Document:

Unassociated Document

    
      Exhibit
10.19

      

      EMPLOYMENT
AGREEMENT

       

      THIS
EMPLOYMENT AGREEMENT (this "Agreement") is
entered into as of the 25th day of
June, 2009, by and between Nanchang Best Animal Husbandry Co., Ltd., a
corporation organized under the laws of the People's Republic of China (the
"Company"), and
Junhong Xiong (the "Executive").

       

      WHEREAS,
the Company desires to set forth the nature and terms upon which the Company
will employ Executive, including the amount of compensation and other benefits
to be provided to Executive and any of the rights of the Executive in the event
of the Executive's termination of employment with the Company.  The
Executive is willing to commit to serve the Company on the terms and conditions
herein provided.

       

      NOW,
THEREFORE, in consideration of the promises and the respective covenants and
agreements of the parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:

       

      1.           Employment.  The
Company hereby agrees to employ the Executive, and the Executive hereby agrees
to serve the Company, on the terms and conditions set forth
herein.  So long as Executive is employed by the Company, Executive
shall devote substantially all of his business time and energy and his best
efforts to the performance of his duties as an employee of the
Company.

       

      2.           Term.  The
term ("Term") of Executive's employment under Section 1 will commence on the
date hereof (the "Effective Date") and shall continue until the third
anniversary of the Effective Date, subject to renewal or earlier termination as
may be set forth in this Agreement.

       

      3.           Position and
Duties.  Subject to the ultimate control of the Company, the
Executive shall serve as the Chief Executive Officer of the Company and its
parent, AgFeed Industries, Inc. ("AgFeed"), and shall handle such
responsibilities and duties as are normally associated with this position and as
may be delegated by the Chairman of AgFeed from time to time, including, but not
limited to supervising and controlling all of the business and affairs of the
Company.  The Executive shall report directly to the Chairman of
AgFeed.

       

      4.           Compensation and Related
Matters.

       

      (a)           Base
Salary.  During the Executive's employment with the Company,
the Company shall pay to the Executive a base salary at a rate of Thirty Six
Thousand Dollars ($36,000) per annum (Three Thousand Dollars ($3,000 per
month), commencing
on the Effective Date.  The Chairman of AgFeed, together with AgFeed's
Compensation Committee, shall review the Executive's performance and base salary
no less than annually and shall decide whether to grant any increase or decrease
in the Executive's base salary and, if so, the amount of such increase or
decrease based upon such review.

       

      (b)           Payment of Base
Salary.  The base salary (as determined in accordance with
Section 4(a)) shall be to the Executive in immediately available funds by wire
transfer as directed by the Executive no less frequently than monthly in
arrears.

       

      (c)           Bonuses.  The
Executive shall be eligible for and may receive bonuses.  The amount,
if any, and timing of any bonuses, shall be solely within the discretion of the
Company.

       

      (d)           Expenses.  During
the Term, the Executive shall be entitled to receive prompt reimbursement for
all pre-approved expenses incurred by the Executive in performing services
hereunder, including all expenses of travel and lodging while on business at the
request of and in the service of the Company, provided that such expenses are
incurred and accounted for in accordance with the policies and procedures
established by the Company.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      (e)           Benefits.  The
Company shall provide the Executive with welfare benefits in accordance with the
Company's employee manual.

       

      (f)           Vacation.  The
Executive will be entitled to receive vacations as specified in the Company's
employee manual.

       

      5.           Directors
and Officers Liability Insurance.  During the term of this Agreement,
AgFeed shall have in force and effect (at its own cost) Directors and Officers
Liability Insurance, with coverage in such amounts as may be deemed appropriate
by AgFeed’s Board of Directors.  The Executive shall be a covered
employee under such insurance.

       

      6.           Termination.

       

      (a)           The
Executive's employment under this Agreement may be terminated by the Executive
or the Company at any time, with or without Cause (as defined
below).

       

      (b)           In
the event of termination by the Company without Cause, or in the event of the
Executive's death or disability or a Constructive Termination (as defined
below), the Company shall pay the Executive a lump sum severance amount equal to
Two Hundred Thousand  Dollars ($200,000).  In the event of
termination by the Company with Cause, or if the Executive voluntarily
terminates his employment, then the Executive shall not be entitled to the
severance payment described in Section 6(b).

       

      (c)           In
the event of termination by the Company without Cause, or in the event of the
Executive's death or disability or a Constructive Termination, any options
granted to the Executive (including the Option) shall vest immediately and may
be exercised in full or in part within one (1) year from the date of
termination, the Executive's death or disability, or Constructive
Termination.  The effect of any other termination of the Executive's
employment on options granted to the Executive shall be the immediate
cancellation and forfeiture of any unexercised portion of the Option (whether or
not vested).

       

      (d)           For
the purposes of this Agreement, "Cause" shall mean (1) a refusal, failure, or
inability to perform any reasonable assigned duties; (2) a material breach or
violation of this Agreement; (3) conduct by the Executive that constitutes gross
negligence or wilful misconduct; (4) material failure to follow AgFeed's or the
Company's policies, directives, or orders applicable to AgFeed or Company
employees holding comparable positions; (5) intentional destruction or theft of
AgFeed or Company property or falsifications of AgFeed or Company documents; (6)
conviction of a felony or any crime involving moral turpitude or a misdemeanor
where imprisonment in excess of fifteen (15) days is imposed; or (7) violation
of AgFeed's Code of Conduct.

       

      (e)           For
the purposes of this Agreement, "Constructive Termination" shall mean: (1)
material reduction by the Company of the scope of the Executive's duties for
forty (40) consecutive Business Days, (2) a material reduction in the
Executive's base salary, or (3) the continued assignment to the Executive of any
duties materially inconsistent with the level of his position with the Company;
provided that none of the foregoing events shall be deemed to result in a
Constructive Termination if the Executive consents to such events or if such
events are the result of actions of the Company or its Board of Directors that
are applicable to all officers of the Company.

       

      (f)           The
Company may extend the Term of this Agreement for successive two year terms so
long as the Company provides the Executive at least sixty (60) calendar days
advance written notice and with the consent of the Executive prior to the
expiration of the Term.

       

      (g)           A
“Business Day”
means any day other than (1) a Saturday, Sunday or legal holiday, or (2) a day
on which commercial banks in Beijing, PRC are authorized or required by law to
close.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      7.           Confidential
Information.  In the course of the Executive’s employment with the
Company, the Executive may become aware of confidential information including,
without limitation, financial information, computer system and software designs,
customer lists, market research, strategic plans, and other non-public or
similar information that relates to the business of AgFeed, the Company and
their affiliates, investors, business partners, customers and/or
clients.  The Executive will not use or disclose any such confidential
information of AgFeed, the Company and their affiliates, investors, business
partners, customers or clients except in the course of his duties to AgFeed or
the Company or unless ordered to do so by a court of competent jurisdiction (in
which latter case the Executive will promptly inform AgFeed or the Company of
such order).  The Executive will comply with AgFeed’s or the Company's
policies and procedures for the protection of confidential
information.  Further, the Executive’s obligation not to disclose or
use such confidential information will continue after the termination of the
Executive’s employment for whatever reason.  Confidential information
excludes any information which was not obtained from AgFeed or the Company (or a
director, officer, employee or agent of AgFeed or the Company) or which is or
becomes known by the public or in AgFeed’s or the Company's industry other than
by a breach by the Executive of a confidentiality obligation to AgFeed and the
Company.

       

      8.           Non-Solicitation
and Non-Compete

       

      (a)           The
Company and the Executive agree that until the Termination Date, the Executive
shall devote substantially all of his working time to the business and affairs
of AgFeed and the Company.

       

      (b)           The
Executive agrees that for a period of twelve (12) months following the date of
termination of the Executive’s employment with the Company for any reason (the
“Termination
Date”), the Executive will not, and will not assist anyone else to,
directly or indirectly solicit or induce any of AgFeed or the Company’s
employees to terminate their employment with AgFeed or the Company or divert,
interfere with or take away from AgFeed or the Company any person, company or
entity which, within the six month period immediately preceding the Termination
Date, was an investor, customer, client, supplier, business partner, prime
contractor, subcontractor, employee or independent contractor of AgFeed or the
Company.

       

      (c)           From
the Termination Date and for a period of twelve (12) months thereafter, the
Executive agrees that he will not, directly or indirectly, as an equity owner,
director, employee, consultant, lender, agent or in any other capacity, (1)
engage or participate in, or have any interest in any corporation, entity or
other person that engages or participates in any actual, contemplated, or
proposed business or activity engaged or participated in by AgFeed or the
Company or their subsidiaries on the Termination Date, or (2) engage or
participate in, or have an interest in any corporation, entity or other person
that participates in a merger, acquisition or consolidation with AgFeed or the
Company or any of their subsidiaries.

       

      (d)           For
purposes of Section 8(c), the Executive will be deemed directly or indirectly to
be engaged or participating in the operation of such a business or activity, or
to have an interest in a corporation, entity or other person, if he is a
proprietor, partner, joint venturer, shareholder, director, officer, lender,
manager, employee, consultant, advisor or agent or if he, directly or indirectly
(including as a member of a group), controls all or any part thereof; provided,
that nothing in Section 8(c) shall prohibit the Executive from holding less than
five percent (5%) of a class of an entity's outstanding securities that are
listed on a national securities exchange or traded in the over-the-counter
market.

       

      9.           Binding
Agreement.  This Agreement and all rights of the Executive hereunder
shall inure to the benefit of and be enforceable by the Executive's personal or
legal representatives, executors, administrators, successors, heirs,
distributes, devisees and legatees.  If the Executive should die while
any amounts would still be payable to the Executive hereunder if the Executive
had continued to live, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to the Executive's
devisee, legatee, or other designee or, if there be no such designee, to the
Executive's estate.  This Agreement and all rights of the Company
hereunder shall inure to the benefit of and be enforceable to the Company, and
its successors and assigns.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      10.           Prior
Agreements.  All prior agreements between the Company and the
Executive with respect to the employment of the Executive are hereby superseded
and terminated effective as of the date hereof and shall be without further
force or effect.

       

      11.           Miscellaneous.  No
provisions of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in a writing signed by the
Executive and a duly authorized officer of the Company.  No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.  No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not set forth expressly in this Agreement.

       

      12.           Governing
Law/Venue.  This Agreement shall be governed by and construed under
the laws of the PRC, without regard to that country's conflicts of laws
principles.

       

      13.           Validity.  The
invalidity or unenforceability of any provision or provisions of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.

       

      14.           Severability;
Headings.  If any portion of this Agreement is held invalid or
inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative.  The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent of intent of the
Agreement or of any part hereof.

       

      [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      IN
WITNESS WHEREOF, the parties have executed this Employment Agreement on the date
and year first above written.

       

      
        
          
            
              
                
                  
                    
                      
                        	 
      	
                                COMPANY:

                              	 
	 
      	 
      	 
	 
      	
                                NANCHANG
      BEST ANIMAL HUSBANDRY CO., LTD.,

                              
	 
      	 
      	 
	 
      	 
      	 
	 
      	
                                By:

                              	
                                /s/ Gerard Daignault

                              	 
	 
      	
                                Name:  Gerard
      Daignault

                              	 
	 
      	
                                Title:  Chief
      Operating Officer

                              	 
	 
      	 
      	 
	 
      	
                                EXECUTIVE:

                              	  
	 
      	 
      	 
	 
      	 
      	 
	 
      	
                                /s/ Junhong Xiong

                              	 
	 
      	
                                Junhong
      XiongEXHIBIT
10.1

     

     

    FOURTH
LOAN MODIFICATION AGREEMENT

    
      

      This
Fourth Loan Modification Agreement (this “Loan Modification Agreement”) is
entered into as of July 2, 2009, by and among (a) SILICON VALLEY BANK, a California corporation,
with its principal place of business at 3003 Tasman Drive, Santa Clara,
California 95054 and with a loan production office located at One Newton
Executive Park, Suite’ 00, 2221 Washington Street, Newton, Massachusetts 02462
(“Bank”) and (b) PARADIGM HOLDINGS, INC.,
a Wyoming corporation, with offices at 9715 Key West Avenue, Rockville, Maryland
20850 (“Holdings”), PARADIGM SOLUTIONS
CORPORATION, a Maryland corporation, with offices at 9715 Key West
Avenue, Rockville, Maryland 20850 (“Solutions”), CALDWELL TECHNOLOGY SOLUTIONS LLC, a Maryland
limited liability company, with offices at 17001 Science Drive, Suite 100,
Bowie, Maryland 20715 (“Caldwell”) and TRINITY
INFORMATION MANAGEMENT SERVICES, a Nevada corporation, with offices at
9715 Key West Avenue, Rockville, Maryland 20850 (“Trinity”) (hereinafter,
Holdings, Solutions, Caldwell and Trinity are jointly and severally,
individually and collectively, referred to as “Borrower”).

      

      1.    DESCRIPTION OF EXISTING INDEBTEDNESS AND
OBLIGATIONS. Among other indebtedness and obligations which may be owing
by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan arrangement
dated as of March 13, 2007, evidenced by, among other documents, a certain Loan
and Security Agreement (working capital line of credit) dated as of March 13,
2007, among Borrower and Bank, as amended by a certain First Loan Modification
Agreement dated as of August 11, 2008, as further amend by a certain Second Loan
Modification Agreement dated as of March 18, 2009, and as further amended by a
certain Third Loan Modification Agreement dated as of May 4, 2009 (as amended,
the “Loan Agreement”). Capitalized terms used but not otherwise defined herein
shall have the same meaning as in the Loan Agreement.

       

      2.    DESCRIPTION OF COLLATERAL. Repayment
of the Obligations is secured by (a) the Collateral as described in the Loan
Agreement, (b) the Intellectual Property Collateral as described in a certain
Intellectual Property Security Agreement dated as of March 13, 2007 between Bank
and Holdings (the “Holdings IP Security Agreement”), (c) the Intellectual
Property Collateral as described in a certain Intellectual Property Security
Agreement dated as of March 13, 2007 between Bank and Solutions (the “Solutions
IP Security Agreement”), (d) the Intellectual Property Collateral as described
in a certain Intellectual Property Security Agreement dated as of July 5, 2007
between Bank and Caldwell (the “Caldwell IP Security Agreement”), and (e) the
Intellectual Property Collateral as described in a certain Intellectual Property
Security Agreement dated as of September 5, 2007 between Bank and Trinity (the
“Trinity IP Security Agreement”) (together with any other collateral security
granted to Bank, the “Security Documents”). Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Obligations shall
be referred to as the “Existing Loan Documents”.

       

      3.    DESCRIPTION OF CHANGE IN
TERMS.

      

      A.    Modifications
to Loan Agreement.

       

      1    The Loan
Agreement shall be amended by deleting the following text appearing in Section
2.2.4 thereof:

       

      “Borrower
will pay to Bank a collateral handling fee equal to (a) 0.125% per month of the
Financed Receivable Balance for each Financed Receivable outstanding based upon
Federal Agency Accounts, Subcontractor Accounts and Unbilled Accounts based upon
a 360 day year, and (b) 0.25% per month of the Financed Receivable Balance for
Financed Receivables outstanding based upon HUD Accounts based upon a 360 day
year (the “Collateral Handling Fee”).”

       

       

      
        
           

        

        
          - 1
-

          
            

          

        

        
           

        

      

      

      and
inserting in lieu thereof the following:

       

      “Borrower
will pay to Bank a collateral handling fee equal to (a) 0.20% per month of the
Financed Receivable Balance for each Financed Receivable outstanding based upon
Federal Agency Accounts and Subcontractor Accounts based upon a 360 day year,
and (b) 0.25% per month of the Financed Receivable Balance for Financed
Receivables outstanding based upon Unbilled Accounts based upon a 360 day year
(the “Collateral Handling Fee”).”

      

      2    The Loan
Agreement shall be amended by deleting the following text appearing in Section
5.3 thereof:

      

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

       

      and
inserting in lieu thereof the following:

      

      “    (f)    There are no
defenses, offsets, counterclaims or agreements for which the Account Debtor may
claim any deduction or discount other than certain “prompt payment” discounts
set forth in certain customer contracts;”

       

      3           The
Loan Agreement shall be amended by deleting the following text appearing in
Section 5.4 thereof:

       

      “In
addition, Borrower represents and warrants that there are no discounts, offsets
or other rights of any Account Debtor under any Unbilled Account.”

       

      and
inserting in lieu thereof the following:

      

      “In
addition, Borrower represents and warrants that there are no discounts, offsets
or other rights of any Account Debtor under any Unbilled Account other than
certain “prompt payment” discounts set forth in certain customer
contracts.”

       

      4    The Loan
Agreement shall be amended by deleting the following, appearing as Section 5.6
thereof:

      

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

       

      and
inserting in lieu thereof the following:

       

      “    5.6    Litigation. Except
as set forth on the Perfection Certificate, there are no actions or proceedings
pending or, to the knowledge of Borrower’s Responsible Officers or legal
counsel, threatened by or against Borrower or any Subsidiary in which an adverse
decision could reasonably be expected to cause a Material Adverse
Change.”

       

       

      
        
           

        

        
          - 2
-

          
            

          

        

        
           

        

      

       

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

       

      “Borrower
and each Subsidiary have timely filed all required tax returns and paid, or made
adequate provision to pay, all material taxes, except those being contested in
good faith with adequate reserves under GAAP.”

       

      and
inserting in lieu thereof the following:

       

      “Borrower
and each Subsidiary have timely filed all required material tax returns and
paid, or made adequate provision to pay, all material taxes, except those being
contested in good faith with adequate reserves under GAAP.”

      

      6    The Loan
Agreement shall be amended by deleting the following text appearing in Section
6.2(c) thereof:

      

      “The
charge to Borrower for the foregoing inspections and audits shall be $750 per
person per day (or such higher amount as shall represent Bank’s then-current
standard charge for the same), plus reasonable out-of-pocket
expenses.”

       

      and
inserting in lieu thereof the following:

       

      “The
charge to Borrower for the foregoing inspections and audits shall be $850 per
person per day (or such higher amount as shall represent Bank’s then-current
standard charge for the same), plus reasonable out-of-pocket
expenses.”

       

      7    The Loan
Agreement shall be amended by deleting the following, appearing as Section 6.7
thereof:

       

      “    6.7    Financial Covenants.

       

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

      

      (a)    EBITDA Loss.
EBITDA minus unfunded capital expenditures loss as of and for the three month
period (or periods) ending on (i) January 31, 2007 and February 28, 2007 of not
more than $1,000,000, and (ii) August 31, 2008 of not more than
$50,000.

       

      (b)    EBITDA Gain.
EBITDA minus unfunded capital expenditures as of and for the three month period
(or periods) ending on (i) March 31, 2007, April 30, 2007 and May 31, 2007, of
at least $1.00, (ii) June 30, 2007, July 31, 2007, August 31, 2007, September
30, 2007, October 31, 2007 and November 30, 2007, of at least $250,000.00, (iii)
December 31, 2007, January 31, 2008, February 29, 2008, March 31, 2008, April
30, 2008, May 31, 2008, June 30, 2008 and July 31, 2008, of at least
$500,000.00, (iv) September 30, 2008, of at least $75,000, (v) October 31, 2008,
of at least $150,000, (vi) November 30, 2008, of at least $250,000, (vii)
December 31, 2008, of at least $400,000, and (viii) January 31, 2009 and as of
and for the three month
period ending of the last day of each month thereafter, of at least
$500,000.00.

       

       

      
        
           

        

        
          - 3
-

          
            

          

        

        
           

        

      

       

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

       

      and
inserting in lieu thereof the following:

      

      “    6.7    Financial Covenants.

       

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

      

      (a)    EBITDA Loss.
EBITDA minus unfunded capital expenditures loss as of and for the three month
period (or periods) ending on (i) January 31, 2007 and February 28, 2007, of not
more than $1,000,000, and (ii) August 31, 2008, April 30, 2009, May 31, 2009,
and June 30, 2009, of not more than $50,000.

       

      (b)    EBITDA Gain.
EBITDA minus unfunded capital expenditures as of and for the three month period
(or periods) ending on (i) March 31, 2007, April 30, 2007 and May 31, 2007, of
at least $1.00, (ii) June 30, 2007, July 31, 2007, August 31, 2007, September
30, 2007, October 31, 2007 and November 30, 2007, of at least $250,000.00, (iii)
December 31, 2007, January 31, 2008, February 29, 2008, March 31, 2008, April
30, 2008, May 31, 2008, June 30, 2008 and July 31, 2008, of at least
$500,000.00, (iv) September 30, 2008, of at least $75,000.00 (v) October 31,
2008, of at least $150,000.00 (vi) November 30, 2008, of at least $250,000.00,
(vii) December 31, 2008, of at least $400,000.00, (viii) January 31, 2009,
February 28, 2009, and March 31, 2009, of at least $500,000.00, (ix) July 31,
2009 and August 31, 2009, of at least $1.00, (x) September 30, 2009, of at least
$100,000.00, (xi) October 31, 2009 and November 30, 2009, of at least
$250,000.00, and (xii) December 31, 2009 and as of and for the three month
period ending of the last day of each month thereafter, of at least
$500,000.00.

       

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

       

       

      
        
           

        

        
          - 4
-

          
            

          

        

        
           

        

      

       

      8    The Loan
Agreement shall be amended by deleting the following text appearing in Section
7.6 thereof:

      

      “or (b)
pay any dividends or make any distribution or payment or redeem, retire or
purchase any capital stock.”

       

      and
inserting in lieu thereof the following:

      

      “or (b)
pay any dividends or make any distribution or payment or redeem, retire or
purchase any capital stock; provided, however, Borrower shall be permitted to
(1) make cash payments to Hale Capital Partners, LP and/or EREF PARA LLC
(together with any transferees of such parties, the “Investors”) in connection
with redemptions and repurchases contemplated by that certain Paradigm Holdings,
Inc. Certificate of Designations of Series A-1 Senior Preferred Stock (the
“Certificate of Designations”), that certain Preferred Stock Purchase Agreement
(the “Preferred Stock Purchase Agreement”) among Holdings, Hale Capital
Partners, LP (“Hale”) and each of the other purchasers identified on the
signature pages thereto (each a “Purchaser” and collectively with Hale, the
“Purchasers”) dated on or about February 27, 2009 and those certain Class A
Warrants and Class B Warrants issued to the Purchasers pursuant to the Preferred
Stock Purchase Agreement, so long as, at the time of any such payment, (i) no
Event of Default exists or would exist after giving effect to such payment, (ii)
Borrower has performed in accordance with at least one hundred percent (100.0%)
of its board-approved revenue plan, (iii) Borrower has performed at least twenty
percent (20.0%) above its board¬approved EBITDA plan, and (iv) Borrower will
have at least One Million Dollars ($1,000,000.00) in unrestricted and
unencumbered cash after each such payment, (2) make monthly cash dividend
payments to the Investors in an amount not to exceed five percent (5.0%) per
annum of the Stated Value (as defined below) per share of the outstanding shares
of Series A-I Senior Preferred Stock, provided, however, the aggregate amount of
such payments made in any month shall not exceed Thirty-Five Thousand Dollars
($35,000.00) and provided further, however, no such payments may be made while
there is an Event of Default or if an Event of Default would exist after giving
effect to any such payment, (3) accrue an additional dividend of seven and a
half percent (7.5%) per annum on the Series A-I Senior Preferred Stock to be
paid by adding such amount to the Stated Value per share of the outstanding
shares of Series A¬I Senior Preferred Stock and (4) make non-cash redemptions or
non-cash repurchases in exchange for capital stock of Borrower. As used herein,
“Stated Value” for each share of Series A-1 Senior Preferred Stock shall
initially be One Thousand Dollars ($1,000.00). Notwithstanding the foregoing,
pursuant to the terms of the Certificate of Designations, in lieu of paying a
cash dividend under (2) above, Borrower may add the amount otherwise payable as
a cash dividend to the Stated Value per share of the outstanding shares of
Series A-I Senior Preferred Stock or pay such dividend in shares of Borrower’s
common stock.”

       

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

       

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

       

       

      
        
           

        

        
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      “    “EBITDA” shall mean (a) Net Income, plus (b)
Interest Expense, plus (c) to the extent deducted in the calculation of Net
Income, depreciation expense and amortization expense (including FAS 123r
expenses and goodwill impairments), plus (d) income tax expense, plus (e)
severance and restructuring expenses not to exceed $250,000.00 in any calendar
year.”

       

      “    “Maturity Date” is June 12, 2009.”

       

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

       

      and
inserting in lieu thereof the following:

       

      “    “Applicable Rate” is (a) with respect to
Financed Receivables based upon Federal Agency Accounts and Subcontractor
Accounts, a per annum rate equal to the Prime Rate plus one and one-half of one
percent (1.50%), and (b) with respect to Financed Receivables based upon
Unbilled Accounts, a per annum rate equal to the Prime Rate plus two percent
(2.0%).”

       

      “    “EBITDA” shall mean (a) Net Income, plus (b)
Interest Expense, plus (c) to the extent deducted in the calculation of Net
Income, depreciation expense and amortization expense (including FAS 123r
expenses and goodwill impairments), plus (d) income tax expense.”

       

      “    “Maturity Date” is June 11, 2010.”

       

      “    “Prime Rate” is the greater of (a) four and
one-half of one percent (4.50%), and (b) Bank’s most recently announced “prime
rate,” even if it is not Bank’s lowest rate.”

       

      10    The
Compliance Certificate appearing as Exhibit B to the Loan Agreement is hereby
replaced with the Compliance Certificate attached as Schedule I
hereto.

      

      

      4.    FEES. Borrower shall pay to Bank a
modification fee equal to Forty-Five Thousand Dollars ($45,000.00) which fee
shall be due on the date hereof and shall be deemed fully earned as of the date
hereof. Borrower shall also reimburse Bank for all reasonable legal fees and
expenses incurred in connection with this amendment to the Existing Loan
Documents.

       

      5.    RATIFICATION OF IP SECURITY
AGREEMENTS.

      

      (a)    Holdings
hereby ratifies, confirms and reaffirms, all and singular, the terms and
conditions of the Holdings IP Security Agreement and acknowledges, confirms and
agrees that the Holdings IP Security Agreement contains an accurate and complete
listing of all Intellectual Property Collateral as defined therein.

       

       

      
        
           

        

        
          - 6
-

          
            

          

        

        
           

        

      

       

      (b)    Solutions
hereby ratifies, confirms and reaffirms, all and singular, the terms and
conditions of the Solutions IP Security Agreement and acknowledges, confirms and
agrees that the Solutions IP Security Agreement contains an accurate and
complete listing of all Intellectual Property Collateral as defined
therein.

       

      (c)    Caldwell
hereby ratifies, confirms and reaffirms, all and singular, the terms and
conditions of the Caldwell IP Security Agreement and acknowledges, confirms and
agrees that the Caldwell IP Security Agreement contains an accurate and complete
listing of all Intellectual Property Collateral as defined therein.

       

      (d)    Trinity
hereby ratifies, confirms and reaffirms, all and singular, the terms and
conditions of the Trinity IP Security Agreement and acknowledges, confirms and
agrees that the Trinity IP Security Agreement contains an accurate and complete
listing of all Intellectual Property Collateral as defined therein.

       

      6.    RATIFICATIONS OF PERFECTION
CERTIFICATES.

       

      (a)    Holdings
hereby ratifies, confirms and reaffirms, all and singular, the terms and
disclosures contained in a certain Perfection Certificate dated as of March 13,
2007 between Holdings and Bank, and acknowledges, confirms and agrees the
disclosures and information Holdings provided to Bank in the Perfection
Certificate have not changed, as of the date hereof, except as set forth on
Schedule
2.

       

      (b)    Solutions
hereby ratifies, confirms and reaffirms, all and singular, the terms and
disclosures contained in a certain Perfection Certificate dated as of March 13,
2007 between Solutions and Bank, and acknowledges, confirms and agrees the
disclosures and information Solutions provided to Bank in the Perfection
Certificate have not changed, as of the date hereof, except as set forth on
Schedule
2.

       

      (c)    Caldwell
hereby ratifies, confirms and reaffirms, all and singular, the terms and
disclosures contained in a certain Perfection Certificate dated as of July 5,
2007 between Caldwell and Bank, and acknowledges, confirms and agrees the
disclosures and information Caldwell provided to Bank in the Perfection
Certificate have not changed, as of the date hereof, except as set forth on
Schedule
2.

       

      (d)    Trinity
hereby ratifies, confirms and reaffirms, all and singular, the terms and
disclosures contained in a certain Perfection Certificate dated as of September
5, 2007 between Trinity and Bank, and acknowledges, confirms and agrees the
disclosures and information Trinity provided to Bank in the Perfection
Certificate have not changed, as of the date hereof, except as set forth on
Schedule
2.

       

      7.    CONSISTENT CHANGES. The Existing Loan
Documents are hereby amended wherever necessary to reflect the changes described
above.

      

      8.    RATIFICATION OF LOAN DOCUMENTS.
Borrower hereby ratifies, confirms, and reaffirms all terms and conditions of
all security or other collateral granted to the Bank, and confirms that the
indebtedness secured thereby includes, without limitation, the
Obligations.

      

      9.    NO DEFENSES OF BORROWER. Borrower
hereby acknowledges and agrees that Borrower has no offsets, defenses, claims,
or counterclaims against Bank with respect to the Obligations, or otherwise, and
that if Borrower now has, or ever did have, any offsets, defenses, claims, or
counterclaims against Bank, whether known or unknown,
at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby
RELEASES Bank from any liability thereunder.

       

       

      
        
           

        

        
          - 7
-

          
            

          

        

        
           

        

      

       

      10.    CONTINUING VALIDITY. Borrower
understands and agrees that in modifying the existing Obligations, Bank is
relying upon Borrower’s representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank’s agreement to modifications
to the existing Obligations pursuant to this Loan Modification Agreement in no
way shall obligate Bank to make any future modifications to the Obligations.
Nothing in this Loan Modification Agreement shall constitute a satisfaction of
the Obligations. It is the intention of Bank and Borrower to retain as liable
parties all makers of Existing Loan Documents, unless the party is expressly
released by Bank in writing. No maker will be released by virtue of this Loan
Modification Agreement.

       

      11.    COUNTERSIGNATURE. This Loan
Modification Agreement shall become effective only when it shall have been
executed by Borrower and Bank.

       

       

       

      [The
remainder of this page is intentionally left blank]

       

      
        
           

        

        
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          This Loan
Modification Agreement is executed as of the date first written
above.

           

          
            	
                    BORROWER:

                  	
                    BANK:

                  
	 	 
	
                    PARADIGM
      HOLDINGS, INC.

                  	
                    SILICON
      VALLEY BANK

                  
	 	 
	
                    By: 
      /s/ Richard Sawchak

                    
                      
      

                  	
                    By: 
      /s/ Christine Egitto

                    
                      
      

                  
	
                    Name:
      Richard Sawchak

                  	
                    Name:
      Christine Egitto

                  
	
                    Title:
      SVP and CFO

                  	
                    Title:
      VP

                  

          

           

           

          PARADIGM
SOLUTIONS CORPORATION

           

          By: 
/s/ Richard Sawchak

            
              

            

          

          Name:  Richard
Sawchak

          Title:   SVP
and CFO

           

          

          CALDWELL
TECHNOLOGY SOLUTIONS LLC

           

          By: 
/s/ Richard Sawchak

            
              

            

          

          Name:  Richard
Sawchak

          Title:   Manager

           

          

          TRINITY
INFORMATION MANAGEMENT SERVICES

           

          By: 
/s/ Richard Sawchak

            
              

            

          

          Name:  Richard
Sawchak

          Title:   SVP
and CFO

           

           

           

          - 9
-

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