EXECUTION
VERSION

    


    SECURITY
AGREEMENT

    


    This
SECURITY AGREEMENT (this
“Agreement”), dated as
of May 26, 2010, is made by and among the grantors listed on the signature pages
hereof (collectively, jointly and severally, the “Grantors” and each,
individually, a “Grantor”), and the secured
parties listed on the signature pages hereof (collectively, the “Secured Parties” and each,
individually, a “Secured
Party”).

     

    RECITALS

     

    WHEREAS, pursuant to that
certain Securities Purchase Agreement, dated as of May 26, 2010 (as may be
amended, restated, supplemented, or otherwise modified from time to time,
including all schedules thereto, collectively, the “Securities Purchase Agreement”), by and
among Paradigm Holdings, Inc., a Wyoming corporation (“Parent”), and each of the
Secured Parties, Parent has agreed to sell, and each of the Secured Parties have
each agreed to purchase, severally and not jointly, certain Notes;
and

     

    WHEREAS, each Grantor other
than Parent is a direct or indirect wholly-owned Subsidiary (as defined below)
of Parent and will receive direct and substantial benefits from the purchase by
each of the Secured Parties of the Notes; and

     

    WHEREAS, in order to induce
the Secured Parties to purchase, severally and not jointly, the Notes as
provided for in the Securities Purchase Agreement, Grantors have agreed to grant
a continuing security interest in and to the Collateral in order to secure the
prompt and complete payment, observance and performance of the Secured
Obligations.

     

    AGREEMENTS

     

    NOW, THEREFORE, for and in
consideration of the recitals made above and other good and valuable
consideration, the receipt, sufficiency and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:

     

    1.            
Defined Terms.
All capitalized terms used herein (including in the preamble and recitals
hereof) without definition shall have the meanings ascribed thereto in the
Notes. Any terms used in this Agreement that are defined in the Code shall be
construed and defined as set forth in the Code unless otherwise defined herein
or in the Notes; provided, however, if the Code
is used to define any term used herein and if such term is defined differently
in different Articles of the Code, the definition of such term contained in
Article 9 of the Code shall govern. In addition to those terms defined elsewhere
in this Agreement, as used in this Agreement, the following terms shall have the
following meanings:

     

    (a)           “Account” means an account (as
that term is defined in the Code).

     

    (b)           “Account Debtor” means an
account debtor (as that term is defined in the Code).


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    (c)           “Bankruptcy Code” means title
11 of the United States Code, as in effect from time to time.

     

    (d)           “Books” means books and records
(including, without limitation, each Grantor’s Records) indicating, summarizing,
or evidencing each Grantor’s assets (including the Collateral) or liabilities,
each Grantor’s Records relating to its business operations (including, without
limitation, stock ledgers) or financial condition, and each Grantor’s goods or
General Intangibles related to such information.

     

    (e)           “Chattel Paper” means chattel
paper (as that term is defined in the Code) and includes tangible chattel paper
and electronic chattel paper.

     

    (f)        
   “Code”
means the New York Uniform Commercial Code, as in effect from time to time;
provided, however, in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection, priority, or remedies with respect to any Secured Party’s Lien on
any Collateral is governed by the Uniform Commercial Code as enacted and in
effect in a jurisdiction other than the State of New York, the term “Code” shall
mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes of the provisions thereof relating to such
attachment, perfection, priority, or remedies.

     

    (g)           “Collateral” has the meaning
specified therefor in Section 2.

     

    (h)           “Commencement Notice” means a
written notice, given by any Secured Party to the other Secured Parties in
accordance with the notice provisions set forth in the Securities Purchase
Agreement, pursuant to which such Secured Party notifies the other Secured
Parties of the existence of one or more Events of Default and of such Secured
Party’s intent to commence the exercise of one or more of the remedies provided
for under this Agreement with respect to all or any portion of the Collateral as
a consequence thereof, which notice shall incorporate a reasonably detailed
description of each Event of Default then existing and of the remedial action
proposed to be taken.

     

    (i)      
     “Commercial Tort Claims” means
commercial tort claims (as that term is defined in the Code), and includes those
commercial tort claims listed on Schedule
1 attached hereto.

     

    (j)     
      “Control Agreement” means a
control agreement, in form and substance satisfactory to Secured Parties,
executed and delivered by a Grantor, one or more Secured Parties, and the
applicable securities intermediary (with respect to a Securities Account) or
bank (with respect to a Deposit Account), as may be amended, restated,
supplemented, or otherwise modified from time to time.

     

    (k)           “Copyrights” means all
copyrights and copyright registrations, and also includes (i) the copyright
registrations and recordings thereof and all applications in connection
therewith listed on Schedule
2 attached hereto and made a part hereof, (ii) all reissues,
continuations, extensions or renewals thereof, (iii) all income, royalties,
damages and payments now and hereafter due or payable under and with respect
thereto, including payments under all licenses entered into in connection
therewith and damages and payments for past or future infringements or dilutions
thereof, (iv) the right to sue for past, present and future infringements and
dilutions thereof, (v) the goodwill of each Grantor’s business symbolized by the
foregoing or connected therewith, and (vi) all of each Grantor’s rights
corresponding thereto throughout the world.

     

    
      
         


      

      
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    (l)           “Copyright Security Agreement”
means each Copyright Security Agreement among Grantors, or any of them, and
Secured Parties, in substantially the form of Exhibit
A attached hereto, pursuant to which Grantors have granted to each
Secured Party a security interest in all their respective Copyrights, as may be
amended, restated, supplemented, or otherwise modified from time to
time.

     

    (m)           “Deposit Account” means a
deposit account (as that term is defined in the Code).

     

    (n)           “Equipment” means equipment (as
that term is defined in the Code).

     

    (o)           “Event of Default” has the
meaning specified therefor in the Notes.

     

    (p)           “General Intangibles” means
general intangibles (as that term is defined in the Code) and, in any event,
includes payment intangibles, contract rights, rights to payment, rights arising
under common law, statutes, or regulations, choses or things in action, goodwill
(including the goodwill associated with any Trademark, Patent, or Copyright),
Patents, Trademarks, Copyrights, URLs and domain names, industrial designs,
other industrial or Intellectual Property or rights therein or applications
therefor, whether under license or otherwise, programs, programming materials,
blueprints, drawings, purchase orders, customer lists, monies due or recoverable
from pension funds, route lists, rights to payment and other rights under any
royalty or licensing agreements, including Intellectual Property Licenses,
infringement claims, computer programs, information contained on computer disks
or tapes, software, literature, reports, catalogs, pension plan refunds, pension
plan refund claims, insurance premium rebates, tax refunds, and tax refund
claims, interests in a partnership or limited liability company which do not
constitute a security under Article 8 of the Code, and any other personal
property other than Commercial Tort Claims, money, Accounts, Chattel Paper,
Deposit Accounts, goods, Investment Related Property, Negotiable Collateral, and
oil, gas, or other minerals before extraction.

     

    (q)           “Governmental Authority” means
any domestic or foreign federal, state, local, or other governmental or
administrative body, instrumentality, board, department, or agency or any court,
tribunal, administrative hearing body, arbitration panel, commission, or other
similar dispute-resolving panel or body.

     

    (r)     
      “Guaranties” means each
Guaranty dated of even date herewith executed by Guarantors in favor of any or
all of the Secured Parties, together with any other guaranty or similar
agreement now or hereafter executed by a Guarantor in favor of any or all of the
Secured Parties in connection with the Notes or any of the other Transaction
Documents, as may be amended, restated, supplemented, or otherwise modified from
time to time.

     

    
      
         


      

      
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    (s)           “Guarantor” means each Grantor,
other than Parent, and each other Person that now or hereafter executes a
Guaranty.

     

    (t)        
   “Insolvency
Proceeding” means any proceeding commenced by or against any Person under
any provision of the Bankruptcy Code or under any other state or federal
bankruptcy or insolvency law or any equivalent laws in any other jurisdiction,
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extensions generally with creditors, or proceedings seeking
reorganization, arrangement, or other similar relief.

     

    (u)           “Intellectual Property” means
Patents, Copyrights, Trademarks, the goodwill associated with such Trademarks,
trade secrets and customer lists, and Intellectual Property
Licenses.

     

    (v)           “Intellectual Property
Licenses” means rights under or interests in any patent, trademark,
copyright or other intellectual property, including software license agreements
with any other party, whether the applicable Grantor is a licensee or licensor
under any such license agreement, including the license agreements listed on
Schedule
3 attached hereto and made a part hereof, as may be amended, restated,
supplemented, or otherwise modified from time to time.

     

    (w)           “Inventory” means inventory (as
that term is defined in the Code).

     

    (x)    
       “Investment Related Property”
means (i) investment property (as that term is defined in the Code), and (ii)
all of the following (regardless of whether classified as investment property
under the Code): all Pledged Interests, Pledged Operating Agreements, and
Pledged Partnership Agreements.

     

    (y)           “Lien” has the meaning
specified therefor in the Notes.

     

    (z) 
          “Negotiable Collateral” means
letters of credit, letter-of-credit rights, instruments, promissory notes,
drafts, and documents.

     

    (aa)         “New Subsidiary” has the
meaning specified therefor in the Notes.

     

    (bb)         “Notes” has the meaning
specified therefor in the Securities Purchase Agreement.

     

    (cc)         “Patents” means all patents and
patent applications, and also includes (i) the patents and patent applications
listed on Schedule
4 attached hereto and made a part hereof, (ii) all renewals thereof,
(iii) all income, royalties, damages and payments now and hereafter due or
payable under and with respect thereto, including payments under all licenses
entered into in connection therewith and damages and payments for past or future
infringements or dilutions thereof, (iv) the right to sue for past, present and
future infringements and dilutions thereof, and (v) all of each Grantor’s rights
corresponding thereto throughout the world.

     

    
      
         


      

      
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    (dd)         “Patent Security Agreement”
means each Patent Security Agreement among Grantors and Secured Parties in
substantially the form of Exhibit
B attached hereto, pursuant to which Grantors have granted to each
Secured Party a security interest in all their respective Patents, as may be
amended, restated, supplemented, or otherwise modified from time to
time.

     

    (ee)         “Permitted Liens” has the
meaning specified therefor in the Notes.

     

    (ff)           “Permitted Secured Party”
means, with respect to the exercise of any remedy provided for under this
Agreement, any Secured Party that has delivered a Commencement Notice with
respect to the exercise of such remedy to the other Secured Parties and has not
received a Veto Notice with respect thereto within the Veto Period; provided, however, there shall
only be a single Permitted Secured Party that may exercise any specific remedy
at any one time (it being agreed that if a Commencement Notice is delivered by
more than one Secured Party with respect to any remedy provided for under this
Agreement, then the first Secured Party to deliver a Commencement Notice and not
receive a Veto Notice within the Veto Period shall be the only Secured Party
that may exercise such remedy).

     

    (gg)         “Person” has the meaning
specified therefor in the Securities Purchase Agreement.

     

    (hh)         “Pledged Companies” means, each
Person listed on Schedule
5 hereto as a “Pledged Company,” together with each other Person all or a
portion of whose Stock is acquired or otherwise owned by a Grantor after the
date hereof.

     

    (ii)           “Pledged Interests” means all
of each Grantor’s right, title and interest in and to all of the Stock now or
hereafter owned by such Grantor, regardless of class or designation, including
all substitutions therefor and replacements thereof, all proceeds thereof and
all rights relating thereto, also including any certificates representing the
Stock, the right to receive any certificates representing any of the Stock, all
warrants, options, share appreciation rights and other rights, contractual or
otherwise, in respect thereof, and the right to receive dividends, distributions
of income, profits, surplus, or other compensation by way of income or
liquidating distributions, in cash or in kind, and cash, instruments, and other
property from time to time received, receivable, or otherwise distributed in
respect of or in addition to, in substitution of, on account of, or in exchange
for any or all of the foregoing.

     

    (jj)           “Pledged Operating Agreements”
means all of each Grantor’s rights, powers, and remedies under the limited
liability company operating agreements of each of the Pledged Companies that are
limited liability companies, as may be amended, restated, supplemented, or
otherwise modified from time to time.

     

    (kk)         “Pledged Partnership
Agreements” means all of each Grantor’s rights, powers, and remedies
under the partnership agreements of each of the Pledged Companies that are
partnerships, as may be amended, restated, supplemented, or otherwise modified
from time to time.

     

    
      
         


      

      
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    (ll)           “Proceeds” has the meaning
specified therefor in Section 2.

     

    (mm)       “Real Property” means any
estates or interests in real property now owned or hereafter acquired by any
Grantor and the improvements thereto.

     

    (nn)        “Records” means information
that is inscribed on a tangible medium or which is stored in an electronic or
other medium and is retrievable in perceivable form.

     

    (oo)        “Secured Obligations” mean all
of the present and future payment and performance obligations of Grantors
arising under this Agreement, the Notes, the Guaranties, and the other
Transaction Documents, including, without duplication, reasonable attorneys’
fees and expenses and any interest, fees, or expenses that accrue after the
filing of an Insolvency Proceeding, regardless of whether allowed or allowable
in whole or in part as a claim in any Insolvency Proceeding.

     

    (pp)        “Securities Account” means a
securities account (as that term is defined in the Code).

     

    (qq)        “Security Documents” means,
collectively, this Agreement, each Copyright Security Agreement, each Patent
Security Agreement, each Trademark Security Agreement, each Control Agreement,
and each other security agreement, pledge agreement, assignment, mortgage,
security deed, deed of trust, and other agreement or document executed and
delivered by a Grantor as security for any of the Secured Obligations, as may be
amended, restated, supplemented, or otherwise modified from time to
time.

     

    (rr)           “Security Interest” and “Security Interests” have the
meanings specified therefor in Section 2.

     

    (ss)         “Senior Lender” means Silicon
Valley Bank and its successors and assigns.

     

    (tt)           “Significant Secured Party”
means, on any date of determination, any Secured Party holding at least 50
percent (50%) or more of the aggregate principal amount of Notes outstanding on
such date.

     

    (uu)        “Stock” means all shares,
options, warrants, interests (including, without limitation, membership and
partnership interests), participations, or other equivalents (regardless of how
designated) of or in a Person, whether voting or nonvoting, including common
stock, preferred stock, or any other “equity security” (as such term is defined
in Rule 3a11-1 of the General Rules and Regulations promulgated by the United
States Securities and Exchange Commission and any successor thereto under the
Securities Exchange Act of 1934, as in effect from time to time).

     

    (vv)        “Subsidiaries” and “Subsidiary” each have the
meanings specified therefor in the Notes.

     

    
      
         


      

      
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    (ww)        “Subordination Agreement” shall
mean that certain subordination agreement with respect to certain senior
indebtedness by and among the Senior Parties and the Secured Lender dated on
even date herewith, as such may be amended from time to time.

     

    (xx)           “Supporting Obligations” means
supporting obligations (as such term is defined in the Code).

     

    (yy)         “Trademarks” means all
trademarks, trade names, trademark applications, service marks, service mark
applications, and also includes (i) the trade names, trademarks, trademark
applications, service marks, and service mark applications listed on Schedule
6 attached hereto and made a part hereof, and (ii) all renewals thereof,
(iii) all income, royalties, damages and payments now and hereafter due or
payable under and with respect thereto, including payments under all licenses
entered into in connection therewith and damages and payments for past or future
infringements or dilutions thereof, (iv) the right to sue for past, present and
future infringements and dilutions thereof, (v) the goodwill of each Grantor’s
business symbolized by the foregoing or connected therewith, and (vi) all of
each Grantor’s rights corresponding thereto throughout the world.

     

    (zz)          “Trademark Security Agreement”
means each Trademark Security Agreement among Grantors and Secured Parties in
substantially the form of Exhibit
C attached hereto, pursuant to which Grantors have granted to each
Secured Party a security interest in all their respective
Trademarks.

     

    (aaa)       “Transaction Documents” has the
meaning specified therefor in the Securities Purchase Agreement.

     

    (bbb)      “URL” means “uniform resource
locator,” an internet web address.

     

    (ccc)       “Veto Notice” means, with
respect to any Commencement Notice, a written notice given by any Significant
Secured Party to the other Secured Parties in accordance with the notice
provisions set forth in the Securities Purchase Agreement pursuant to which such
Significant Secured Party notifies the other Secured Parties of its objection to
the commencement of the remedial action specified in such Commencement Notice
and certifies that, to the best of its knowledge, it is a Significant Secured
Party.

     

    (ddd)      “Veto Period” means, with
respect to any Commencement Notice, the period of ten (10) consecutive calendar
days following the delivery of such Commencement Notice to the Secured
Parties.

     

    2.           
Grant of
Security. Each Grantor hereby unconditionally grants, assigns, and
pledges to each Secured Party a separate, continuing security interest (each, a
“Security Interest” and,
collectively, the “Security
Interests”) in all assets of such Grantor (other than Real Property)
whether now owned or hereafter acquired or arising and wherever located
(collectively, the “Collateral”), including,
without limitation, such Grantor’s right, title, and interest in and to the
following, whether now owned or hereafter acquired or arising and wherever
located:

     

    
      
         


      

      
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    (a)           all
of such Grantor’s Accounts;

     

    (b)           all
of such Grantor’s Books;

     

    (c)           all
of such Grantor’s Chattel Paper;

     

    (d)           all
of such Grantor’s Deposit Accounts;

     

    (e)           all
of such Grantor’s Equipment and fixtures;

     

    (f)           all
of such Grantor’s General Intangibles;

     

    (g)           all
of such Grantor’s Inventory;

     

    (h)           all
of such Grantor’s Investment Related Property;

     

    (i)     
      all of such Grantor’s Negotiable
Collateral;

     

    (j)   
        all of such Grantor’s rights in
respect of Supporting Obligations;

     

    (k)           all
of such Grantor’s Commercial Tort Claims;

     

    (l)   
        all of such Grantor’s money,
cash, cash equivalents, or other assets of each such Grantor that now or
hereafter come into the possession, custody, or control of any Secured
Party;

     

    (m)           all
of the proceeds and products, whether tangible or intangible, of any of the
foregoing, including proceeds of insurance or Commercial Tort Claims covering or
relating to any or all of the foregoing, and any and all Accounts, Books,
Chattel Paper, Deposit Accounts, Equipment, General Intangibles, Inventory,
Investment Related Property, Negotiable Collateral, Supporting Obligations,
money, or other tangible or intangible property resulting from the sale, lease,
license, exchange, collection, or other disposition of any of the foregoing, the
proceeds of any award in condemnation with respect to any of the foregoing, any
rebates or refunds, whether for taxes or otherwise, and all proceeds of any such
proceeds, or any portion thereof or interest therein, and the proceeds thereof,
and all proceeds of any loss of, damage to, or destruction of the above, whether
insured or not insured, and, to the extent not otherwise included, any
indemnity, warranty, or guaranty payable by reason of loss or damage to, or
otherwise with respect to any of the foregoing (the “Proceeds”). Without limiting
the generality of the foregoing, the term “Proceeds” includes whatever is
receivable or received when Investment Related Property or proceeds are sold,
exchanged, collected, or otherwise disposed of, whether such disposition is
voluntary or involuntary, and includes proceeds of any indemnity or guaranty
payable to any Grantor or any Secured Party from time to time with respect to
any of the Investment Related Property.

     

    
      
         


      

      
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    Notwithstanding
anything herein to the contrary, the term "Collateral" shall not include,
in the case of a Subsidiary (as defined in the Securities Purchase Agreements)
of such Grantor organized under the laws of a jurisdiction other than the United
States, any of the states thereof or the District of Columbia (a "Foreign Subsidiary"), more
than 65% (or such greater percentage that, due to a change in applicable law
after the date hereof, (i) would not reasonably be expected to cause the
undistributed earnings of such Foreign Subsidiary as determined for United
States federal income tax purposes to be treated as a deemed dividend to such
Foreign Subsidiary's United States parent and (ii) would not reasonably be
expected to cause any material adverse tax consequences) of the issued and
outstanding shares of Capital Stock entitled to vote (within the meaning of
Treas. Reg. Section 1.956-2(c)(2)) (it being understood and agreed that the
Collateral shall include 100% of the issued and outstanding shares of Capital
Stock not entitled to vote (within the meaning of Treas. Reg. Section
1.956-2(c)(2)) or other equity interest of such Foreign
Subsidiary).

     

    The
Grantors agree that the pledge of the shares of Stock acquired by a Grantor of
any and all Persons now or hereafter existing who is a Foreign Subsidiary may be
supplemented by one or more separate pledge agreements, deeds of pledge, share
charges, or other similar agreements or instruments, executed and delivered by
the relevant Grantors in favor of the Secured Parties, which pledge agreements
will provide for the pledge of such shares of Stock in accordance with the laws
of the applicable foreign jurisdiction.  With respect to such shares
of Stock, any Secured Party may, at any time and from time to time, in its sole
discretion, take actions in such foreign jurisdictions that will result in the
perfection of the Lien created in such shares of Stock.

     

    3.      
     Security for
Obligations. This Agreement and the Security Interests created hereby
secure the payment and performance of the Secured Obligations, whether now
existing or arising hereafter.  Without limiting the generality of the
foregoing, this Agreement secures the payment of all amounts which constitute
part of the Secured Obligations and would be owed by Grantors, or any of them,
to Secured Parties, or any of them, but for the fact that they are unenforceable
or not allowable due to the existence of an Insolvency Proceeding involving any
Grantor.

     

    4.     
      Grantors Remain
Liable.  Anything herein to the contrary notwithstanding, (a)
each of the Grantors shall remain liable under the contracts and agreements
included in the Collateral, including the Pledged Operating Agreements and the
Pledged Partnership Agreements, to perform all of the duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (b)
the exercise by Secured Parties, or any of them, of any of the rights hereunder
shall not release any Grantor from any of its duties or obligations under such
contracts and agreements included in the Collateral, and (c) no Secured Party
shall have any obligation or liability under such contracts and agreements
included in the Collateral by reason of this Agreement, nor shall any Secured
Party be obligated to perform any of the obligations or duties of any Grantor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.  Until an Event of Default shall occur and be
continuing, except as otherwise provided in this Agreement or any other
Transaction Document, Grantors shall have the right to possession and enjoyment
of the Collateral for the purpose of conducting the ordinary course of their
respective businesses, subject to and upon the terms hereof and the other
Transaction Documents.  Without limiting the generality of the
foregoing, it is the intention of the parties hereto that record and beneficial
ownership of the Pledged Interests, including all voting, consensual, and
dividend rights, shall remain in the applicable Grantor until the occurrence of
an Event of Default and until any Secured Party shall notify the applicable
Grantor of such Secured Party’s exercise of voting, consensual, or dividend
rights with respect to the Pledged Interests pursuant to Section 15
hereof.

     

    
      
         


      

      
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    5.    
        Representations and
Warranties.  Each Grantor hereby represents and warrants as
follows:

     

    (a)           The
exact legal name of each of the Grantors is set forth on the signature pages of
this Agreement.

     

    (b)           Schedule
7 attached hereto sets forth (i) all Real Property owned or leased by
Grantors, together with all other locations of Collateral, as of the date
hereof, and (ii) the chief executive office of each Grantor as of the date
hereof.

     

    (c)           As
of the date hereof, no Grantor has any interest in, or title to,
any  Copyrights, Intellectual Property Licenses, Patents, or
Trademarks except as set forth on Schedules
2, 3, 4, and 6,
respectively, attached hereto.  This Agreement is effective to create
a valid and continuing Lien on such Copyrights, Intellectual Property Licenses,
Patents and Trademarks and, upon filing of the Copyright Security Agreement with
the United States Copyright Office and filing of the Patent Security Agreement
and the Trademark Security Agreement with the United States Patent and Trademark
Office, and the filing of appropriate financing statements in the jurisdictions
listed on Schedule
8 hereto, all action necessary or desirable to protect and perfect the
Security Interests in and to each Grantor’s Patents, Trademarks, or Copyrights
has been taken and such perfected Security Interests are enforceable as such as
against any and all creditors of and purchasers from any Grantor.  No
Grantor has any interest in any Copyright that is necessary in connection with
the operation of such Grantor’s business, except for those Copyrights identified
on Schedule
2 attached hereto which have been registered with the United States
Copyright Office.

     

    (d)           This
Agreement creates a valid security interest in all of the Collateral of each
Grantor, to the extent a security interest therein can be created under the Code
securing the payment of the Secured Obligations. Except to the extent a security
interest in the Collateral cannot be perfected by the filing of a financing
statement under the Code, all filings and other actions necessary or desirable
to perfect and protect such security interest have been duly taken or will have
been taken upon the filing of financing statements listing each applicable
Grantor, as a debtor, and Secured Parties, as secured parties, in the
jurisdictions listed next to such Grantor’s name on Schedule
8 attached hereto. Upon the making of such filings, subject to Permitted
Liens, Secured Parties shall each have a first priority (or second priority, to
the extent such Collateral is subject to a Permitted Lien (as defined in the
Notes) with respect to the Senior Indebtedness (as defined in the Notes))
perfected security interest in all of the Collateral of each Grantor to the
extent such security interest can be perfected by the filing of a financing
statement .  All action by any Grantor necessary to protect and
perfect such security interest on each item of Collateral has been duly
taken.  Notwithstanding anything to the contrary in this Agreement or
any other Transaction Document (as defined in the Securities Purchase
Agreement), the parties hereto acknowledge that on September 7, 2006 a UCC 3
termination statement was filed in the State of Wyoming with respect to a
previously filed UCC Financing Statement by SunTrust Bank (the “Suntrust Lien”) and that on
January 7, 2010 a UCC 3 continuation statement (the “Continuation Statement”) was
filed in error with respect the SunTrust Lien.  Grantors agree to use
reasonable commercial efforts to promptly cause the withdrawal or termination
of  the Continuation Statement and the  parties hereto
acknowledge and agree that references to the priority  of the Secured
Parties’ security interest in the Collateral is subject to the withdrawal or
termination of the Continuation Statement.

     

    
      
         


      

      
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    (e)           (i)
Except for the Security Interests created hereby, such Grantor is and will at
all times be the sole holder of record and the legal and beneficial owner, free
and clear of all Liens other than Permitted Liens, of the Pledged Interests
indicated on Schedule
5 as being owned by such Grantor and, when acquired by such Grantor, any
Pledged Interests acquired after the date hereof; (ii) all of the Pledged
Interests are duly authorized, validly issued, fully paid and nonassessable and
the Pledged Interests constitute or will constitute the percentage of the issued
and outstanding Stock of the Pledged Companies of such Grantor identified on
Schedule
5 hereto; (iii) such Grantor has the right and requisite authority to
pledge all Investment Related Property pledged by such Grantor to each Secured
Party as provided herein; (iv) all actions necessary or desirable, subject to
Permitted Liens, to perfect, establish the first priority (or second priority,
to the extent such Collateral is subject to a Permitted Lien  with
respect to the Senior Indebtedness ) of, or otherwise protect, Secured Parties’
respective Liens in the Investment Related Property pledged hereunder, and the
proceeds thereof, have been duly taken, (A) upon the execution and delivery of
this Agreement; (B) upon the taking of possession by any Secured Party of any
certificates constituting the Pledged Interests, to the extent such Pledged
Interests are represented by certificates, together with undated powers endorsed
in blank by the applicable Grantor; (C) upon the filing of financing statements
in the applicable jurisdiction set forth on Schedule
8 attached hereto for such Grantor with respect to the Pledged Interests
of such Grantor that are not represented by certificates, and (D) with respect
to any Securities Accounts, upon the delivery of Control Agreements with respect
thereto; and (v) subject to the terms and conditions of the Subordination
Agreement, each Grantor has delivered to and deposited with any Secured Party
(or, with respect to any Pledged Interests created or obtained after the date
hereof, will deliver and deposit in accordance with Sections 6(a) and 8 hereof)
all certificates representing the Pledged Interests now or hereafter owned by
such Grantor to the extent such Pledged Interests are represented by
certificates, and undated powers endorsed in blank with respect to such
certificates. None of the Pledged Interests owned or held by such Grantor has
been issued or transferred in violation of any securities registration,
securities disclosure, or similar laws of any jurisdiction to which such
issuance or transfer may be subject.

     

    (f)           Other
than the Senior Lender and Hale Capital (as defined in the Securities Purchase
Agreement), no consent, approval, authorization, or other order or other action
by, and no notice to or filing with, any Governmental Authority or any other
Person is required (i) for the grant of a Security Interest by such Grantor in
and to the Collateral pursuant to this Agreement or for the execution, delivery,
or performance of this Agreement by such Grantor, or (ii) for the exercise by
any Secured Party of the voting or other rights provided in this Agreement with
respect to Investment Related Property pledged hereunder or the remedies in
respect of the Collateral pursuant to this Agreement, except (A) as may be
required in connection with such disposition of Investment Related Property by
laws affecting the offering and sale of securities generally and (B) for any
consent that may be required for the assignment of any Intellectual Property
License.

     

    
      
         


      

      
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    6.  
         Covenants.  Subject
to the terms and conditions of the Subordination Agreement, each Grantor,
jointly and severally, covenants and agrees with each Secured Party that from
and after the date of this Agreement and until the date of termination of this
Agreement in accordance with Section 24 hereof (but only to the extent the
particular assets described in this Section 6 constitute Collateral
hereunder):

     

    (a)           Possession of
Collateral.  In the event that any Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Investment
Related Property, or Chattel Paper, and if and to the extent that perfection or
priority of Secured Parties’ respective Security Interests is dependent on or
enhanced by possession, the applicable Grantor, immediately upon the request of
any Secured Party, shall execute such other documents and instruments as shall
be reasonably requested by such Secured Party or, if applicable, endorse and
deliver physical possession of such Negotiable Collateral, Investment Related
Property, or Chattel Paper to such Secured Party, together with such undated
powers endorsed in blank as shall be requested by such Secured
Party.

     

    (b)           Chattel
Paper.

     

    (i)         Each
Grantor shall take all steps reasonably necessary to grant each Secured Party
control of all Chattel Paper in accordance with the Code and all “transferable
records” as that term is defined in Section 16 of the Uniform Electronic
Purchase Act and Section 201 of the federal Electronic Signatures in Global and
National Commerce Act as in effect in any relevant jurisdiction;
and

     

    (ii)         If
any Grantor retains possession of any Chattel Paper or instruments (which
retention of possession shall be subject to the extent permitted hereby and by
the Securities Purchase Agreement), promptly upon the request of any Secured
Party, such Chattel Paper and instruments shall be marked with the following
legend: “This writing and the obligations evidenced or secured hereby are
subject to the Security Interests of [names of Secured Parties].”

     

    (c)           Control
Agreements.

     

    (i)         Promptly
upon the request of any Secured Party (but in no event later than five (5) days
following the date of such request), each Grantor shall obtain an authenticated
Control Agreement from each bank maintaining a Deposit Account for such Grantor;
and

     

    (ii)         Promptly
upon the request of any Secured Party (but in no event later than five (5) days
following the date of such request), each Grantor shall obtain authenticated
Control Agreements from each issuer of uncertificated securities, securities
intermediary, or commodities intermediary issuing or holding any financial
assets or commodities to or for such Grantor.

     

    
      
         


      

      
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    (d)           Letter-of-Credit
Rights.  Each Grantor that is or becomes the beneficiary of a
letter of credit shall promptly (and in any event within 2 Business Days after
becoming a beneficiary) notify Secured Parties thereof and, upon the request by
any Secured Party, enter into a multi-party agreement with Secured Parties and
the issuing or confirming bank with respect to letter-of-credit rights assigning
such letter-of-credit rights to Secured Parties and directing all payments
thereunder to Secured Parties, all in form and substance satisfactory to Secured
Parties.

     

    (e)           Commercial Tort
Claims.  Each Grantor shall promptly (and in any event within 2
Business Days of receipt thereof) notify Secured Parties in writing upon
incurring or otherwise obtaining a Commercial Tort Claim after the date hereof
and, upon request of any Secured Party, promptly amend Schedule
1 to this Agreement to describe such after-acquired Commercial Tort Claim
in a manner that reasonably identifies such Commercial Tort Claim, and hereby
authorizes the filing of additional financing statements or amendments to
existing financing statements describing such Commercial Tort Claims, and agrees
to do such other acts or things deemed necessary or desirable by any Secured
Party to, subject to Permitted Liens, give Secured Parties a first priority (or
second priority, to the extent such Collateral is subject to a Permitted Lien
with respect to the Senior Indebtedness ) , perfected security interest in any
such Commercial Tort Claim.

     

    (f)  
         Government
Contracts.  If any Account or Chattel Paper arises out of a
contract or contracts with the United States of America, or any department,
agency, or instrumentality thereof, Grantors shall promptly (and in any event
within 2 Business Days of the creation thereof) notify Secured Parties thereof
in writing and execute any instruments or take any steps reasonably required by
any Secured Party in order that all moneys due or to become due under such
contract or contracts shall be assigned to Secured Parties, and shall provide
written notice thereof and take all other appropriate actions under the
Assignment of Claims Act or other applicable law to provide each Secured Party,
subject to Permitted Liens, a first-priority (or second priority, to the extent
such Collateral is subject to a Permitted Lien with respect to the Senior
Indebtedness ) perfected security interest in such contract.

     

    (g)           Intellectual
Property.

     

    (i)         Upon
request of any Secured Party, in order to facilitate filings with the United
States Patent and Trademark Office and the United States Copyright Office or any
other applicable Governmental Authority, each Grantor shall execute and deliver
to Secured Parties one or more Copyright Security Agreements, Trademark Security
Agreements, or Patent Security Agreements to further evidence Secured Parties’
respective Liens on such Grantor’s Copyrights, Trademarks or
Patents.


    
      
         


      

      
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    (ii)         Each
Grantor shall have the duty (unless waived by Hale Capital) (A) to promptly sue
for infringement, misappropriation, or dilution, after obtaining knowledge of
the same, with respect to its rights in Intellectual Property and to recover any
and all damages for such infringement, misappropriation, or dilution, (B) to
prosecute diligently any trademark application or service mark application that
is part of the Trademarks pending as of the date hereof or hereafter until the
termination of this Agreement, (C) to prosecute diligently any patent
application that is part of the Patents pending as of the date hereof or
hereafter until the termination of this Agreement, and (D) to take all
reasonable and necessary action to preserve and maintain all of each Grantor’s
Trademarks, Patents, Copyrights, Intellectual Property Licenses, and its rights
therein, including the filing of applications for renewal, affidavits of use,
affidavits of noncontestability and opposition and interference and cancellation
proceedings.  Each Grantor shall promptly file an application with the
United States Copyright Office for any Copyright that has not been registered
with the United States Copyright Office. Each Grantor shall promptly file an
application with the United States Patent and Trademark Office for any Patent or
Trademark that has not been registered with the United States Patent and
Trademark Office. Any expenses incurred in connection with the foregoing shall
be borne by Grantors.  Each Grantor further agrees not to abandon any
Trademark, Patent, Copyright or Intellectual Property License without the prior
written consent of Hale Capital.

     

    (iii)        Grantors
acknowledge and agree that Secured Parties shall have no duties with respect to
the Trademarks, Patents, Copyrights, or Intellectual Property
Licenses.  Without limiting the generality of this Section 6(g),
Grantors acknowledge and agree that no Secured Party shall be under any
obligation to take any steps necessary to preserve rights in the Trademarks,
Patents, Copyrights, or Intellectual Property Licenses against any other Person,
but any Secured Party may do so at its option from and after the occurrence and
during the continuance of an Event of Default, and all expenses incurred in
connection therewith (including fees and expenses of attorneys and other
professionals) shall be for the sole account of the Grantors and shall be deemed
to be Secured Obligations.

     

    (h)           Investment Related
Property.

     

    (i)         If
any Grantor shall receive or become entitled to receive any Pledged Interests
after the date hereof, it shall promptly (and in any event within 2 Business
Days of receipt thereof) identify such Pledged Interests in a written notice to
Secured Parties;

     

    (ii)         Subject
to the terms and conditions of the Subordination Agreement, all sums of money
and property paid or distributed in respect of the Investment Related Property
pledged hereunder which are received by any Grantor shall be held by the
Grantors in trust for the benefit of Secured Parties segregated from such
Grantor’s other property, and such Grantor shall deliver it forthwith to the
Secured Parties in the exact form received;

     

    (iii)       Each
Grantor shall promptly deliver to Secured Parties a copy of each notice or other
communication received by it in respect of any Pledged Interests;

     

    
      
         


      

      
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    (iv)       Unless
Grantor receives the prior written consent of Hale Capital, no Grantor shall
make or consent to any material amendment or other modification or waiver with
respect to any Pledged Interests, Pledged Operating Agreement, or Pledged
Partnership Agreement, or enter into any agreement or, subject to the terms and
conditions of the Subordination Agreement, permit to exist any restriction with
respect to any Pledged Interests;

     

    (v)       Each
Grantor agrees that it will cooperate with Secured Parties in obtaining all
necessary approvals and making all necessary filings under federal, state,
local, or foreign law in connection with the Security Interests on the
Investment Related Property pledged hereunder or any sale or transfer thereof;
and

     

    (vi)       As
to all limited liability company or partnership interests issued under any
Pledged Operating Agreement or Pledged Partnership Agreement, each Grantor
hereby represents, warrants and covenants that the Pledged Interests issued
pursuant to such agreement (A) are not and shall not be dealt in or traded on
securities exchanges or in securities markets, (B) do not and will not
constitute investment company securities, and (C) are not and will not be
held by such Grantor in a securities account.  In addition, none of
the Pledged Operating Agreements, the Pledged Partnership Agreements, or any
other agreements governing any of the Pledged Interests issued under any Pledged
Operating Agreement or Pledged Partnership Agreement, provide or shall provide
that such Pledged Interests are securities governed by Article 8 of the Uniform
Commercial Code as in effect in any relevant jurisdiction.

     

    (i)           Transfers and Other
Liens.  Except for the transactions contemplated by the
Reincorporation Agreement, Grantors shall not (i) sell, lease, license, assign
(by operation of law or otherwise), transfer or otherwise dispose of, or grant
any option with respect to, any of the Collateral, except as expressly permitted
by this Agreement and the other Transaction Documents, or (ii) create or permit
to exist any Lien upon or with respect to any of the Collateral of any of
Grantors, except for Permitted Liens.  The inclusion of Proceeds in
the Collateral shall not be deemed to constitute consent by any Secured Party to
any sale or other disposition of any of the Collateral except as expressly
permitted in this Agreement or the other Transaction Documents.

     

    (j)           Preservation of
Existence.  Except for the transactions contemplated by the
Reincorporation Agreement, each Grantor shall maintain and preserve its
existence, rights and privileges, and become or remain duly qualified and in
good standing in each jurisdiction in which the character of the properties
owned or leased by it or in which the transaction of its business makes such
qualification necessary.

     

    (k)           Maintenance of
Properties. Each Grantor shall maintain and preserve in all material
respects all of its properties which are necessary or useful in the proper
conduct of its business in good working order and condition, ordinary wear and
tear excepted, and comply at all times with the provisions in all material
respects of all leases to which it is a party as lessee or under which it
occupies property, so as to prevent any loss or forfeiture thereof or
thereunder.

     

    
      
         


      

      
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    (l)           Maintenance of
Insurance. Each Grantor shall maintain insurance with responsible
and reputable insurance companies or associations (including, without
limitation, comprehensive general liability, hazard, rent and business
interruption insurance) with respect to its properties (including all real
properties leased or owned by it) and business, in such amounts and covering
such risks as is required by any governmental authority having jurisdiction with
respect thereto or as is carried generally in accordance with sound business
practice by companies in similar businesses similarly situated.

     

    (m)           Other Actions as to Any and
All Collateral.  Each Grantor shall promptly (and in any event
within 2 Business Days of acquiring or obtaining such Collateral) notify Secured
Parties in writing upon (i) acquiring or otherwise obtaining any Collateral
after the date hereof consisting of Trademarks, Patents, registered Copyrights,
material Intellectual Property Licenses, Investment Related Property, Chattel
Paper (electronic, tangible or otherwise), documents (as defined in Article 9 of
the Code), promissory notes (as defined in the Code, or instruments (as defined
in the Code) or (ii) any amount payable under or in connection with any of the
Collateral being or becoming evidenced after the date hereof by any Chattel
Paper, documents, promissory notes, or instruments and, in each such case upon
the request of any Secured Party, promptly execute such other documents, or if
applicable, deliver such Chattel Paper, other documents or certificates
evidencing any Investment Related Property and do such other acts or things
deemed necessary or desirable by any Secured Party to protect Secured Parties’
respective Security Interests therein.

     

    7.     
      Relation to Other
Transaction Documents.  The provisions of this Agreement shall
be read and construed with the Transaction Documents referred to below in the
manner so indicated.

     

    (a)           Securities Purchase
Agreement and Notes. In the event of any conflict between any provision
in this Agreement and any provision in the Securities Purchase Agreement or
Notes, such provision of the Securities Purchase Agreement or Notes shall
control, except to the extent the applicable provision in this Agreement is more
restrictive with respect to the rights of Grantors or imposes more burdensome or
additional obligations on Grantors, in which event the applicable provision in
this Agreement shall control.

     

    (b)           Patent, Trademark, Copyright
Security Agreements.  The provisions of the Copyright Security
Agreements, Trademark Security Agreements, and Patent Security Agreements are
supplemental to the provisions of this Agreement, and nothing contained in the
Copyright Security Agreements, Trademark Security Agreements or the Patent
Security Agreements shall limit any of the rights or remedies of any Secured
Party hereunder.

     

    
      
         


      

      
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    8.       
     Further
Assurances.

     

    (a)           Subject
to the terms and conditions of the Subordination Agreement, each Grantor agrees
that from time to time, at its own expense, such Grantor will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or that any Secured Party may reasonably request, in order
to perfect and protect the Security Interests granted or purported to be granted
hereby or to enable any Secured Party to exercise and enforce its rights and
remedies hereunder with respect to any of the Collateral.

     

    (b)           Each
Grantor authorizes the filing by any Secured Party of financing or continuation
statements, or amendments thereto, and such Grantor will execute and deliver to
such Secured Party such other instruments or notices, as may be necessary or as
such Secured Party may reasonably request, in order to perfect and preserve the
Security Interests granted or purported to be granted hereby.

     

    (c)           Each
Grantor authorizes any Secured Party at any time and from time to time to file,
transmit, or communicate, as applicable, financing statements and amendments (i)
describing the Collateral as “all personal property of debtor” or “all assets of
debtor” or words of similar effect, (ii) describing the Collateral as being of
equal or lesser scope or with greater detail, or (iii) that contain any
information required by part 5 of Article 9 of the Code for the sufficiency or
filing office acceptance.  Each Grantor also hereby ratifies any and
all financing statements or amendments previously filed by any Secured Party in
any jurisdiction.

     

    (d)           Subject
to Section 24 of this Agreement, each Grantor acknowledges that it is not
authorized to file any financing statement or amendment or termination statement
with respect to any financing statement filed in connection with this Agreement
without the prior written consent of each Secured Party affected thereby,
subject to such Grantor’s rights under Section 9-509(d)(2) of the
Code.

     

    (e)           Subject
to the restrictions and limitations set forth under Section 4.17 of the Amended
Preferred Purchase Agreement (as defined in the Securities Puchase Agreement),
each Grantor shall permit each Secured Party or its employees, accountants,
attorneys or agents, to examine and inspect any Collateral or any other property
of such Grantor at any time during ordinary business hours.

     

    9.       
    Secured Parties’ Right to
Perform Contracts, Exercise Rights, etc.  Subject to the terms
and conditions of the Subordination Agreement, upon the occurrence and during
the continuance of an Event of Default, any Secured Party (a) may proceed to
perform any and all of the obligations of any Grantor contained in any contract,
lease, or other agreement and exercise any and all rights of any Grantor therein
contained as fully as such Grantor itself could, (b) shall have the right to use
any Grantor’s rights under Intellectual Property Licenses in connection with the
enforcement of the Secured Party’s rights hereunder, including the right to
prepare for sale and sell any and all Inventory and Equipment now or hereafter
owned by any Grantor and now or hereafter covered by such licenses, and (c)
shall have the right to request that any Stock that is pledged hereunder be
registered in the name of such Secured Party or any of its
nominees.

     

    
      
         


      

      
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    10.           Secured Parties Appointed
Attorney-in-Fact. Each Grantor, on behalf of itself and each New
Subsidiary of such Grantor, hereby irrevocably appoints each Secured Party as
the attorney-in-fact of such Grantor and each such New Subsidiary to exercise
the powers granted pursuant to this Section 10. In the event any Grantor or any
New Subsidiary fails to execute or deliver in a timely manner any Transaction
Document or other agreement, document, certificate or instrument which such
Grantor or New Subsidiary now or at any time hereafter is required to execute or
deliver pursuant to the terms of the Securities Purchase Agreement or any other
Transaction Document, each Secured Party shall have full authority in the place
and stead of such Grantor or New Subsidiary, and in the name of such Grantor,
such New Subsidiary or otherwise, to execute and deliver each of the foregoing.
Without limitation of the foregoing, each Secured Party shall have full
authority in the place and stead of each Grantor and each New Subsidiary, and in
the name of any such Grantor, any such New Subsidiary or otherwise, at such time
as an Event of Default has occurred and is continuing, to take any action and to
execute any instrument which such Secured Party may reasonably deem necessary or
advisable to accomplish the purposes of this Agreement, including, without
limitation:

     

    (a)           to
ask, demand, collect, sue for, recover, compromise, receive and give acquittance
and receipts for moneys due and to become due under or in connection with any
Collateral of such Grantor or New Subsidiary;

     

    (b)           to
receive and open all mail addressed to such Grantor or New Subsidiary and to
notify postal authorities to change the address for the delivery of mail to such
Grantor or New Subsidiary to that of such Secured Party;

     

    (c)           to
receive, indorse, and collect any drafts or other instruments, documents,
Negotiable Collateral or Chattel Paper;

     

    (d)           to
file any claims or take any action or institute any proceedings which such
Secured Party may deem necessary or desirable for the collection of any of the
Collateral of such Grantor or New Subsidiary or otherwise to enforce the rights
of any Secured Party with respect to any of the Collateral;

     

    (e)           to
repair, alter, or supply goods, if any, necessary to fulfill in whole or in part
the purchase order of any Person obligated to such Grantor or New Subsidiary in
respect of any Account of such Grantor or New Subsidiary;

     

    (f)           to
use any labels, Patents, Trademarks, trade names, URLs, domain names, industrial
designs, Copyrights, customer lists, advertising matter or other industrial or
intellectual property rights, in advertising for sale and selling Inventory and
other Collateral and to collect any amounts due under Accounts, contracts or
Negotiable Collateral of such Grantor or New Subsidiary; and

     

    (g)           such
Secured Party shall have the right, but shall not be obligated, to bring suit in
its own name to enforce the Trademarks, Patents, Copyrights and Intellectual
Property Licenses and, if such Secured Party shall commence any such suit, the
appropriate Grantor or New Subsidiary shall, at the request of such Secured
Party, do any and all lawful acts and execute any and all proper documents
reasonably required by such Secured Party in aid of such
enforcement.

     

    
      
         


      

      
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    To the
extent permitted by law, each Grantor hereby ratifies, for itself and each of
its New Subsidiaries, all that such attorney-in-fact shall lawfully do or cause
to be done by virtue hereof.  This power-of-attorney granted pursuant
to this Section 10 is coupled with an interest and shall be irrevocable until
this Agreement is terminated.

     

    11.           Secured Parties May
Perform.  If any Grantor fails to perform any agreement
contained herein, any Secured Party may itself perform, or cause performance of,
such agreement, and the reasonable expenses of such Secured Party incurred in
connection therewith shall be payable, jointly and severally, by
Grantors.

     

    12.           Secured Parties’ Duties;
Bailee for Perfection.  The powers conferred on Secured Parties
hereunder are solely to protect the Secured Parties’ respective interests in the
Collateral and shall not impose any duty upon any Secured Party in favor of any
Grantor or any other Secured Party to exercise any such
powers.  Except for the safe custody of any Collateral in its actual
possession and the accounting for moneys actually received by it hereunder, no
Secured Party shall have any duty to any Grantor or any other Secured Party as
to any Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any
Collateral.  A Secured Party shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its actual
possession if such Collateral is accorded treatment substantially equal to that
which such Secured Party accords its own property.  Each Secured Party
agrees that, with respect to any Collateral at any time or times in its
possession and in which any other Secured Party has a Lien, the Secured Party in
possession of any such Collateral shall be the bailee of each other Secured
Party solely for purposes of perfecting (to the extent not otherwise perfected)
each other Secured Party’s Lien in such Collateral, provided that no Secured
Party shall be obligated to obtain or retain possession of any such
Collateral.  Without limiting the generality of the foregoing, Secured
Parties and Grantors hereby agree that any Secured Party that is in possession
of any Collateral at such time as the Secured Obligations owing to such Secured
Party have been paid in full shall re-deliver such Collateral to the applicable
Grantor or, if requested by any Secured Party, if there are any Secured
Obligations owed by such Grantor to such Secured Party, prior to such
re-delivery, may deliver such Collateral (unless otherwise restricted by
applicable law or court order and subject in all events to the receipt of an
indemnification of all liabilities arising from such delivery) to the requesting
Secured Party, without recourse to or representation or warranty by the Secured
Party in such possession.

     

    13.           Collection of Accounts,
General Intangibles and Negotiable Collateral.  At any time
upon the occurrence and during the continuation of an Event of Default, any
Secured Party may (a) notify Account Debtors of any Grantor that the Accounts,
General Intangibles, Chattel Paper or Negotiable Collateral have been assigned
to such Secured Party or that such Secured Party has a security interest
therein, and (b) collect the Accounts, General Intangibles and Negotiable
Collateral directly, and any collection costs and expenses shall constitute part
of the Secured Obligations.

     

    
      
         


      

      
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    14.           Disposition of Pledged
Interests by Secured Party.  None of the Pledged Interests
existing as of the date of this Agreement are, and none of the Pledged Interests
hereafter acquired on the date of acquisition thereof will be, registered or
qualified under the various federal, state or other securities laws of the
United States or any other jurisdiction, and disposition thereof after an Event
of Default may be restricted to one or more private (instead of public) sales in
view of the lack of such registration.  Each Grantor understands that
in connection with such disposition, any Secured Party may approach only a
restricted number of potential purchasers and further understands that a sale
under such circumstances may yield a lower price for the Pledged Interests than
if the Pledged Interests were registered and qualified pursuant to federal,
state and other securities laws and sold on the open market.  Each
Grantor, therefore, agrees that:  (a) if a Secured
Party  shall, pursuant to the terms of this Agreement, sell or cause
the Pledged Interests or any portion thereof to be sold at a private sale, such
Secured Party shall have the right to rely upon the advice and opinion of any
nationally recognized brokerage or investment firm (but shall not be obligated
to seek such advice and the failure to do so shall not be considered in
determining the commercial reasonableness of such action) as to the best manner
in which to offer the Pledged Interest or any portion thereof for sale and as to
the best price reasonably obtainable at the private sale thereof; and (b) such
reliance shall be conclusive evidence that such Secured Party has handled the
disposition in a commercially reasonable manner.

     

    15.           Voting
Rights.

     

    (a)           Subject
to terms and conditions of the Subordination Agreement, upon the occurrence and
during the continuation of an Event of Default, (i) any Secured Party may, at
its option, and with 2 Business Days prior notice to any Grantor, and in
addition to all rights and remedies available to Secured Parties under any other
agreement, at law, in equity, or otherwise, exercise all voting rights, and all
other ownership or consensual rights in respect of the Pledged Interests owned
by such Grantor, but under no circumstances is any Secured Party obligated by
the terms of this Agreement to exercise such rights, and (ii) if such Secured
Party duly exercises its right to vote any of such Pledged Interests, each
Grantor hereby appoints such Secured Party as such Grantor’s true and lawful
attorney-in-fact and IRREVOCABLE PROXY to vote such Pledged Interests in any
manner that such Secured Party deems advisable for or against all matters
submitted or which may be submitted to a vote of shareholders, partners or
members, as the case may be.  This power-of-attorney granted pursuant
to this Section 15 is coupled with an interest and shall be irrevocable until
this Agreement is terminated.

     

    (b)           For
so long as any Grantor shall have the right to vote the Pledged Interests owned
by it, such Grantor covenants and agrees that it will not, without the prior
written consent of Secured Parties, vote or take any consensual action with
respect to such Pledged Interests which would materially or adversely affect the
rights of Secured Parties exercising the voting rights owned by such Grantor or
the value of the Pledged Interests.

     

    16.           Remedies.  Subject
to the terms and conditions of the Subordination Agreement, upon the occurrence
and during the continuance of an Event of Default:

     

    
      
         


      

      
        20

        
          

        

      

      
         


      

    

     

    (a)           Any
Secured Party may exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein, in the other Transaction Documents, or
otherwise available to it, all the rights and remedies of a secured party on
default under the Code or any other applicable law.  Without limiting
the generality of the foregoing, each Grantor expressly agrees that, in any such
event, any Secured Party without any demand, advertisement, or notice of any
kind (except a notice specified below of time and place of public or private
sale) to or upon any Grantor or any other Person (all and each of which demands,
advertisements and notices are hereby expressly waived to the maximum extent
permitted by the Code or by any other applicable law), may take immediate
possession of all or any portion of the Collateral and (i) require Grantors to,
and each Grantor hereby agrees that it will at its own expense and upon request
of such Secured Party forthwith, assemble all or part of the Collateral as
directed by such Secured Party and make it available to such Secured Party at
one or more locations where such Grantor regularly maintains Inventory, and (ii)
without notice except as specified below, sell the Collateral or any part
thereof in one or more parcels at public or private sale, at any of such Secured
Party’s offices or elsewhere, for cash, on credit, and upon such other terms as
such Secured Party may deem commercially reasonable.  Each Grantor
agrees that, to the extent notice of sale shall be required by law, at least 10
days notice to any Grantor of the time and place of any public sale or the time
after which any private sale is to be made shall constitute reasonable
notification and specifically such notice shall constitute a reasonable
“authenticated notification of disposition” within the meaning of Section 9-611
of the Code.  No Secured Party shall be obligated to make any sale of
Collateral regardless of notice of sale having been given.  Any
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so
adjourned.

     

    (b)           Each
Secured Party is hereby granted a license or other right to use, without
liability for royalties or any other charge, each Grantor’s labels, Patents,
Copyrights, rights of use of any name, trade secrets, trade names, Trademarks,
service marks and advertising matter, URLs, domain names, industrial designs,
other industrial or intellectual property or any property of a similar nature,
whether owned by any Grantor or with respect to which any Grantor has rights
under license, sublicense, or other agreements (but only to the extent (i) such
license, sublicense or agreement does not prohibit such use by such Secured
Party and (ii) such Grantor will not be in default under such license,
sublicense, or other agreement as a result of such use by such Secured Party),
as it pertains to the Collateral, in preparing for sale, advertising for sale
and selling any Collateral, and each Grantor’s rights under all licenses and all
franchise agreements shall inure to the benefit of such Secured
Party.

     

    (c)           Any
cash held by any Secured Party as Collateral and all proceeds received by any
Secured Party in respect of any sale of, collection from, or other realization
upon all or any part of the Collateral shall be applied against the Secured
Obligations in the order set forth in Section 17 hereof. In the event the
proceeds of Collateral are insufficient for the Satisfaction in Full of the
Secured Obligations (as defined below), each Grantor shall remain jointly and
severally liable for any such deficiency.

    

      
        
           


        

        
          21

          
            

          

        

        
           


        

      

    

     

    
      (d)           Each
Grantor hereby acknowledges that the Secured Obligations arose out of a
commercial transaction, and agrees that if an Event of Default shall occur and
be continuing any Secured Party shall have the right to an immediate writ of
possession without notice of a hearing.  Each Secured Party shall have
the right to the appointment of a receiver for the properties and assets of each
Grantor, and each Grantor hereby consents to such rights and such appointment
and hereby waives any objection such Grantor may have thereto or the right to
have a bond or other security posted by any Secured Party.

       

      (e)           Notwithstanding
anything in this Agreement to the contrary, each Secured Party agrees that it
will not exercise any remedy provided for under this Agreement with respect to
all or any portion of the Collateral unless such Secured Party is a Permitted
Secured Party (provided that the foregoing shall not prevent any Secured Party
from commencing or participating in any Insolvency Proceeding or taking any
action (other than with respect to the Collateral) to enforce the payment or
performance of any Grantors’ obligations under any of the Notes, Guaranties or
other Transaction Documents).  This Section 16(e) is not intended to
confer any rights or benefits upon Grantors, or any of them, or any other Person
except Secured Parties, and no Person (including any or all Grantors) other than
Secured Parties shall have any right to enforce any of the provisions of
this Section 16(e). As between Grantors, or any of them, and any Secured
Party, any action that such Secured Party may take under this Agreement shall be
conclusively presumed to have been authorized and approved by the other Secured
Parties.

       

      17.           Priority of Liens;
Application of Proceeds of Collateral.  Each Secured Party
hereby acknowledges and agrees that, notwithstanding the time or order of the
filing of any financing statement or other registration or document with respect
to the Collateral and the Security Interests, or any provision of this
Agreement, any other Security Document, the Code or other applicable law, solely
as amongst the Secured Parties, the separate Security Interests of the Secured
Parties shall have the same rank and priority; provided, that, the foregoing
shall not apply to any Security Interest of a Secured Party that is void or
voidable as  a matter of law.  In furtherance thereof, all
proceeds of Collateral received by any Secured Party shall be applied as
follows:

       

      (a)           first, ratably to pay
any expenses due to any of the Secured Parties (including, without limitation,
the reasonable costs and expenses paid or incurred by any Secured Party to
correct any default under or enforce any provision of the Transaction Documents,
or after the occurrence of any Event of Default in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Collateral, or any portion thereof,
irrespective of whether a sale is consummated) or indemnities then due to any of
the Secured Parties under the Transaction Documents, until paid in
full;

       

      (b)           second, ratably to
pay any fees or premiums then due to any of the Secured Parties under the
Transaction Documents, until paid in full;

       

      (c)           third, ratably to pay
interest due in respect of the Secured Obligations then due to any of the
Secured Parties, until paid in full;


      
        
           


        

        
          22

          
            

          

        

        
           


        

      

       

      (d)           fourth, ratably to
pay the principal amount of all Secured Obligations then due to any of the
Secured Parties, until paid in full;

       

      (e)           fifth, ratably to pay
any other Secured Obligations then due to any of the Secured Parties;
and

       

      (f)           sixth, to Grantors or
such other Person entitled thereto under applicable law.

       

      18.           Remedies
Cumulative.  Each right, power, and remedy of any Secured Party
as provided for in this Agreement or in any other Transaction Document or now or
hereafter existing at law or in equity or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power,
or remedy provided for in this Agreement or in the other Transaction Documents
or now or hereafter existing at law or in equity or by statute or otherwise, and
the exercise or beginning of the exercise by any Secured Party, of any one or
more of such rights, powers, or remedies shall not preclude the simultaneous or
later exercise by such Secured Party of any or all such other rights, powers, or
remedies.

       

      19.           Marshaling. No
Secured Party shall be required to marshal any present or future collateral
security (including but not limited to the Collateral) for, or other assurances
of payment of, the Secured Obligations or any of them or to resort to such
collateral security or other assurances of payment in any particular order, and
all of its rights and remedies hereunder and in respect of such collateral
security and other assurances of payment shall be cumulative and in addition to
all other rights and remedies, however existing or arising.  To the
extent that it lawfully may, each Grantor hereby agrees that it will not invoke
any law relating to the marshaling of collateral which might cause delay in or
impede the enforcement of any Secured Party’s rights and remedies under this
Agreement or under any other instrument creating or evidencing any of the
Secured Obligations or under which any of the Secured Obligations is outstanding
or by which any of the Secured Obligations is secured or payment thereof is
otherwise assured, and, to the extent that it lawfully may, each Grantor hereby
irrevocably waives the benefits of all such laws.

       

      
        
          
             


          

          
            23

            
              

            

          

          
             


          

        

      

       

      20.           Acknowledgment.

       

      (a)           Each
Secured Party hereby agrees and acknowledges that no other Secured Party has
agreed to act for it as an administrative or collateral agent, and each Secured
Party is and shall remain solely responsible for the attachment, perfection and
priority of all Liens created by this Agreement or any other Security Document
in favor of such Secured Party.  No Secured Party shall have by reason
of this Agreement or any other Transaction Document an agency or fiduciary
relationship with any other Secured Party.  No Secured Party (which
term, as used in this sentence, shall include reference to each Secured Party’s
officers, directors, employees, attorneys, agents and affiliates and to the
officers, directors, employees, attorneys and agents of such Secured Party’s
affiliates) shall: (i) have any duties or responsibilities except those
expressly set forth in this Agreement and the other Security Documents or
(ii) be required to take, initiate or conduct any enforcement action
(including any litigation, foreclosure or collection proceedings hereunder or
under any of the other Security Documents).  Without limiting the
foregoing, no Secured Party shall have any right of action whatsoever against
any other Secured Party as a result of such Secured Party acting or refraining
from acting hereunder or under any of the Security Documents except as a result
and to the extent of losses caused by such Secured Party’s actual gross
negligence or willful misconduct (it being understood and agreed by each
Secured Party that the delivery by any Significant Secured Party of one or more
Veto Notices shall not be deemed to be or construed as gross negligence or
willful misconduct on the part of the Secured Party delivering any such Veto
Notice).  No Secured Party assumes any responsibility for any failure
or delay in performance or breach by any Grantor or any Secured Party of
its obligations under this Agreement or any other Transaction
Document.  No Secured Party makes to any other Secured Party any
express or implied warranty, representation or guarantee with respect to any
Secured Obligations, Collateral, Transaction Document or Grantor.  No
Secured Party nor any of its officers, directors, employees, attorneys or agents
shall be responsible to any other Secured Party or any of its officers,
directors, employees, attorneys or agents for: (i) any recitals,
statements, information, representations or warranties contained in any of the
Transaction Documents or in any certificate or other document furnished pursuant
to the terms hereof; (ii) the execution, validity, genuineness,
effectiveness or enforceability of any of the Transaction Documents;
(iii) the validity, genuineness, enforceability, collectability, value,
sufficiency or existence of any Collateral, or the attachment, perfection or
priority of any Lien therein; or (iv) the assets, liabilities, financial
condition, results of operations, business, creditworthiness or legal status of
any Grantor or any Account Debtor.  No Secured Party nor any of its
officers, directors, employees, attorneys or agents shall have any obligation to
any other Secured Party to ascertain or inquire into the existence of any
default or Event of Default, the observance or performance by any Grantor
of any of the duties or agreements of such Grantor under any of the Transaction
Documents or the satisfaction of any conditions precedent contained in any of
the Transaction Documents.

       

      (b)           Each
Secured Party hereby acknowledges and represents that it has, independently and
without reliance upon any other Secured Party, and based upon such documents,
information and analyses as it has deemed appropriate, made its own credit
analysis of each Grantor and its own decision to enter into the Transaction
Documents and to purchase the Notes, and each Secured Party has made such
inquiries concerning the Transaction Documents, the Collateral and each Grantor
as such Secured Party feels necessary and appropriate, and has taken such care
on its own behalf as would have been the case had it entered into the
Transaction Documents without any other Secured Party.  Each Secured
Party hereby further acknowledges and represents that the other Secured Parties
have not made any representations or warranties to it concerning any Grantor,
any of the Collateral or the legality, validity, sufficiency or enforceability
of any of the Transaction Documents.  Each Secured Party also hereby
acknowledges that it will, independently and without reliance upon the other
Secured Parties, and based upon such financial statements, documents and
information as it deems appropriate at the time, continue to make and rely upon
its own credit decisions in taking or refraining to take any other action
under this Agreement or the Transaction Documents.  No Secured Party
shall have any duty or responsibility to provide any other Secured Party with
any notices, reports or certificates furnished to such Secured Party by any
Grantor or any credit or other information concerning the affairs, financial
condition, business or assets of any Grantor (or any of its affiliates) which
may come into possession of such Secured Party.

       

      
        
           


        

        
          24

          
            

          

        

        
           


        

      

       

      21.           Indemnity and
Expenses.

       

      (a)           Without
limiting any obligations of Parent under the Securities Purchase Agreement, each
Grantor agrees to indemnify all Secured Parties from and against all claims,
lawsuits and liabilities (including reasonable attorneys’ fees) arising out of
or resulting from this Agreement (including enforcement of this Agreement) or
any other Transaction Document, except claims, losses or liabilities resulting
from the gross negligence or willful misconduct of the party seeking
indemnification as determined by a final non-appealable order of a court of
competent jurisdiction. This provision shall survive the termination of this
Agreement and the Transaction Documents and the Satisfaction in Full of the
Secured Obligations.

       

      (b)           Grantors,
jointly and severally, shall, upon demand, pay to each Secured Party all of the
reasonable costs and expenses which such Secured Party may incur in connection
with (i) the administration of this Agreement, (ii) the custody, preservation,
use or operation of, or, upon an Event of Default, the sale of, collection from,
or other realization upon, any of the Collateral in accordance with this
Agreement and the other Transaction Documents, (iii) the exercise or enforcement
of any of the rights of such Secured Party hereunder or (iv) the failure by any
Grantor to perform or observe any of the provisions hereof.

       

      22.           Merger, Amendments;
Etc.  THIS AGREEMENT, TOGETHER WITH THE OTHER TRANSACTION
DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES SOLELY WITH
RESPECT TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.  THERE ARE NO UNWRITTEN AGREEMENTS BETWEEN THE
PARTIES.  No waiver of any provision of this Agreement, and no consent
to any departure by any of Grantors herefrom, shall in any event be effective
unless the same shall be in writing and signed by each Secured Party, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given, provided that any party may give a waiver
in writing as to itself. No amendment of any provision of this Agreement shall
be effective unless the same shall be in writing and signed by each Secured
Party and each Grantor to which such amendment applies.

       

      23.           Addresses for
Notices.  All notices and other communications provided for
hereunder (a) shall be given in the form and manner set forth in the Securities
Purchase Agreement and (b) shall be delivered, (i) in the case of notice to any
Grantor, by delivery of such notice to Parent at Parent’s address specified in
the Securities Purchase Agreement or at such other address as shall be
designated by Parent in a written notice to each of the Secured Parties in
accordance with the provisions thereof, and (ii) in the case of notice to any
Secured Party, by delivery of such notice to such Secured Party at its address
specified in the Securities Purchase Agreement or at such other address as shall
be designated by such Secured Party in a written notice to Parent and each other
Secured Party in accordance with the provisions thereof.  For the
avoidance of doubt, the Foreign Subsidiaries, as Grantors, hereby irrevocably
appoint the Parent as its agent for receipt of service of process and all
notices and other communications in the United States at the address specified
below.

       

      
        
           


        

        
          25

          
            

          

        

        
           


        

      

       

      24.           Separate, Continuing
Security Interests; Assignments under Transaction
Documents.  This Agreement shall create a separate, continuing
security interest in the Collateral in favor of each Secured Party and shall (a)
remain in full force and effect until Satisfaction in Full of the Secured
Obligations, (b) be binding upon each of Grantors, and their respective
permitted successors and permitted assigns, and (c) inure to the benefit of, and
be enforceable by, the Secured Parties and their respective successors,
transferees and assigns.  Without limiting the generality of the
foregoing clause (c), any Secured Party may, in accordance with the provisions
of the Transaction Documents, assign or otherwise transfer all or any portion of
its rights and obligations under the Transaction Documents to any other Person,
and such other Person shall thereupon become vested with all the benefits in
respect thereof granted to such Secured Party herein or otherwise. Upon
Satisfaction in Full of the Secured Obligations, the Security Interests granted
hereby and pursuant to the other Security Documents shall terminate and all
rights to the Collateral shall revert to Grantors or any other Person entitled
thereto. At such time, each Secured Party will authorize the filing of
appropriate termination statements to terminate such Security
Interests.  No transfer or renewal, extension, assignment, or
termination of this Agreement or any other Transaction Document, or any other
instrument or document executed and delivered by any Grantor to any Secured
Party nor any additional loans made by any Secured Party to any Grantor, nor the
taking of further security, nor the retaking or re-delivery of the Collateral to
Grantors, or any of them, by any Secured Party, nor any other act of Secured
Parties, or any of them, shall release any of Grantors from any obligation,
except a release or discharge executed in writing by all Secured
Parties.  No Secured Party shall by any act, delay, omission or
otherwise, be deemed to have waived any of its rights or remedies hereunder,
unless such waiver is in writing and signed by such Secured Party and then only
to the extent therein set forth.  A waiver by any Secured Party of any
right or remedy on any occasion shall not be construed as a bar to the exercise
of any such right or remedy which such Secured Party would otherwise have had on
any other occasion.

       

      25.           Governing
Law; Jurisdiction; Service of Process; Jury Trial. All questions concerning the
construction, validity, enforcement and interpretation of this Agreement shall
be governed by the internal laws of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in The City of New York, Borough of Manhattan, for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim
that it is not personally subject to the jurisdiction of any such court, that
such suit, action or proceeding is brought in an inconvenient forum or that the
venue of such suit, action or proceeding is improper; provided, however, that any
suit seeking enforcement against any Collateral or other property may be
brought, at any Secured Party’s option, in the courts of any jurisdiction where
such Secured Party elects to bring such action or where such Collateral or other
property may be found.  Each party hereby irrevocably waives personal
service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Without limitation of
the foregoing, each Grantor other than Parent hereby irrevocably appoints Parent
as such Grantor’s agent for purposes of receiving and accepting any service of
process hereunder or under any of the other Security
Documents.  Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE
ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF
THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

       

      
        
           


        

        
          26

          
            

          

        

        
           


        

      

       

      26.           Miscellaneous.

       

      (a)           This
Agreement may be executed in two or more identical counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to the other party. In
the event that any signature is delivered by facsimile transmission or by an
e-mail which contains a portable document format (.pdf) file of an executed
signature page, such signature page shall create a valid and binding obligation
of the party executing (or on whose behalf such signature is executed) with the
same force and effect as if such signature page were an original thereof. Any
party delivering an executed counterpart of this Agreement by facsimile or other
electronic method of transmission also shall deliver an original executed
counterpart of this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Agreement. The foregoing shall apply to each other Security Document mutatis
mutandis.

       

      (b)           Any
provision of this Agreement which is prohibited or unenforceable shall be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof in that jurisdiction or affecting
the validity or enforceability of such provision in any other
jurisdiction.

       

      (c)           Headings
used in this Agreement are for convenience only and shall not be used in
connection with the interpretation of any provision hereof.

       

      (d)           The
pronouns used herein shall include, when appropriate, either gender and both
singular and plural, and the grammatical construction of sentences shall conform
thereto.

       

      (e)           The
language used in this Agreement will be deemed to be the language chosen by the
parties to express their mutual intent, and no rules of strict construction will
be applied against any party. For clarification purposes, the Recitals are part
of this Agreement.

       

      
        
           


        

        
          27

          
            

          

        

        
           


        

      


      (f)           Unless
the context of this Agreement or any other Transaction Document clearly requires
otherwise, references to the plural include the singular, references to the
singular include the plural, the terms “includes” and  “including” are
not limiting, and the term “or” has, except where otherwise indicated, the
inclusive meaning represented by the phrase “and/or.” The words “hereof,”
“herein,” “hereby,” “hereunder,” and similar terms in this Agreement or any
other Transaction Document refer to this Agreement or such other Transaction
Document, as the case may be, as a whole and not to any particular provision of
this Agreement or such other Transaction Document, as the case may
be.  Section, subsection, clause, schedule, and exhibit references
herein are to this Agreement unless otherwise specified.  Any
reference in this Agreement or in any other Transaction Document to any
agreement, instrument, or document shall include all alterations, amendments,
changes, extensions, modifications, renewals, replacements, substitutions,
joinders, and supplements, thereto and thereof, as applicable (subject to any
restrictions on such alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, joinders, and supplements
set forth herein). “Satisfaction in Full of the Secured
Obligations” shall mean the indefeasible payment in full in cash and
discharge, or other satisfaction in accordance with the terms of the Transaction
Documents and discharge, of all Secured Obligations in full. Any reference
herein to any Person shall be construed to include such Person’s permitted
successors and permitted assigns. Any requirement of a writing contained herein
or in any other Transaction Document shall be satisfied by the transmission of a
Record and any Record so transmitted shall constitute a representation and
warranty as to the accuracy and completeness of the information contained
therein.

       

      (g)           All
dollar amounts referred to in this Agreement and the other Transaction Documents
are in United States Dollars (“U.S. Dollars”), and all
amounts owing under this Agreement and all other Transaction Documents shall be
paid in U.S. Dollars. All amounts denominated in other currencies shall be
converted in the U.S. Dollar equivalent amount in accordance with the Exchange
Rate on the date of calculation. “Exchange Rate” means, in relation to
any amount of currency to be converted into U.S. Dollars pursuant to this
Agreement, the U.S. Dollar exchange rate as published in the Wall Street Journal
on the relevant date of calculation.

       

      [signature pages
follow]

       

      
        
          
             


          

          
            28

            
              

            

          

          
             


          

        

      

       

      IN
WITNESS WHEREOF, the undersigned parties hereto have executed this Agreement by
and through their duly authorized officers, as of the day and year first above
written.

       

      
        
          
            
              
                
                  
                    	
                            GRANTORS:

                          	
                            PARADIGM
      HOLDINGS, INC., a Wyoming corporation

                          
	 
      	 
      
	 
      	
                            By:

                          	
                            /s/Peter B. LaMontagne

                          
	 
      	 
      	
                            Peter
      B. LaMontagne

                          
	 
      	 
      	
                            President
      and Chief Executive Officer

                          
	 
      	 
      
	 
      	
                            PARADIGM
      HOLDINGS, INC., a Nevada corporation

                          
	 
      	 
      
	 
      	
                            By:

                          	
                            /s/Peter B. LaMontagne

                          
	 
      	 
      	
                            Peter
      B. LaMontagne

                          
	 
      	 
      	
                            President
      and Chief Executive Officer

                          
	 
      	 
      
	 
      	
                            PARADIGM
      SOLUTIONS CORPORATION

                          
	 
      	 
      
	 
      	
                            By:

                          	
                            /s/Peter B. LaMontagne

                          
	 
      	 
      	
                            Peter
      B. LaMontagne

                          
	 
      	 
      	
                            President
      and Chief Executive Officer

                          
	 
      	 
      
	 
      	
                            CALDWELL
      TECHNOLOGY SOLUTIONS LLC

                          
	 
      	 
      
	 
      	
                            By:

                          	
                            /s/Peter B. LaMontagne

                          
	 
      	 
      	
                            Peter
      B. LaMontagne

                          
	 
      	 
      	
                            Manager

                          


                  

                

              

            

          

        

      

    

     

    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

     

    
      	 
      	
              TRINITY
      INFORMATION MANAGEMENT SERVICES

            
	 
      	 
      
	 
      	
              By:

            	
              /s/Peter B. LaMontagne

            
	 
      	 
      	
              Peter
      B. LaMontagne

            
	 
      	 
      	
              President
      and Chief Executive Officer

            


    

    
      


      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

       

      
        	
                SECURED
      PARTIES:

              	
                HALE
      CAPITAL PARTNERS, LP

              
	 
      	 
      
	 
      	
                By:

              	
                /s/Martin Hale

              
	 
      	 
      	
                Name:  Martin
      M. Hale, Jr.

              
	 
      	 
      	
                Title:  Chief
      Executive Officer

              
	 
      	 
      
	 
      	
                EREF
      PARA, LLC

              
	 
      	 
      
	 
      	
                By:  Hale
      Fund Management, LLC, its

              
	 
      	
                Managing
      Member

              
	 
      	 
      
	 
      	
                By:

              	
                /s/Martin Hale

              
	 
      	 
      	
                Name:  Martin
      M. Hale, Jr.

              
	 
      	 
      	
                Title:  Chief
      Executive Officer

              


      

       

      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

      


      SCHEDULE
1

       

      COMMERCIAL
TORT CLAIMS


       

      N/A

       

      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

       

      SCHEDULE
2

       

      COPYRIGHTS

       

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

      


      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

      


      SCHEDULE
3

       

      INTELLECTUAL
PROPERTY LICENSES

       

      N/A

      


      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

      


      SCHEDULE
4

       

      PATENTS

       

      N/A

       

      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

       

      SCHEDULE
5

       

      PLEDGED
COMPANIES


       

      
        
          
            
              
                
                  
                    	
                            Name of Pledgor

                          	 	
                            Name of Pledged Company

                          	 	
                            Percentage of Class

                            Owned

                          	 
	 
      	 	 
      	 	 	 
	
                            Paradigm
      Holdings, Inc., a Wyoming corporation

                          	 	
                            Caldwell
      Technology Solutions, LLC

                          	 	 	100	%
	 
      	 	 
      	 	 	 	 
	
                            Paradigm
      Holdings, Inc., a Wyoming corporation

                          	 	
                            Paradigm
      Solutions Corporation

                          	 	 	100	%
	 
      	 	 
      	 	 	 	 
	
                            Paradigm
      Holdings, Inc., a Wyoming corporation

                          	 	
                            Trinity
      Information Management Services

                          	 	 	100	%
	 
      	 	 
      	 	 	 	 
	
                            Paradigm
      Holdings, Inc., a Wyoming corporation

                          	 	
                            Paradigm
      Holdings, Inc., a Nevada corporation

                          	 	 	100	%
	 
      	 	 
      	 	 	 	 
	
                            Paradigm
      Solutions Corporation

                          	 	
                            Unified
      Solutions LLC

                          	 	 	49	%


                  

                

              

            

          

        

      

       

      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

      


      SCHEDULE
6

       

      TRADEMARKS

       

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

      


      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

      


      SCHEDULE
7

       

      REAL
PROPERTY

       

      Owned Real
Property

       

      N/A

       

      Leased Real
Property


       

      
        
          	
                  Grantor

                	 
      	
                  Location

                	 
      	
                  Lessor

                	 
      	
                  Lease Terms

                
	
                  Paradigm
      Solutions Corporation

                	 
      	
                  9715
      Key West Avenue, Rockville, MD 20850

                	 
      	
                  Manugistics,
      Inc

                	 
      	
                  6/2/06
      - 5/31/12

                
	
                  Paradigm
      Solutions Corporation

                	 
      	
                  2600
      Tower Oaks Blvd, Rockville, MD 20852

                	 
      	
                  Legato
      Systems, Inc.

                	 
      	
                  7/15/03
      - 5/31/11

                
	
                  Trinity
      Information Management Services, Inc.

                	
                    

                	
                  2424
      Vista Way, Oceanside, CA 92054

                	
                    

                	
                  Jaeger
      Vineyards Commercial Investments Series

                	
                    

                	
                  12/1/05
      - 11/30/10

                


        

      

       

      Chief Executive
Office

       

      
        
          
            	
                    Grantor

                  	 
      	
                    Chief Executive Office

                  	 
      	
                    Books and Records

                  	 
      	
                    Inventory, Equipment,

                    Etc.

                  
	
                    Paradigm
      Holdings, Inc., a Wyoming corporation

                  	 
      	
                    9715
      Key West Avenue, Rockville, MD 20850

                  	 
      	
                    9715
      Key West Avenue, Rockville, MD 20850

                  	 
      	
                    9715
      Key West Avenue, Rockville, MD 20850

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                    Paradigm
      Solutions Corporation

                  	 
      	
                    9715
      Key West Avenue, Rockville, MD 20850

                  	 
      	
                    9715
      Key West Avenue, Rockville, MD 20850

                  	 
      	
                    9715
      Key West Avenue, Rockville, MD 20850

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                    Trinity
      Information Management Services, Inc.

                  	 
      	
                    9715
      Key West Avenue, Rockville, MD 20850

                  	 
      	
                    9715
      Key West Avenue, Rockville, MD 20850

                  	 
      	
                    9715
      Key West Avenue, Rockville, MD 20850

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                    Caldwell
      Technology Solutions, LLC

                  	 
      	
                    9715
      Key West Avenue, Rockville, MD 20850

                  	 
      	
                    9715
      Key West Avenue, Rockville, MD 20850

                  	 
      	
                    9715
      Key West Avenue, Rockville, MD 20850

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	
                    Paradigm
      Holdings, Inc., a Nevada corporation

                  	
                      

                  	
                    9715
      Key West Avenue, Rockville, MD 20850

                  	
                      

                  	
                    9715
      Key West Avenue, Rockville, MD 20850

                  	
                      

                  	
                    9715
      Key West Avenue, Rockville, MD
20850

                  


          

        

      

       

      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

      


      SCHEDULE
8

       

      LIST OF
UNIFORM COMMERCIAL CODE FILING JURISDICTIONS

       

      
        
          
            
              
                
                  
                    	
                            Grantor

                          	 
      	
                            Jurisdictions

                          
	 	 	 
	
                            Paradigm
      Holdings, Inc., a Wyoming corporation

                          	 
      	
                            Wyoming

                          
	 	 	 
	
                            Paradigm
      Holdings, Inc., a Nevada corporation

                          	 
      	
                            Nevada

                          
	 	 	 
	
                            Paradigm
      Solutions Corporation

                          	 
      	
                            Maryland

                          
	 	 	 
	
                            Trinity
      Information Management Services

                          	 
      	
                            Nevada

                          
	 	 	 
	
                            Caldwell
      Technology Solutions LLC.

                          	 
      	
                            Maryland

                          


                  

                

              

            

          

        

      

       

      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

      


      EXHIBIT
A

       

      COPYRIGHT SECURITY
AGREEMENT

       

      This
COPYRIGHT SECURITY AGREEMENT (this “Copyright Security Agreement”)
is made this 26th day of
May 2010, by the Grantors listed on the signature pages hereof (collectively,
jointly and severally, “Grantors” and each
individually “Grantor”),
in favor of the Secured Parties under and as defined in the below-described
Security Agreement.

       

      RECITALS

       

      WHEREAS,
pursuant to that certain Securities Purchase Agreement, dated as of May 26, 2010
(as may be amended, restated, supplemented, or otherwise modified from time to
time, including all schedules thereto, collectively, the “Securities Purchase Agreement”), by and
among Paradigm Holdings, Inc., a Wyoming corporation (“Parent”), and each of the
Secured Parties, Parent has agreed to sell, and each of the Secured Parties have
each agreed to purchase, severally and not jointly, certain Notes;
and

       

      WHEREAS,
in order to induce each of the Secured Parties to purchase, severally and not
jointly, the Notes as provided for in the Securities Purchase Agreement,
Grantors have executed and delivered to each of the Secured Parties that certain
Security Agreement of even date herewith (including all annexes, exhibits or
schedules thereto, as from time to time amended, restated, supplemented or
otherwise modified, the “Security Agreement”);
and

       

      WHEREAS,
pursuant to the Security Agreement, Grantors are required to execute and deliver
to each of the Secured Parties this Copyright Security Agreement.

       

      AGREEMENTS

       

      NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as
follows:

       

      1.      
      DEFINED
TERMS.  All capitalized terms used but not otherwise defined
herein have the meanings given to them in the Security Agreement.

       

      2.     
       GRANT OF SECURITY INTEREST
IN COPYRIGHT COLLATERAL.  Each Grantor hereby grants to each
Secured Party, subject to Permitted Liens, a continuing first priority (or
second priority, to the extent such Collateral is subject to a Permitted Lien
with respect to the Senior Indebtedness ) security interest in all of such
Grantor’s right, title and interest in, to and under the following, whether
presently existing or hereafter created or acquired (collectively, the “Copyright
Collateral”):

       

      (a)           all
of each Grantor’s Copyrights and Copyright Intellectual Property Licenses to
which it is a party including those referred to on Schedule
I hereto;

       

      (b)           all
reissues, continuations or extensions of the foregoing; and

      


      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

       

      (c)           all
products and proceeds of the foregoing, including any claim by such Grantor
against third parties for past, present or future infringement or dilution of
any Copyright or any Copyright licensed under any Intellectual Property
License.

       

      3.     
      SECURITY FOR
OBLIGATIONS.  This Copyright Security Agreement and the
Security Interests created hereby secures the payment and performance of all the
Secured Obligations, whether now existing or arising
hereafter.  Without limiting the generality of the foregoing, this
Copyright Security Agreement secures the payment of all amounts which constitute
part of the Secured Obligations and would be owed by Grantors, or any of them,
to Secured Parties, or any of them, whether or not they are unenforceable or not
allowable due to the existence of an Insolvency Proceeding involving any
Grantor.

       

      4.  
         SECURITY
AGREEMENT.  The security interests granted pursuant to this
Copyright Security Agreement are granted in conjunction with the security
interests granted to Secured Parties pursuant to the Security
Agreement.  Each Grantor hereby acknowledges and affirms that the
rights and remedies of Secured Parties with respect to their respective security
interests in the Copyright Collateral made and granted hereby are more fully set
forth in the Security Agreement, the terms and provisions of which are
incorporated by reference herein as if fully set forth herein.

       

      5.   
         AUTHORIZATION TO
SUPPLEMENT.  To the extent required under the Security
Agreement, Grantors shall give Secured Parties prompt notice in writing of any
additional copyright registrations or applications therefor after the date
hereof. Grantors hereby authorize Secured Parties unilaterally to modify this
Agreement by amending Schedule
I to include any future registered copyrights or applications therefor of
Grantors.  Notwithstanding the foregoing, no failure to so modify this
Copyright Security Agreement or amend Schedule
I shall in any way affect, invalidate or detract from any Secured Party’s
continuing security interest in all Collateral, whether or not listed on Schedule
I.

       

      6.      
      COUNTERPARTS.  This
Copyright Security Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event that any signature is delivered by
facsimile transmission or by an e-mail which contains a portable document format
(.pdf) file of an executed signature page, such signature page shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such signature page
were an original thereof.  In proving this Copyright Security
Agreement or any other Transaction Document in any judicial proceedings, it
shall not be necessary to produce or account for more than one such counterpart
signed by the party against whom such enforcement is sought.

       

      
        
          
             


          

          
            2

            
              

            

          

          
             


          

        

      

      


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

       

      [signature page
follows]

       

      
        
          
             


          

          
            3

            
              

            

          

          
             


          

        

      

       

      IN
WITNESS WHEREOF, each Grantor has caused this Copyright Security Agreement to be
executed and delivered by its duly authorized officer as of the date first set
forth above.

       

      
        
          	
                  GRANTORS:

                	
                  PARADIGM
      HOLDINGS, INC., a Wyoming corporation

                
	 
      	 
      
	 
      	
                  By:

                	
                      

                
	 
      	
                  Name:

                	
                      

                
	 
      	
                  Title:

                	
                      

                
	 
      	 
      
	 
      	
                  PARADIGM
      HOLDINGS, INC., a Nevada corporation

                
	 
      	 
      
	 
      	
                  By:

                	
                      

                
	 
      	
                  Name:

                	
                      

                
	 
      	
                  Title:

                	
                      

                
	 
      	 
      
	 
      	
                  PARADIGM
      SOLUTIONS CORPORATION

                
	 
      	 
      
	 
      	
                  By:

                	
                      

                
	 
      	
                  Name:

                	
                      

                
	 
      	
                  Title:

                	
                      

                
	 
      	 
      
	 
      	
                  CALDWELL
      TECHNOLOGY SOLUTIONS LLC

                
	 
      	 
      
	 
      	
                  By:

                	
                      

                
	 
      	
                  Name:

                	
                      

                
	 
      	
                  Title:

                	
                      

                


        

      

       

      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

       

      
        
          	 
      	
                  TRINITY
      INFORMATION MANAGEMENT SERVICES

                
	 
      	 
      
	 
      	
                  By:

                	
                      

                
	 
      	
                  Name:

                	
                      

                
	 
      	
                  Title:

                	
                      

                


        

      

      


      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

       

      SCHEDULE
I

      to

      COPYRIGHT SECURITY
AGREEMENT

       

      Copyright
Registrations

       

      N/A

       

      
        
          
            	
                    Grantor

                  	 
      	
                    Country

                  	 
      	
                    Copyright

                  	 
      	
                    Registration No.

                  	 
      	
                    Registration

                    Date

                  
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      


          

        

      

       

      Copyright
Licenses


       

      N/A

       

      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

       

      EXHIBIT
B

       

      PATENT SECURITY
AGREEMENT

       

      This
PATENT SECURITY AGREEMENT (this “Patent Security Agreement”) is
made this 26th day of
May 2010, by the Grantors listed on the signature pages hereof (collectively,
jointly and severally, “Grantors” and each
individually “Grantor”),
in favor of the Secured Parties under and as defined in the below-described
Security Agreement.

       

      RECITALS

       

      WHEREAS,
pursuant to that certain Securities Purchase Agreement, dated as of May 26, 2010
(as may be amended, restated, supplemented, or otherwise modified from time to
time, including all schedules thereto, collectively, the “Securities Purchase Agreement”), by and
among Paradigm Holdings, Inc., a Wyoming corporation (“Parent”), and each of the
Secured Parties, Parent has agreed to sell, and each of the Secured Parties have
each agreed to purchase, severally and not jointly, certain Notes;
and

       

      WHEREAS,
in order to induce each of the Secured Parties to purchase, severally and not
jointly, the Notes as provided for in the Securities Purchase Agreement,
Grantors have executed and delivered to each of the Secured Parties that certain
Security Agreement of even date herewith (including all annexes, exhibits or
schedules thereto, as from time to time amended, restated, supplemented or
otherwise modified, the “Security Agreement”);
and

       

      WHEREAS,
pursuant to the Security Agreement, Grantors are required to execute and deliver
to each of the Secured Parties this Patent Security Agreement.

       

      AGREEMENTS

       

      NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as
follows:

       

      8.      
      DEFINED
TERMS.  All capitalized terms used but not otherwise defined
herein have the meanings given to them in the Security Agreement.

       

      9.      
      GRANT OF SECURITY INTEREST
IN PATENT COLLATERAL.  Each Grantor hereby grants to each
Secured Party, subject to Permitted Liens, a continuing first priority (or
second priority, to the extent such Collateral is subject to a Permitted Lien
with respect to the Senior Indebtedness ) security interest in all of such
Grantor’s right, title and interest in, to and under the following, whether
presently existing or hereafter created or acquired (collectively, the “Patent
Collateral”):

       

      (a)           all
of its Patents and Patent Intellectual Property Licenses to which it is a party
including those referred to on Schedule
I hereto;

       

      (b)           all
reissues, continuations or extensions of the foregoing; and

      


      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

       

      (c)           all
products and proceeds of the foregoing, including any claim by such Grantor
against third parties for past, present or future infringement or dilution of
any Patent or any Patent licensed under any Intellectual Property
License.

       

      10.           SECURITY FOR
OBLIGATIONS.  This Patent Security Agreement and the Security
Interests created hereby secures the payment and performance of all the Secured
Obligations, whether now existing or arising hereafter.  Without
limiting the generality of the foregoing, this Patent Security Agreement secures
the payment of all amounts which constitute part of the Secured Obligations and
would be owed by Grantors, or any of them, to Secured Parties, or any of them,
whether or not they are unenforceable or not allowable due to the existence of
an Insolvency Proceeding involving any Grantor.

       

      11.           SECURITY
AGREEMENT.  The security interests granted pursuant to this
Patent Security Agreement are granted in conjunction with the security interests
granted to Secured Parties pursuant to the Security Agreement.  Each
Grantor hereby acknowledges and affirms that the rights and remedies of Secured
Parties with respect to their respective security interests in the Patent
Collateral made and granted hereby are more fully set forth in the Security
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.

       

      12.           AUTHORIZATION TO
SUPPLEMENT.  If any Grantor shall obtain rights to any new
patentable inventions or become entitled to the benefit of any patent
application or patent for any reissue, division, or continuation, of any patent,
the provisions of this Patent Security Agreement shall automatically apply
thereto. To the extent required under the Security Agreement, Grantors shall
give prompt notice in writing to Secured Parties with respect to any such new
patent rights.  Without limiting each Grantor’s obligations under this
Section 5, Grantors hereby authorize Secured Parties unilaterally to modify this
Agreement by amending Schedule
I to include any such new patent rights of
Grantors.  Notwithstanding the foregoing, no failure to so modify this
Patent Security Agreement or amend Schedule
I shall in any way affect, invalidate or detract from any Secured Party’s
continuing security interest in all Collateral, whether or not listed on Schedule
I.

       

      13.           COUNTERPARTS.  This
Patent Security Agreement may be executed in two or more identical counterparts,
all of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party. In the event that any signature is delivered by facsimile
transmission or by an e-mail which contains a portable document format (.pdf)
file of an executed signature page, such signature page shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such signature page were an
original thereof. In proving this Patent Security Agreement or any other
Transaction Document in any judicial proceedings, it shall not be necessary to
produce or account for more than one such counterpart signed by the party
against whom such enforcement is sought.

       

      
        
          
             


          

          
            2

            
              

            

          

          
             


          

        

      

       

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

       

      [signature pages
follow]

      


      
        
          
             


          

          
            3

            
              

            

          

          
             


          

        

      

      


      IN
WITNESS WHEREOF, each Grantor has caused this Patent Security Agreement to be
executed and delivered by its duly authorized officer as of the date first set
forth above.

       

      
        
          	
                  GRANTORS:

                	
                  PARADIGM
      HOLDINGS, INC., a Wyoming corporation

                
	 
      	 
      
	 
      	
                  By:

                	
                      

                
	 
      	
                  Name:

                	
                      

                
	 
      	
                  Title:

                	
                      

                
	 
      	 
      
	 
      	
                  PARADIGM
      HOLDINGS, INC., a Nevada corporation

                
	 
      	 
      
	 
      	
                  By:

                	
                      

                
	 
      	
                  Name:

                	
                      

                
	 
      	
                  Title:

                	
                      

                
	 
      	 
      
	 
      	
                  PARADIGM
      SOLUTIONS CORPORATION

                
	 
      	 
      
	 
      	
                  By:

                	
                      

                
	 
      	
                  Name:

                	
                      

                
	 
      	
                  Title:

                	
                      

                
	 
      	 
      
	 
      	
                  CALDWELL
      TECHNOLOGY SOLUTIONS LLC

                
	 
      	 
      
	 
      	
                  By:

                	
                      

                
	 
      	
                  Name:

                	
                      

                
	 
      	
                  Title:

                	
                      

                


        

      

       

      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

       

      
        
          	 
      	
                  TRINITY
      INFORMATION MANAGEMENT SERVICES

                
	 
      	 
      
	 
      	
                  By:

                	
                      

                
	 
      	
                  Name:

                	
                      

                
	 
      	
                  Title:

                	
                      

                


        

      

      


      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

       

      EXHIBIT
C

      


      TRADEMARK SECURITY
AGREEMENT

       

      This
TRADEMARK SECURITY AGREEMENT (this “Trademark Security Agreement”)
is made this 26th day of
May 2010, by the Grantors listed on the signature pages hereof (collectively,
jointly and severally, “Grantors” and each
individually “Grantor”),
in favor of the Secured Parties under and as defined in the below-described
Security Agreement.

       

      RECITALS

       

      WHEREAS,
pursuant to that certain Securities Purchase Agreement, dated as of May 26, 2010
(as may be amended, restated, supplemented, or otherwise modified from time to
time, including all schedules thereto, collectively, the “Securities Purchase Agreement”), by and
among Paradigm Holdings, Inc., a Wyoming corporation (“Parent”), and each of the
Secured Parties, Parent has agreed to sell, and each of the Secured Parties have
each agreed to purchase, severally and not jointly, certain Notes ;
and

       

      WHEREAS,
in order to induce each of the Secured Parties to purchase, severally and not
jointly, the Notes as provided for in the Securities Purchase Agreement,
Grantors have executed and delivered to each of the Secured Parties that certain
Security Agreement of even date herewith (including all annexes, exhibits or
schedules thereto, as from time to time amended, restated, supplemented or
otherwise modified, the “Security Agreement”);
and

       

      WHEREAS,
pursuant to the Security Agreement, Grantors are required to execute and deliver
to each of the Secured Parties this Trademark Security Agreement.

       

      AGREEMENTS

       

      NOW,
THEREFORE, in consideration of the premises and mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Grantors hereby agree as
follows:

       

      15.           DEFINED
TERMS.  All capitalized terms used but not otherwise defined
herein have the meanings given to them in the Security Agreement.

       

      16.           GRANT OF SECURITY INTEREST
IN TRADEMARK COLLATERAL.  Each Grantor hereby grants to each
Secured Party, subject to Permitted Liens, a continuing first priority (or
second priority, to the extent such Collateral is subject to a Permitted Lien
with respect to the Senior Indebtedness ) security interest in all of such
Grantor’s right, title and interest in, to and under the following, whether
presently existing or hereafter created or acquired (collectively, the “Trademark
Collateral”):

       

      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

       

      (a)           all
of its Trademarks and Trademark Intellectual Property Licenses to which it is a
party including those referred to on Schedule
I hereto;

       

      (b)           all
goodwill, trade secrets, proprietary or confidential information, technical
information, procedures, formulae, quality control standards, designs, operating
and training manuals, customer lists, and other General Intangibles with respect
to the foregoing;

       

      (c)           all
reissues, continuations or extensions of the foregoing;

       

      (d)           all
goodwill of the business connected with the use of, and symbolized by, each
Trademark and each Trademark Intellectual Property License; and

       

      (e)           all
products and proceeds of the foregoing, including any claim by such Grantor
against third parties for past, present or future (i) infringement or dilution
of any Trademark or any Trademark licensed under any Intellectual Property
License or (ii) injury to the goodwill associated with any Trademark or any
Trademark licensed under any Intellectual Property License.

       

      17.           SECURITY FOR
OBLIGATIONS.  This Trademark Security Agreement and the
Security Interests created hereby secures the payment and performance of all the
Secured Obligations, whether now existing or arising
hereafter.  Without limiting the generality of the foregoing, this
Trademark Security Agreement secures the payment of all amounts which constitute
part of the Secured Obligations and would be owed by Grantors, or any of them,
to Secured Parties, or any of them, whether or not they are unenforceable or not
allowable due to the existence of an Insolvency Proceeding involving any
Grantor.

       

      18.           SECURITY
AGREEMENT.  The security interests granted pursuant to this
Trademark Security Agreement are granted in conjunction with the security
interests granted to Secured Parties pursuant to the Security
Agreement.  Each Grantor hereby acknowledges and affirms that the
rights and remedies of Secured Parties with respect to their respective security
interests in the Trademark Collateral made and granted hereby are more fully set
forth in the Security Agreement, the terms and provisions of which are
incorporated by reference herein as if fully set forth herein.

       

      19.           AUTHORIZATION TO
SUPPLEMENT.  If any Grantor shall obtain rights to any new
trademarks, the provisions of this Trademark Security Agreement shall
automatically apply thereto. To the extent required under the Security
Agreement, Grantors shall give prompt notice in writing to Secured Parties with
respect to any such new trademarks or renewal or extension of any trademark
registration.   Without limiting each Grantor’s obligations under
this Section 12, Grantors hereby authorize Secured Parties unilaterally to
modify this Agreement by amending Schedule
I to include any such new trademark rights of
Grantors.  Notwithstanding the foregoing, no failure to so modify this
Trademark Security Agreement or amend Schedule
I shall in any way affect, invalidate or detract from any Secured Party’s
continuing security interest in all Collateral, whether or not listed on Schedule
I.

       

      
        
          
             


          

          
            2

            
              

            

          

          
             


          

        

      

       

      20.           COUNTERPARTS.  This
Trademark Security Agreement may be executed in two or more identical
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each party and
delivered to the other party. In the event that any signature is delivered by
facsimile transmission or by an e-mail which contains a portable document format
(.pdf) file of an executed signature page, such signature page shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such signature page
were an original thereof. In proving this Trademark Security Agreement or any
other Transaction Document in any judicial proceedings, it shall not be
necessary to produce or account for more than one such counterpart signed by the
party against whom such enforcement is sought.

       

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

       

      [signature pages
follow]

       

      
        
          
             


          

          
            3

            
              

            

          

          
             


          

        

      

       

      IN
WITNESS WHEREOF, each Grantor has caused this Trademark Security Agreement to be
executed and delivered by its duly authorized officer as of the date first set
forth above.

       

      
        
          	
                  GRANTORS:

                	
                  Paradigm
      Holdings, Inc., a Wyoming corporation

                
	 
      	 
      
	 
      	
                  By:

                	
                      

                
	 
      	
                  Name:

                	
                      

                
	 
      	
                  Title:

                	
                      

                
	 
      	 
      
	 
      	
                  PARADIGM
      HOLDINGS, INC., a Nevada corporation

                
	 
      	 
      
	 
      	
                  By:

                	
                      

                
	 
      	
                  Name:

                	
                      

                
	 
      	
                  Title:

                	
                      

                
	 
      	 
      
	 
      	
                  PARADIGM
      SOLUTIONS CORPORATION

                
	 
      	 
      
	 
      	
                  By:

                	
                      

                
	 
      	
                  Name:

                	
                      

                
	 
      	
                  Title:

                	
                      

                
	 
      	 
      
	 
      	
                  CALDWELL
      TECHNOLOGY SOLUTIONS LLC

                
	 
      	 
      
	 
      	
                  By:

                	
                      

                
	 
      	
                  Name:

                	
                      

                
	 
      	
                  Title:

                	
                      

                


        

      

       

      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

       

      
        
          	 
      	
                  TRINITY
      INFORMATION MANAGEMENT SERVICES

                
	 
      	 
      
	 
      	
                  By:

                	
                      

                
	 
      	
                  Name:

                	
                      

                
	 
      	
                  Title:

                	
                      

                


        

      

       

      
        
          
             


          

          
            
            

            
              

            

          

          
             


          

        

      

      


      SCHEDULE
I

      to

      TRADEMARK SECURITY
AGREEMENT


       

      Trademark
Registrations/Applications

       

      N/A

       

      
        
          	
                  Grantor

                	 
      	
                  Country

                	 
      	
                  Mark

                	 
      	
                  Application/

                  Registration No.

                	 
      	
                  App/Reg Date

                
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      	 
      


        

      

       

      Trade
Names

       

      N/A

       

      Common Law
Trademarks

       

      Grantors
may be entitled to certain “common law” trademarks and similar
rights.

       

      Trademarks Not Currently In
Use

       

      Grantors
may be entitled to certain “common law” trademarks and similar rights, some or
which trademarks and similar rights may not presently be in use by
Grantors.

       

      Trademark
Licenses

       

      N/A