtor is insolvent or subject to any Insolvency
      Proceedings; 

    


    It
      has
      not filed or had filed against it Insolvency Proceedings and does not anticipate
      any filing;

    


    Bank
      has
      the right to endorse and/ or require Borrower to endorse all payments received
      on Financed Receivables and all proceeds of Collateral.

    


    No
      representation, warranty or other statement of Borrower in any certificate
      or
      written statement given to Bank contains any untrue statement of a material
      fact
      or omits to state a material fact necessary to make the statement contained
      in
      the certificates or statement not misleading.

    


    With
      respect to Financed Receivables based upon Unbilled Accounts, Borrower
      represents and warrants that
      the
      estimated face value amount determined by Borrower is based upon the best
      information available to Borrower and accurately and fully (considering all
      known discounts available to each such Account Debtor) reflects same. In
      addition, Borrower represents and warrants that there are no discounts, offsets
      or other rights of any Account Debtor under any Unbilled Account.

    


    With
      respect to Financed Receivables based upon HUD Accounts, Borrower
      represents and warrants that
      either
      (a) with respect to Financed Receivables based upon Unbilled HUD Account
      Advances,
      the estimated face value amount determined by Borrower is based upon the best
      information available to Borrower and accurately and fully (considering all
      known discounts available to each such Account Debtor) reflects same, and that
      there are no discounts, offsets or other rights of any Account Debtor under
      any
      Unbilled Account, and (b) with respect to Financed Receivables based upon Billed
      HUD Account
      Advances,
      such Billed HUD Account is due and owing from the United States Department
      of
      Housing and Urban Development pursuant to a binding contract between Borrower
      and the United States Department of Housing and Urban Development and is an
      Eligible Account hereunder.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    Additionally,
      Borrower represents and warrants as follows:

    


    Borrower
      and each Subsidiary is duly existing and in good standing in its state of
      formation and qualified and licensed to do business in, and in good standing
      in,
      any state in which the conduct of its business or its ownership of property
      requires that it be qualified except where the failure to do so could not
      reasonably be expected to cause a Material Adverse Change. The execution,
      delivery and performance of the Loan Documents have been duly authorized, and
      do
      not conflict with Borrower’s organizational documents, nor constitute an event
      of default under any material agreement by which Borrower is bound. Borrower
      is
      not in default under any agreement to which or by which it is bound in which
      the
      default could reasonably be expected to cause a Material Adverse
      Change.

    


    Borrower
      has good title to the Collateral, free of Liens except Permitted Liens. All
      inventory is in all material respects of good and marketable quality, free
      from
      material defects. 

    


    Borrower
      is not an “investment company” or a company “controlled” by an “investment
      company” under the Investment Company Act. Borrower is not engaged as one of its
      important activities in extending credit for margin stock (under Regulations
      X,
      T and U of the Federal Reserve Board of Governors). Borrower has complied in
      all
      material respects with the Federal Fair Labor Standards Act. Borrower has not
      violated any laws, ordinances or rules, the violation of which could reasonably
      be expected to cause a Material Adverse Change. None of Borrower’s or any
      Subsidiary’s properties or assets has been used by Borrower or any Subsidiary
      or, to the best of Borrower’s knowledge, by previous Persons, in disposing,
      producing, storing, treating, or transporting any hazardous substance other
      than
      legally. Borrower and each Subsidiary has timely filed all required tax returns
      and paid, or made adequate provision to pay, all material taxes, except those
      being contested in good faith with adequate reserves under GAAP. Borrower and
      each Subsidiary has obtained all consents, approvals and authorizations of,
      made
      all declarations or filings with, and given all notices to, all government
      authorities that are necessary to continue its business as currently conducted
      except where the failure to obtain or make such consents, declarations, notices
      or filings would not reasonably be expected to cause a Material Adverse
      Change.

    


    Borrower
      is in compliance with the Financial Covenant(s) set forth in Section 6.7 of
      the
      Agreement.

    


    All
      representations and warranties in the Agreement are true and correct in all
      material respects on this date, and Borrower represents that there is no
      existing Event of Default. 

    


    


    Sincerely,
      

    


    _________________________

    


    ________________________

    Signature

    ________________________

    Title

    ________________________
      

    


    Date