Document:

Exhibit
4.1

     

    NEITHER
THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS OR BLUE SKY LAWS.  NOTWITHSTANDING THE FOREGOING,
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.

     

    PARADIGM
HOLDINGS, INC.

     

    CLASS
A WARRANT

     

    
      
        	
                Warrant
      No. [  ]

              	
                Dated:
      February 27, 2009

              

      

    

     

    PARADIGM
HOLDINGS, INC., a Wyoming corporation (the “Company”), hereby certifies
that, for value received, [______] or its registered assigns (the “Holder”), is entitled to
purchase from the Company up to a total of [_______] shares of common stock,
$0.01 par value per share (the “Common Stock”), of the Company
(each such share, a “Warrant
Share” and all such shares, the “Warrant Shares”) at an
exercise price equal to $0.0780 per share (as adjusted from time to time as
provided in Section
4 and Section
9, the “Exercise
Price”), at any time and from time to time from and after the date hereof
and through and including the date that is seven (7) years from the date of
issuance hereof, as may be extended pursuant to Section 4 (the “Expiration Date”), and subject
to the following terms and conditions.  This Class A Warrant (this
“Warrant”) is one of a
series of similar warrants issued pursuant to that certain Preferred Stock
Purchase Agreement, dated as of February 27, 2009 by and among the Company and
the Purchasers identified therein (the “Purchase
Agreement”).  All such warrants are referred to herein,
collectively, as the “Warrants.”

     

    1.        
   Definitions.  In
addition to the terms defined elsewhere in this Warrant, capitalized terms that
are not otherwise defined herein have the meanings given to such terms in the
Purchase Agreement or the Company’s Certificate of Designations of the Series
A-1 Senior Preferred Stock (the “Certificate of Designations”),
as applicable.

     

    2.         
  Registration of
Warrant.  The Company shall register this Warrant, upon records
to be maintained by the Company for that purpose (the “Warrant Register”), in the
name of the record Holder hereof from time to time.  The Company may
deem and treat the registered Holder of this Warrant as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the
contrary.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3.            Registration of
Transfers.  This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof; provided, however, that the transferee shall agree in writing to be
bound by the terms and subject to the conditions of this Warrant and the
Purchase Agreement.  The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Company at its address specified herein.  Upon any such registration
or transfer, a new warrant to purchase Common Stock, in substantially the form
of this Warrant (any such new warrant, a “New Warrant”), evidencing the
portion of this Warrant so transferred shall be issued to the transferee and a
New Warrant evidencing the remaining portion of this Warrant not so transferred,
if any, shall be issued to the transferring Holder.  The acceptance of
the New Warrant by the transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of a holder of a
Warrant.

     

    4.            Exercise and Duration of
Warrants.

     

    (a)           Subject
to the limitations set forth in Section 12 hereof,
this Warrant shall be exercisable, prior to the Amendment Date with respect to
the Holder’s pro rata portion of all Available Underlying Shares (based on the
proportion of Warrant Shares to the total Available Underlying Shares), and from
and after the Amendment Date with respect to all Warrant Shares, by the
registered Holder at any time and from time to time on or after the date hereof
to and including the Expiration Date.  At 6:30 P.M., New York City
time on the Expiration Date, the portion of this Warrant not exercised prior
thereto shall be and become void and of no value; provided that, if the average
of the Closing Prices for the five (5) Trading Days immediately prior to (but
not including) the Expiration Date exceeds the Exercise Price on the Expiration
Date, then this Warrant shall be deemed to have been exercised in full (to the
extent not previously exercised, and subject to the limitations set forth in
Section 12
hereof) on a “cashless exercise” basis at 6:30 P.M. New York City time on the
Expiration Date.

     

    (b)           A
Holder may exercise this Warrant by delivering to the Company (i) an exercise
notice, in the form attached hereto (the “Exercise Notice”),
appropriately completed and duly signed, and (ii) payment of the Exercise
Price for the number of Warrant Shares as to which this Warrant is being
exercised (which may take the form of a “cashless exercise” if so indicated in
the Exercise Notice and if a “cashless exercise” may occur at such time pursuant
to Section 10
below), and the date such items are delivered to the Company (as determined in
accordance with the notice provisions hereof) is an “Exercise Date.”  The
Holder shall not be required to deliver the original Warrant in order to effect
an exercise hereunder.  Execution and delivery of the Exercise Notice
shall have the same effect as cancellation of the original Warrant and issuance
of a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares.  The Holder shall deliver the original Warrant to the
Company within 30 days after the full exercise of this Warrant; provided that the
Holder’s failure to so deliver the original Warrant shall not affect the
validity of such exercise or any of the Company’s obligations under this Warrant
and the Company’s sole remedy for the Holder’s failure to deliver the original
Warrant shall be to obtain an affidavit of lost warrant from the
Holder.

    
      
         

      

      
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    (c)           If
upon the date that is seven (7) years from the original date of issuance of this
Warrant, any portion of this Warrant remains unexercised, then the Company shall
issue to the Holder a new Warrant to purchase Common Stock, in substantially the
form of this Warrant, with a new Maturity Date of seven (7) years from the
original Maturity Date and with a new Exercise Price equal to the Closing Price
on the original Maturity Date and exercisable for the number of Warrant Shares
equal to quotient of (A) the greater of the Black-Scholes value of the remaining
unexercised portion of this Warrant (without regard to any limitations on the
exercise hereof) (x) on the original date of issuance of this Warrant, and (y)
on the original Maturity Date, in each case as determined in accordance with
Annex A
attached to the Purchase Agreement, divided by (B) the new Exercise Price as
determined above.  Notwithstanding the foregoing, this Section 4(c) shall
cease to apply in the event that prior to the original Maturity Date, the
Company satisfies Section 4.22 of the Purchase Agreement.

     

    5.        
   Delivery of Warrant
Shares.

     

    (a)           Subject
to Sections 4(a) and
5(c) below and the limitations set forth in Section 12, upon
exercise of this Warrant, the Company shall promptly (but in no event later than
three (3) Trading Days after the Exercise Date) issue or cause to be issued and
cause to be delivered to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate for the Warrant Shares
issuable upon such exercise, free of restrictive legends unless a registration
statement covering the resale of the Warrant Shares and naming the Holder as a
selling stockholder thereunder is not then effective and the Warrant Shares are
not freely transferable without volume restrictions pursuant to Rule 144 under
the Securities Act.  The Holder, or any Person so designated by the
Holder to receive Warrant Shares, shall be deemed to have become holder of
record of such Warrant Shares as of the Exercise Date.  The Company
shall, upon request of the Holder, use its reasonable best efforts to deliver
Warrant Shares hereunder electronically through the Depository Trust Corporation
or another established clearing corporation performing similar
functions.

     

    (b)           Subject
to Sections 4(a) and
5(c) below and the limitations set forth in Section 12 hereof,
this Warrant is exercisable, either in its entirety or, from time to time, for
all or a portion of the number of Warrant Shares.  Upon surrender of
this Warrant following one or more partial exercises, the Company shall issue or
cause to be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares.

     

    (c)           In
addition to any other rights available to a Holder, if the Company fails to
deliver or cause to be delivered to the Holder a certificate representing
Warrant Shares by the third (3rd)Trading
Day after the date on which delivery of such certificate is required by this
Warrant, and if after such third (3rd)Trading
Day the Holder purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Shares that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company
shall, within three (3) Trading Days after the Holder’s request and in the
Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased (the “Buy-In Price”), at which point
the Company’s obligation to deliver such certificate (and to issue such Common
Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such Common Stock and pay cash
to the Holder in an amount equal to the excess (if any) of the Buy-In Price over
the product of (A) such number of shares of Common Stock, times (B) the Closing
Price on the date of the event giving rise to the Company’s obligation to
deliver such certificate.

    
      
         

      

      
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    (d)           The
Company’s obligations to issue and deliver Warrant Shares in accordance with the
terms and subject to the conditions hereof are absolute and unconditional
(provided that prior to the Amendment Date, such obligations extend to the
Holder’s pro rata portion of all Available Underlying Shares, and from and after
the Amendment Date such obligations extend to all Warrant Shares), irrespective
of any action or inaction by the Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of
Warrant Shares (other than such limitations contemplated by this
Warrant).  Nothing herein shall limit a Holder’s right to pursue any
other remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver certificates representing
shares of Common Stock upon exercise of the Warrant as required pursuant to the
terms hereof.

     

    (e)           Each
certificate for Warrant Shares shall bear a restrictive legend to the extent and
as provided in the Purchase Agreement and any certificate issued at any time in
exchange or substitution for any certificate bearing such legend shall also bear
such legend, unless, in the opinion of counsel for the Holder thereof (which
opinion shall be reasonably satisfactory to counsel for the Company), the
securities represented thereby are not, at such time, required by law to bear
such legend.

     

    6.           Charges, Taxes and
Expenses.  Issuance and delivery of certificates for shares of
Common Stock upon exercise of this Warrant shall be made without charge to the
Holder for any issue or transfer tax, transfer agent fee or other incidental tax
or expense in respect of the issuance of such certificates, all of which taxes
and expenses shall be paid by the Company; provided, however, that the Company
shall not be required to pay any withholding or other tax which may be payable
in respect of any transfer involved in the registration of any certificates for
Warrant Shares or Warrants in a name other than that of the Holder or an
Affiliate thereof.  The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring this Warrant or
receiving Warrant Shares upon exercise hereof.

     

    7.           Replacement of
Warrant.  If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested.  Applicants for a New Warrant
under such circumstances shall also comply with such other reasonable
regulations and procedures and pay such other reasonable third-party costs as
the Company may prescribe.

    
      
         

      

      
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    8.      
     Reservation of Warrant
Shares.  The Company covenants that it will at all times
reserve and keep available out of the aggregate of its authorized but unissued
and otherwise unreserved Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, prior to
the Amendment Date, a number of shares of Common Stock equal to the Holder’s pro
rata portion of all Available Underlying Shares, and from and after the
Amendment Date, a number of shares of Common Stock equal to all Warrant Shares,
free from preemptive rights or any other contingent purchase rights of persons
other than the Holder (taking into account the adjustments and restrictions of
Section
9).  The Company covenants that all Warrant Shares so issuable
and deliverable shall, upon issuance and the payment of the applicable Exercise
Price in accordance with the terms hereof, be duly and validly authorized,
issued and fully paid and nonassessable.  The Company will take all
such action as may be necessary to assure that such shares of Common Stock may
be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any securities exchange or automated
quotation system upon which the Common Stock may be listed.

     

    9.    
       Certain
Adjustments.  The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section
9.

     

    (a)           Stock Dividends and
Splits.  If the Company, at any time while this Warrant is
outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a
distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event.  Any adjustment made pursuant to clause (i) of this paragraph
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination.

     

    (b)           Pro Rata
Distributions.  If the Company, at any time while this Warrant
is outstanding, distributes to holders of Common Stock (and not to all Holders
of Warrants in respect of their ownership thereof) (i) evidences of its
Indebtedness, (ii) any security (other than a distribution of Common Stock
covered by the preceding paragraph), (iii) rights or warrants to subscribe
for or purchase any security, or (iv) cash or any other asset (in each case,
“Distributed Property”),
then in each such case the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution shall be adjusted (effective on such record date) to equal the
product of such Exercise Price times a fraction of which the denominator shall
be the average of the Closing Prices for the five (5) Trading Days immediately
prior to (but not including) such record date and of which the numerator shall
be such average less the then fair market value of the Distributed Property
distributed in respect of one (1) outstanding share of Common Stock, as
determined by the Company’s independent certified public accountants that
regularly examine the financial statements of the Company (an “Appraiser”).  In
such event, the Holder, after receipt of the determination by the Appraiser,
shall have the right to select an additional appraiser (which shall be a
nationally recognized accounting firm), in which case such fair market value
shall be deemed to equal the average of the values determined by each of the
Appraiser and such appraiser.  As an alternative to the foregoing
adjustment to the Exercise Price, at the request of the Holder delivered before
the 90th day
after such record date, the Company will deliver to such Holder, within five (5)
Trading Days after such request (or, if later, on the effective date of such
distribution), the Distributed Property that such Holder would have been
entitled to receive in respect of the Warrant Shares for which this Warrant
could have been exercised immediately prior to such record date.  If
such Distributed Property is not delivered to a Holder pursuant to the preceding
sentence, then upon expiration of or any exercise of the Warrant that occurs
after such record date, such Holder shall remain entitled to receive, in
addition to the Warrant Shares otherwise issuable upon such exercise (if
applicable), such Distributed Property.

    
      
         

      

      
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    (c)           Fundamental
Transactions.  If, at any time while this Warrant is
outstanding, any of the following occur in one or a series of related
transactions: (i) an acquisition after the Closing Date by an individual or
legal entity or “group” (as described in Rule 13d-5(b)(1), other than any
Purchaser, under the Exchange Act) of fifty percent (50%) or more of the voting
rights or voting equity interests in the Corporation; (ii) Continuing Directors
cease to constitute more than one-half (1/2) of the members of the Board, other
than in accordance with Sections 8 or 9(c) of
the Certificate of Designations and/or the Side Letter; (iii) a merger or
consolidation of the Corporation or any Significant Subsidiary or a sale of all
or substantially all of the assets of the Corporation or any Significant
Subsidiary, unless immediately following such transaction or series of
transactions, the holders of the Corporation’s securities immediately prior to
the first such transaction continue to hold at least one-half (1/2) of the
voting rights or voting equity interests in of the surviving entity or acquirer
of such assets; (iv) a recapitalization, reorganization or other similar
transaction involving the Corporation or any Significant Subsidiary that
constitutes or results in a transfer of more than one-half of the voting rights
or voting equity interests in the Corporation; (v) consummation of a
“Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange
Act with respect to the Corporation; (vi) any tender offer or exchange offer
(whether by the Corporation or another Person, other than any Purchaser) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property and as a result of
which the Persons who own Common Stock immediately prior to the launch of such
tender offer or exchange offer do not own a majority of the outstanding equity
interests of the Corporation, directly or indirectly, immediately after the
consummation thereof; (vii) the Corporation effects any reclassification of the
Common Stock or any compulsory share exchange pursuant to which the Common Stock
is effectively converted into or exchanged for other securities, cash or
property; or (viii) the execution by the Corporation of an agreement directly or
indirectly providing for any of the foregoing events (in any such case, a “Fundamental Transaction”)
(provided that no action taken for the purpose of changing the Corporation’s
jurisdiction of incorporation pursuant to Section 4.19 of the Purchase Agreement
or otherwise specifically contemplated by Section 4.19 or Section 4.20 of the
Purchase Agreement for the purposes set forth therein shall constitute a
Fundamental Transaction), then the Holder shall have the right thereafter to
receive, upon exercise of this Warrant, the same amount and kind of securities,
cash or property as it would have been entitled to receive upon the occurrence
of such Fundamental Transaction if it had been, immediately prior to such
Fundamental Transaction, the holder of the number of Warrant Shares then
issuable upon exercise in full of this Warrant (the “Alternate
Consideration”).  The aggregate Exercise Price for this Warrant
will not be affected by any such Fundamental Transaction, but the Company shall
apportion such aggregate Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration.  If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction.  In the event of a Fundamental Transaction,
the Company or the successor or purchasing Person, as the case may be, shall
execute with the Holder a written agreement providing that:

    
      
         

      

      
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    (x)           this
Warrant shall thereafter entitle the Holder to purchase the Alternate
Consideration in accordance with this Section
9(c),

    

    (y)           in
the case of any such successor or purchasing Person, upon such consolidation,
merger, statutory exchange, combination, sale or conveyance such successor or
purchasing Person shall be jointly and severally liable with the Company for the
performance of all of the Company’s obligations under this Warrant and the
Purchase Agreement, and

    

    (z)           if
registration or qualification is required under the Exchange Act or applicable
state law for the public resale by the Holder of shares of stock and other
securities so issuable upon exercise of this Warrant, such registration or
qualification shall be completed prior to such reclassification, change,
consolidation, merger, statutory exchange, combination or sale.

    

    If, in
the case of any Fundamental Transaction, the Alternate Consideration includes
shares of stock, other securities, other property or assets of a Person other
than the Company or any such successor or purchasing Person, as the case may be,
in such Fundamental Transaction, then such written agreement shall also be
executed by such other Person and shall contain such additional provisions to
protect the interests of the Holder as the Board of Directors of the Company
shall reasonably consider necessary by reason of the foregoing.  At
the Holder’s request, any successor to the Company or surviving entity in such
Fundamental Transaction shall issue to the Holder a New Warrant consistent with
the foregoing provisions and evidencing the Holder’s right to purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise
thereof.  The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this paragraph (c) and
insuring that the Warrant (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.  Without limiting the foregoing, in the event of a
Fundamental Transaction, at the request of the Holder delivered before the
90th
day after such Fundamental Transaction, the Company (or any such successor or
surviving entity) will purchase this Warrant from the Holder for a purchase
price, payable in cash within five (5) Trading Days after such request (or, if
later, on the effective date of the Fundamental Transaction), equal to the
greater of (A) the Original Issuance Value (as defined below), and (B) the then
current Black-Scholes value of the remaining unexercised portion of this Warrant
on the date of such payment, without regard to any limitations on the exercise
hereof and as determined in accordance with Annex A attached to
the Purchase Agreement (such purchase price, the “Repurchase
Price”).  For purposes of this Warrant, the “Original Issuance Value” means
$6,206,000 multiplied by a fraction the denominator of which is the total number
of shares of Common Stock issuable upon exercise of all outstanding Class A
Warrants on the date hereof (without regard to any limitations on the exercise
thereof) and the numerator of which is the total number of shares of Common
Stock issuable upon exercise of this Warrant on the date of such payment
(without regard to any limitations on the exercise hereof).  For
purposes of clarity, in no event shall the Holder be entitled to receive both
the Repurchase Price hereunder and the “Repurchase Price” pursuant to Section 6
of the Certificate of Designations in respect of this Warrant.  In
addition to the foregoing, upon the occurrence of any Event of Default pursuant
to the Certificate of Designations (whether or not such Event of Default is a
Fundamental Transaction), each Holder may elect by written notice to the
Corporation to require the Corporation to purchase this Warrant from the Holder
for a purchase price, payable in cash within five (5) Trading Days after such
request equal to the Repurchase Price.  Upon payment in full of the
Repurchase Price pursuant to this paragraph, this Warrant shall be deemed
repurchased by the Company and no longer exercisable.

    
      
         

      

      
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    (d)          Subsequent Equity
Sales.

     

    (i)           If,
at any time while this Warrant is outstanding, the Company or any Subsidiary
issues additional shares of Common Stock or rights, warrants, options or other
securities or debt convertible, exercisable or exchangeable for shares of Common
Stock or otherwise entitling any Person to acquire shares of Common Stock
(collectively, “Common Stock
Equivalents”) at an effective price to the Company (net of any rebates,
discounts, fees, commissions or expenses, other than customary expenses) per
share of Common Stock (the “Effective Price”) less than
the Exercise Price (as adjusted hereunder to such date), then the Exercise Price
shall be reduced to equal the Effective Price.  For purposes of this
paragraph, in connection with any issuance of any Common Stock Equivalents, (A)
the maximum number of shares of Common Stock potentially issuable at any time
upon conversion, exercise or exchange of such Common Stock Equivalents (the
“Deemed Number”) shall
be deemed to be outstanding upon issuance of such Common Stock Equivalents, (B)
the Effective Price applicable to such Common Stock shall equal the minimum
dollar value of consideration payable to the Company to purchase such Common
Stock Equivalents and to convert, exercise or exchange them into Common Stock
(net of any rebates, discounts, fees, commissions and expenses, other than
customary expenses), divided by the Deemed Number, and (C) no further adjustment
shall be made to the Exercise Price upon the actual issuance of Common Stock
upon conversion, exercise or exchange of such Common Stock
Equivalents.

     

    (ii)           If,
at any time while this Warrant is outstanding, the Company directly or
indirectly issues Common Stock Equivalents with an Effective Price or a number
of underlying shares that floats or resets or otherwise varies or is subject to
adjustment based (directly or indirectly) on market prices of the Common Stock
(a “Floating Price
Security”), then for purposes of applying the preceding paragraph in
connection with any subsequent exercise, the Effective Price will be determined
separately on each Exercise Date and will be deemed to equal the lowest
Effective Price at which any holder of such Floating Price Security is entitled
to acquire Common Stock on such Exercise Date (regardless of whether any such
holder actually acquires any shares on such date).

    
      
         

      

      
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    (iii)           The
Company shall not issue any Common Stock Equivalents at an Effective Price less
than the Exercise Price (as adjusted hereunder to such date) unless prior to
such issuance (A) the Holder has consented to such issuance in writing and
(B) the Company shall have obtained all necessary shareholder and other
approvals required for the Conversion Price under this Warrant to be reduced to
such Effective Price.

     

    (iv)           Notwithstanding
the foregoing, no adjustment will be made under this paragraph (d) in respect of
any issuances of Common Stock or Common Stock Equivalents made pursuant to the
definition of Excluded Stock.

     

    (e)           Number of Warrant
Shares.  Simultaneously with any adjustment to the Exercise
Price pursuant to paragraphs (a), (b) or (d) of this Section 9, the number
of Warrant Shares that may be purchased upon exercise of this Warrant shall be
increased or decreased proportionately, so that after such adjustment the
aggregate Exercise Price payable hereunder for the increased or decreased number
of Warrant Shares shall be the same as the aggregate Exercise Price in effect
immediately prior to such adjustment.

     

    (f)           Calculations.  All
calculations under this Section 9 shall be
made to the nearest cent or the nearest 1/100th of a share, as
applicable.  The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of the
Company, and the disposition of any such shares shall be considered an issue or
sale of Common Stock.

     

    (g)           Notice of
Adjustments.  Upon the occurrence of each adjustment pursuant
to this Section
9, the Company at its expense will promptly compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment, including a statement of the adjusted Exercise Price and
adjusted number or type of Warrant Shares or other securities issuable upon
exercise of this Warrant (as applicable), describing the transactions giving
rise to such adjustments and showing in detail the facts upon which such
adjustment is based.  Upon written request, the Company will promptly
deliver a copy of each such certificate to the Holder and to the Company’s
Transfer Agent.

     

    (h)           Notice of Corporate
Events.  If the Company  (i) declares a dividend or
any other distribution of cash, securities or other property in respect of its
Common Stock, including without limitation any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any Subsidiary,
(ii) authorizes or approves, enters into any agreement contemplating or solicits
stockholder approval for a Fundamental Transaction or (iii) authorizes the
voluntary dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction, at least 20 calendar days prior to the
applicable record or effective date on which a Person would need to hold Common
Stock in order to participate in or vote with respect to such transaction, and
the Company will take all steps reasonably necessary in order to insure that the
Holder is given the practical opportunity to exercise this Warrant prior to such
time so as to participate in or vote with respect to such transaction; provided,
however, that the failure to deliver such notice or any defect therein shall not
affect the validity of the corporate action required to be described in such
notice.

     

    10.           Payment of Exercise
Price.  The Holder, at its election, may either pay the
Exercise Price in immediately available funds, or satisfy its obligation to pay
the Exercise Price through a “cashless exercise,” in which event the Company
shall issue to the Holder the number of Warrant Shares determined as
follows:

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    
      
        
          	 
      	
                  X =
      Y [(A-B)/A]

                
	
                  where:

                	 
      
	 
      	
                  X =
      the number of Warrant Shares to be issued to the
Holder.

                
	 
      	 
      
	 
      	
                  Y =
      the number of Warrant Shares with respect to which this Warrant is being
      exercised.

                
	 
      	 
      
	 
      	
                  A =
      the Current Market Price (as of the date of
      such calculation) of one share of Common Stock .

                
	 
      	 
      
	 
      	
                  B =
      the Exercise Price (as adjusted to the date of such
      calculation).

                

        

      

    

    

    For purposes of this Warrant, the
“Current Market Price”
of one share of the Company’s Common Stock as of a particular date shall be
determined as follows: (a) if traded on a national securities exchange or
through the Nasdaq Stock Market, the Current Market Price shall be deemed to be
the arithmetic average of the VWAPs for the five (5) consecutive Trading Days
immediately preceding the applicable date; (b) if traded over-the-counter but
not on the Nasdaq Stock Market, the Current Market Price shall be deemed to be
the average of the closing bid and asked prices as of five (5) Business Days
immediately prior to the date of exercise indicated in the Notice of Exercise;
and (c) if there is no active public market, the Current Market Price shall be
the fair market value of the Common Stock as of the date of exercise, as
determined by an independent appraiser selected in good faith by the
Holder.

     

    For purposes of Rule 144 promulgated
under the Securities Act, it is intended, understood and acknowledged that the
Warrant Shares issued in a cashless exercise transaction shall be deemed to have
been acquired by the Holder, and the holding period for the Warrant Shares shall
be deemed to have commenced, on the date this Warrant was originally issued
pursuant to the Purchase Agreement.

     

    11.          [Intentionally
Omitted.]

     

    12.          Limitation on
Exercise.  This Section 12, or any
provision hereof, shall be effective after, and only after, the Holder has
delivered written notice to the Company of its election that this Section 12, or any
provision hereof, shall become effective with respect to such
Holder:

     

    (a)           Subject
to Section
12(b), the number of shares of Common Stock that may be acquired by a
Holder upon any exercise of Warrants (or otherwise in respect hereof) shall be
limited to the extent necessary to insure that, following such exercise (or
other issuance), the total number of shares of Common Stock then beneficially
owned by such Holder and its Affiliates and any other Persons whose beneficial
ownership of Common Stock would be aggregated with such Holder’s for purposes of
Section 13(d) of the Exchange Act, does not exceed 4.999% of the total number of
issued and outstanding shares of Common Stock (including for such purpose the
shares of Common Stock issuable upon such conversion) (the “Threshold
Percentage”).  For such purposes, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    (b)           Notwithstanding
the provisions of Section 12(a), the
Holder shall have the right at any time and from time to time, to waive the
provisions of this Section insofar as they relate to the Threshold Percentage or
to increase its Threshold Percentage (but not in excess of 9.999% (or such lower
percentage if Section 16 of the Exchange Act or the rules promulgated thereunder
(or any successor statute or rules) is changed to reduce the beneficial
ownership percentage threshold thereunder to a percentage less than 9.999%)) by
written instrument delivered to the Company, but (i) any such waiver or increase
will not be effective until the 61st day after such notice is delivered to the
Company, and (ii) any such waiver or increase or decrease will apply only to the
Holder and not to any other holder of Warrants.

     

    (c)           Notwithstanding
anything to the contrary contained herein, if the Trading Market is the Nasdaq
Small-Cap Market or any other market or exchange with similar applicable rules,
then the maximum number of shares of Common Stock that the Company may issue
pursuant to the Transaction Documents at an effective purchase price less than
the Closing Price on the Trading Day immediately preceding the Closing Date
equals 19.99% of the outstanding shares of Common Stock immediately preceding
the Closing Date (the “Issuable
Maximum”), unless the Company obtains stockholder
approval.  If, at the time any Holder requests an exercise of any of
the Warrants (or the Company is required or permitted to pay in shares of Common
Stock any payment due under the Series A-1 Preferred Shares), the Actual Minimum
would cause the Issuable Maximum to be exceeded (and if the Company has not
previously obtained the required stockholder approval), then the Company shall
issue to the Holder requesting such exercise and/or such conversion (and/or such
payment of principal or interest) a number of shares of Common Stock not
exceeding such Holder’s pro-rata portion of the Issuable Maximum (based on such
Holder’s share (vis-à-vis other Holders) of the aggregate purchase price paid
under the Purchase Agreement and taking into account any Warrant Shares
previously issued to such Holder).  For the purposes hereof, “Actual Minimum” shall mean, as
of any date, the maximum aggregate number of shares of Common Stock then issued
or potentially issuable in the future pursuant to the Transaction Documents,
including any Underlying Shares issuable upon exercise in full of all Warrants,
without giving effect to (x) any limits on the number of shares of Common Stock
that may be owned by a Holder at any one time, or (y) any additional Underlying
Shares that could be issuable as a result of any future possible adjustments
made under Section
9(d).

     

    13.           Fractional
Shares.  The Company shall not be required to issue or cause to
be issued fractional Warrant Shares on the exercise of this
Warrant.  If any fraction of a Warrant Share would, except for the
provisions of this Section, be issuable upon exercise of this Warrant, the
number of Warrant Shares to be issued will be rounded up to the nearest whole
share or right to purchase the nearest whole share, as the case may
be.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    14.          Notices.  Any
and all notices or other communications or deliveries hereunder (including
without limitation any Exercise Notice) shall be in writing and shall be deemed
given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (ii) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (iii) the Trading Day following the date of
mailing, if sent by a nationally recognized overnight courier service specifying
next Business Day delivery, or (iv) upon actual receipt by the party to whom
such notice is required to be given, if by hand delivery.  The address
and facsimile number of a party for such notices or communications shall be as
set forth in the Purchase Agreement, unless changed by such party by two (2)
Trading Days’ prior notice to the other party in accordance with this Section
14.

     

    15.          Warrant
Agent.  The Company shall serve as warrant agent under this
Warrant.  Upon 30 days’ notice to the Holder, the Company may appoint
a new warrant agent.  Any corporation into which the Company or any
new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party or
any corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or stockholders services business shall
be a successor warrant agent under this Warrant without any further
act.  Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder’s last address as shown on the Warrant
Register.

     

    16.          Extension of Expiration
Date. At the option of the Holder, the Expiration Date may be extended
for the number of Trading Days during any period occurring after the Required
Effectiveness Date in which (i) trading in the Common Stock is suspended by any
Trading Market, (ii) any Registration Statement is not effective when required
pursuant to the Purchase Agreement, or (iii) the prospectus included in the
Registration Statement may not be used by the Holders for the resale of
Registrable Securities thereunder.

     

    17.          Miscellaneous.

     

    (a)           Subject
to the restrictions on transfer set forth on the first page hereof and in Section 3, this
Warrant may be assigned by the Holder.  This Warrant may not be
assigned by the Company except to a successor in the event of a Fundamental
Transaction, pursuant to Section 4.19 of the Purchase Agreement or with the
prior written consent of the Holder.  This Warrant shall be binding on
and inure to the benefit of the parties hereto and their respective successors
and assigns.  Subject to the preceding sentence, nothing in this
Warrant shall be construed to give to any Person other than the Company and the
Holder any legal or equitable right, remedy or cause of action under this
Warrant.  This Warrant, together with the other Transaction Documents,
constitutes the entire agreement of the parties with respect to the subject
matter hereof.  This Warrant may be amended only in writing signed by
the Company and the Holder and their successors and assigns.  The
restrictions set forth in Section 12 hereof,
upon becoming effective, may not be amended or waived.

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    (b)           The
Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder against impairment.  Without limiting the
generality of the foregoing, the Company (i) will not increase the par value of
any Warrant Shares above the amount payable therefor on such exercise, (ii) will
take all such action as may be reasonably necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable Warrant
Shares on the exercise of this Warrant, and (iii) will not close its stockholder
books or records in any manner which interferes with the timely exercise of this
Warrant.

     

    (c)           Governing Law; Venue; Waiver
Of Jury Trial.  all questions concerning the construction,
validity, enforcement and interpretation of this warrant shall be governed by
and construed and enforced in accordance with the laws of the state of new york
(except for matters governed by corporate law in the state of
Wyoming).  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
improper.  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 via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.  the company hereby waives all rights
to a trial by jury.

     

    (d)           The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.

     

    (e)           In
case any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Warrant shall not in any way be affected or
impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

     

    

    [Signature
page follows.]

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

     

    IN
WITNESS WHEREOF, the undersigned has caused this Class A Warrant to be duly
executed by its authorized officer as of the date first indicated
above.

    

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  PARADIGM
      HOLDINGS, INC.

                                	 
	 
      	 
      	 
	 
      	 
      	 
	
                                  By:

                                	 
      	 
	
                                  Name:
      

                                	 
      	 
	
                                  Title:

                                	 
      	 

                        

                      

                    

                  

                

              

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    FORM OF
EXERCISE NOTICE

     

    (To be
executed by the Holder to exercise the right to purchase shares of Common Stock
under the foregoing Warrant)

     

    To:  PARADIGM
HOLDINGS, INC.

     

    The
undersigned is the Holder of Class A Warrant No. _______ (the “Warrant”) issued by PARADIGM
HOLDINGS, INC., a Wyoming corporation (the “Company”).  Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Warrant.

     

    
      	
              1.

            	
              The
      Warrant is currently exercisable to purchase a total of ______________
      Warrant Shares.

            

    

     

    
      	
              2.

            	
              The
      undersigned Holder hereby exercises its right to purchase
      _________________ Warrant Shares pursuant to the
  Warrant.

            

    

     

    
      	
              3.

            	
              The
      Holder intends that payment of the Exercise Price shall be made as (check
      one):

            

    

     

    ____        “Cash
Exercise” under Section 10 of the
Warrant

     

    ____        “Cashless
Exercise” under Section 10 of the
Warrant

     

    
      	
              4.

            	
              If
      the Holder has elected a Cash Exercise, the Holder shall pay the sum of
      $____________ to the Company in accordance with the terms of the
      Warrant.

            

    

     

    
      	
              5.

            	
              Pursuant
      to this exercise, the Company shall deliver to the Holder _______________
      Warrant Shares in accordance with the terms of the
  Warrant.

            

    

     

    
      	
              6.

            	
              Following
      this exercise, the Warrant shall be exercisable to purchase a total of
      ______________ Warrant Shares.

            

    

    

    
      
        
          
            
              
                
                  	
                          Dated:                                      ,              

                        	 
      	
                          Name
      of Holder:

                        
	 
      	 
      	 
      	 
      
	 
      	 
      	
                          (Print)

                        	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                          By:

                        	 
      
	 
      	 
      	
                          Name:
      

                        	 
      
	 
      	 
      	
                          Title:

                        	 
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                          (Signature
      must conform in all respects to name of holder as specified on the face of
      the
Warrant)

                        

                

              

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    FORM OF
ASSIGNMENT

     

    (To be
completed and signed only upon transfer of Warrant)

     

    FOR VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the within Class A
Warrant to purchase ____________ shares of Common Stock of PARADIGM HOLDINGS,
INC. to which the within Class A Warrant relates and appoints ________________
attorney to transfer said right on the books of PARADIGM HOLDINGS, INC. with
full power of substitution in the premises.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              	
                                      Dated:                                      ,              

                                    	 	 
      
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	
                                      (Signature
      must conform in all respects to name of holder as specified on the face of
      the Warrant)

                                    
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	
                                      Address
      of Transferee

                                    
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	 
      
	
                                      In
      the presence of:Exhibit
4.2

    

     

    NEITHER
THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE
HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE
SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS OR BLUE SKY LAWS.  NOTWITHSTANDING THE FOREGOING,
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY SUCH SECURITIES.

     

    PARADIGM
HOLDINGS, INC.

     

    CLASS
B WARRANT

     

    
      
        	
                Warrant
      No. [  ]

              	
                Dated:
      February 27, 2009

              

      

    

     

    PARADIGM
HOLDINGS, INC., a Wyoming corporation (the “Company”), hereby certifies
that, for value received, [_____] or its registered assigns (the “Holder”), is entitled to
purchase from the Company up to a total of [_____] shares of common stock, $0.01
par value per share (the “Common Stock”), of the Company
(each such share, a “Warrant
Share” and all such shares, the “Warrant Shares”) at an
exercise price equal to $0.0858 per share (as adjusted from time to time as
provided in Section
9, the “Exercise
Price”), at any time and from time to time from and after the date hereof
and through and including the date that is seven (7) years from the date of
issuance hereof (the “Expiration Date”), and subject
to the following terms and conditions.  This Class B Warrant (this
“Warrant”) is one of a
series of similar warrants issued pursuant to that certain Preferred Stock
Purchase Agreement, dated as of February 27, 2009 by and among the Company and
the Purchasers identified therein (the “Purchase
Agreement”).  All such warrants are referred to herein,
collectively, as the “Warrants.”

     

    1.           Definitions.  In
addition to the terms defined elsewhere in this Warrant, capitalized terms that
are not otherwise defined herein have the meanings given to such terms in the
Purchase Agreement or the Company’s Certificate of Designations of the Series
A-1 Senior Preferred Stock (the “Certificate of Designations”),
as applicable.

     

    2.           Registration of
Warrant.  The Company shall register this Warrant, upon records
to be maintained by the Company for that purpose (the “Warrant Register”), in the
name of the record Holder hereof from time to time.  The Company may
deem and treat the registered Holder of this Warrant as the absolute owner
hereof for the purpose of any exercise hereof or any distribution to the Holder,
and for all other purposes, absent actual notice to the
contrary.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    3.           Registration of
Transfers.  This Warrant and all rights hereunder are
transferable in whole or in part upon the books of the Company by the Holder
hereof; provided, however, that the transferee shall agree in writing to be
bound by the terms and subject to the conditions of this Warrant and the
Purchase Agreement.  The Company shall register the transfer of any
portion of this Warrant in the Warrant Register, upon surrender of this Warrant,
with the Form of Assignment attached hereto duly completed and signed, to the
Company at its address specified herein.  Upon any such registration
or transfer, a new warrant to purchase Common Stock, in substantially the form
of this Warrant (any such new warrant, a “New Warrant”), evidencing the
portion of this Warrant so transferred shall be issued to the transferee and a
New Warrant evidencing the remaining portion of this Warrant not so transferred,
if any, shall be issued to the transferring Holder.  The acceptance of
the New Warrant by the transferee thereof shall be deemed the acceptance by such
transferee of all of the rights and obligations of a holder of a
Warrant.

     

    4.           Exercise and Duration of
Warrants.

     

    (a)           Subject
to the limitations set forth in Section 12 hereof,
this Warrant shall be exercisable, prior to the Amendment Date with respect to
the Holder’s pro rata portion of all Available Underlying Shares (based on the
proportion of Warrant Shares to the total Available Underlying Shares), and from
and after the Amendment Date with respect to all Warrant Shares, by the
registered Holder at any time and from time to time on or after the date hereof
to and including the Expiration Date.  At 6:30 P.M., New York City
time on the Expiration Date, the portion of this Warrant not exercised prior
thereto shall be and become void and of no value; provided that, if the average
of the Closing Prices for the five (5) Trading Days immediately prior to (but
not including) the Expiration Date exceeds the Exercise Price on the Expiration
Date, then this Warrant shall be deemed to have been exercised in full (to the
extent not previously exercised, and subject to the limitations set forth in
Section 12
hereof) on a “cashless exercise” basis at 6:30 P.M. New York City time on the
Expiration Date.

     

    (b)           A
Holder may exercise this Warrant by delivering to the Company (i) an exercise
notice, in the form attached hereto (the “Exercise Notice”),
appropriately completed and duly signed, and (ii) payment of the Exercise
Price for the number of Warrant Shares as to which this Warrant is being
exercised (which may take the form of a “cashless exercise” if so indicated in
the Exercise Notice and if a “cashless exercise” may occur at such time pursuant
to Section 10
below), and the date such items are delivered to the Company (as determined in
accordance with the notice provisions hereof) is an “Exercise Date.”  The
Holder shall not be required to deliver the original Warrant in order to effect
an exercise hereunder.  Execution and delivery of the Exercise Notice
shall have the same effect as cancellation of the original Warrant and issuance
of a New Warrant evidencing the right to purchase the remaining number of
Warrant Shares.  The Holder shall deliver the original Warrant to the
Company within 30 days after the full exercise of this Warrant; provided that the
Holder’s failure to so deliver the original Warrant shall not affect the
validity of such exercise or any of the Company’s obligations under this Warrant
and the Company’s sole remedy for the Holder’s failure to deliver the original
Warrant shall be to obtain an affidavit of lost warrant from the
Holder.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    5.           Delivery of Warrant
Shares.

     

    (a)           Subject
to Sections 4(a) and
5(c) below and the limitations set forth in Section 12, upon
exercise of this Warrant, the Company shall promptly (but in no event later than
three (3) Trading Days after the Exercise Date) issue or cause to be issued and
cause to be delivered to or upon the written order of the Holder and in such
name or names as the Holder may designate, a certificate for the Warrant Shares
issuable upon such exercise, free of restrictive legends unless a registration
statement covering the resale of the Warrant Shares and naming the Holder as a
selling stockholder thereunder is not then effective and the Warrant Shares are
not freely transferable without volume restrictions pursuant to Rule 144 under
the Securities Act.  The Holder, or any Person so designated by the
Holder to receive Warrant Shares, shall be deemed to have become holder of
record of such Warrant Shares as of the Exercise Date.  The Company
shall, upon request of the Holder, use its reasonable best efforts to deliver
Warrant Shares hereunder electronically through the Depository Trust Corporation
or another established clearing corporation performing similar
functions.

     

    (b)           Subject
to Sections 4(a) and
5(c) below and the limitations set forth in Section 12 hereof,
this Warrant is exercisable, either in its entirety or, from time to time, for
all or a portion of the number of Warrant Shares.  Upon surrender of
this Warrant following one or more partial exercises, the Company shall issue or
cause to be issued, at its expense, a New Warrant evidencing the right to
purchase the remaining number of Warrant Shares.

     

    (c)           In
addition to any other rights available to a Holder, if the Company fails to
deliver or cause to be delivered to the Holder a certificate representing
Warrant Shares by the third (3rd)Trading
Day after the date on which delivery of such certificate is required by this
Warrant, and if after such third (3rd)Trading
Day the Holder purchases (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Shares that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company
shall, within three (3) Trading Days after the Holder’s request and in the
Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased (the “Buy-In Price”), at which point
the Company’s obligation to deliver such certificate (and to issue such Common
Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the
Holder a certificate or certificates representing such Common Stock and pay cash
to the Holder in an amount equal to the excess (if any) of the Buy-In Price over
the product of (A) such number of shares of Common Stock, times (B) the Closing
Price on the date of the event giving rise to the Company’s obligation to
deliver such certificate.

     

    (d)           The
Company’s obligations to issue and deliver Warrant Shares in accordance with the
terms and subject to the conditions hereof are absolute and unconditional
(provided that prior to the Amendment Date, such obligations extend to the
Holder’s pro rata portion of all Available Underlying Shares, and from and after
the Amendment Date such obligations extend to all Warrant Shares), irrespective
of any action or inaction by the Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any judgment
against any Person or any action to enforce the same, or any setoff,
counterclaim, recoupment, limitation or termination, or any breach or alleged
breach by the Holder or any other Person of any obligation to the Company or any
violation or alleged violation of law by the Holder or any other Person, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Company to the Holder in connection with the issuance of
Warrant Shares (other than such limitations contemplated by this
Warrant).  Nothing herein shall limit a Holder’s right to pursue any
other remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver certificates representing
shares of Common Stock upon exercise of the Warrant as required pursuant to the
terms hereof.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    (e)           Each
certificate for Warrant Shares shall bear a restrictive legend to the extent and
as provided in the Purchase Agreement and any certificate issued at any time in
exchange or substitution for any certificate bearing such legend shall also bear
such legend, unless, in the opinion of counsel for the Holder thereof (which
opinion shall be reasonably satisfactory to counsel for the Company), the
securities represented thereby are not, at such time, required by law to bear
such legend.

     

    6.           Charges, Taxes and
Expenses.  Issuance and delivery of certificates for shares of
Common Stock upon exercise of this Warrant shall be made without charge to the
Holder for any issue or transfer tax, transfer agent fee or other incidental tax
or expense in respect of the issuance of such certificates, all of which taxes
and expenses shall be paid by the Company; provided, however, that the Company
shall not be required to pay any withholding or other tax which may be payable
in respect of any transfer involved in the registration of any certificates for
Warrant Shares or Warrants in a name other than that of the Holder or an
Affiliate thereof.  The Holder shall be responsible for all other tax
liability that may arise as a result of holding or transferring this Warrant or
receiving Warrant Shares upon exercise hereof.

     

    7.           Replacement of
Warrant.  If this Warrant is mutilated, lost, stolen or
destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation hereof, or in lieu of and substitution
for this Warrant, a New Warrant, but only upon receipt of evidence reasonably
satisfactory to the Company of such loss, theft or destruction and customary and
reasonable indemnity, if requested.  Applicants for a New Warrant
under such circumstances shall also comply with such other reasonable
regulations and procedures and pay such other reasonable third-party costs as
the Company may prescribe.

     

    8.           Reservation of Warrant
Shares.  The Company covenants that it will at all times
reserve and keep available out of the aggregate of its authorized but unissued
and otherwise unreserved Common Stock, solely for the purpose of enabling it to
issue Warrant Shares upon exercise of this Warrant as herein provided, prior to
the Amendment Date, a number of shares of Common Stock equal to the Holder’s pro
rata portion of all Available Underlying Shares, and from and after the
Amendment Date, a number of shares of Common Stock equal to all Warrant Shares,
free from preemptive rights or any other contingent purchase rights of persons
other than the Holder (taking into account the adjustments and restrictions of
Section
9).  The Company covenants that all Warrant Shares so issuable
and deliverable shall, upon issuance and the payment of the applicable Exercise
Price in accordance with the terms hereof, be duly and validly authorized,
issued and fully paid and nonassessable.  The Company will take all
such action as may be necessary to assure that such shares of Common Stock may
be issued as provided herein without violation of any applicable law or
regulation, or of any requirements of any securities exchange or automated
quotation system upon which the Common Stock may be listed.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    9.           Certain
Adjustments.  The Exercise Price and number of Warrant Shares
issuable upon exercise of this Warrant are subject to adjustment from time to
time as set forth in this Section
9.

     

    (a)           Stock Dividends and
Splits.  If the Company, at any time while this Warrant is
outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a
distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such
event.  Any adjustment made pursuant to clause (i) of this paragraph
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution, and any
adjustment pursuant to clause (ii) or (iii) of this paragraph shall become
effective immediately after the effective date of such subdivision or
combination.

     

    (b)           Pro Rata
Distributions.  If the Company, at any time while this Warrant
is outstanding, distributes to holders of Common Stock (and not to all Holders
of Warrants in respect of their ownership thereof) (i) evidences of its
Indebtedness, (ii) any security (other than a distribution of Common Stock
covered by the preceding paragraph), (iii) rights or warrants to subscribe
for or purchase any security, or (iv) cash or any other asset (in each case,
“Distributed Property”),
then in each such case the Exercise Price in effect immediately prior to the
record date fixed for determination of stockholders entitled to receive such
distribution shall be adjusted (effective on such record date) to equal the
product of such Exercise Price times a fraction of which the denominator shall
be the average of the Closing Prices for the five (5) Trading Days immediately
prior to (but not including) such record date and of which the numerator shall
be such average less the then fair market value of the Distributed Property
distributed in respect of one (1) outstanding share of Common Stock, as
determined by the Company’s independent certified public accountants that
regularly examine the financial statements of the Company (an “Appraiser”).  In
such event, the Holder, after receipt of the determination by the Appraiser,
shall have the right to select an additional appraiser (which shall be a
nationally recognized accounting firm), in which case such fair market value
shall be deemed to equal the average of the values determined by each of the
Appraiser and such appraiser.  As an alternative to the foregoing
adjustment to the Exercise Price, at the request of the Holder delivered before
the 90th day
after such record date, the Company will deliver to such Holder, within five (5)
Trading Days after such request (or, if later, on the effective date of such
distribution), the Distributed Property that such Holder would have been
entitled to receive in respect of the Warrant Shares for which this Warrant
could have been exercised immediately prior to such record date.  If
such Distributed Property is not delivered to a Holder pursuant to the preceding
sentence, then upon expiration of or any exercise of the Warrant that occurs
after such record date, such Holder shall remain entitled to receive, in
addition to the Warrant Shares otherwise issuable upon such exercise (if
applicable), such Distributed Property.

    
      
         

      

      
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    (c)           Fundamental
Transactions.  If, at any time while this Warrant is
outstanding, any of the following occur in one or a series of related
transactions: (i) an acquisition after the Closing Date by an individual or
legal entity or “group” (as described in Rule 13d-5(b)(1), other than any
Purchaser, under the Exchange Act) of fifty percent (50%) or more of the voting
rights or voting equity interests in the Corporation; (ii) Continuing Directors
cease to constitute more than one-half (1/2) of the members of the Board, other
than in accordance with Sections 8 or 9(c) of
the Certificate of Designations and/or the Side Letter; (iii) a merger or
consolidation of the Corporation or any Significant Subsidiary or a sale of all
or substantially all of the assets of the Corporation or any Significant
Subsidiary, unless immediately following such transaction or series of
transactions, the holders of the Corporation’s securities immediately prior to
the first such transaction continue to hold at least one-half (1/2) of the
voting rights or voting equity interests in of the surviving entity or acquirer
of such assets; (iv) a recapitalization, reorganization or other similar
transaction involving the Corporation or any Significant Subsidiary that
constitutes or results in a transfer of more than one-half of the voting rights
or voting equity interests in the Corporation; (v) consummation of a
“Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange
Act with respect to the Corporation; (vi) any tender offer or exchange offer
(whether by the Corporation or another Person, other than any Purchaser) is
completed pursuant to which holders of Common Stock are permitted to tender or
exchange their shares for other securities, cash or property and as a result of
which the Persons who own Common Stock immediately prior to the launch of such
tender offer or exchange offer do not own a majority of the outstanding equity
interests of the Corporation, directly or indirectly, immediately after the
consummation thereof; (vii) the Corporation effects any reclassification of the
Common Stock or any compulsory share exchange pursuant to which the Common Stock
is effectively converted into or exchanged for other securities, cash or
property; or (viii) the execution by the Corporation of an agreement directly or
indirectly providing for any of the foregoing events (in any such case, a “Fundamental Transaction”)
(provided that no action taken for the purpose of changing the Corporation’s
jurisdiction of incorporation pursuant to Section 4.19 of the Purchase Agreement
or otherwise specifically contemplated by Section 4.19 or Section 4.20 of the
Purchase Agreement for the purposes set forth therein shall constitute a
Fundamental Transaction), then the Holder shall have the right thereafter to
receive, upon exercise of this Warrant, the same amount and kind of securities,
cash or property as it would have been entitled to receive upon the occurrence
of such Fundamental Transaction if it had been, immediately prior to such
Fundamental Transaction, the holder of the number of Warrant Shares then
issuable upon exercise in full of this Warrant (the “Alternate
Consideration”).  The aggregate Exercise Price for this Warrant
will not be affected by any such Fundamental Transaction, but the Company shall
apportion such aggregate Exercise Price among the Alternate Consideration in a
reasonable manner reflecting the relative value of any different components of
the Alternate Consideration.  If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction.  In the event of a Fundamental Transaction,
the Company or the successor or purchasing Person, as the case may be, shall
execute with the Holder a written agreement providing that:

     

    (x)           this
Warrant shall thereafter entitle the Holder to purchase the Alternate
Consideration in accordance with this Section
9(c),

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    (y)           in
the case of any such successor or purchasing Person, upon such consolidation,
merger, statutory exchange, combination, sale or conveyance such successor or
purchasing Person shall be jointly and severally liable with the Company for the
performance of all of the Company’s obligations under this Warrant and the
Purchase Agreement, and

    

    (z)           if
registration or qualification is required under the Exchange Act or applicable
state law for the public resale by the Holder of shares of stock and other
securities so issuable upon exercise of this Warrant, such registration or
qualification shall be completed prior to such reclassification, change,
consolidation, merger, statutory exchange, combination or sale.

    

    If, in
the case of any Fundamental Transaction, the Alternate Consideration includes
shares of stock, other securities, other property or assets of a Person other
than the Company or any such successor or purchasing Person, as the case may be,
in such Fundamental Transaction, then such written agreement shall also be
executed by such other Person and shall contain such additional provisions to
protect the interests of the Holder as the Board of Directors of the Company
shall reasonably consider necessary by reason of the foregoing.  At
the Holder’s request, any successor to the Company or surviving entity in such
Fundamental Transaction shall issue to the Holder a New Warrant consistent with
the foregoing provisions and evidencing the Holder’s right to purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise
thereof.  The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or
surviving entity to comply with the provisions of this paragraph (c) and
insuring that the Warrant (or any such replacement security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental
Transaction.  Without limiting the foregoing, in the event of a
Fundamental Transaction, at the request of the Holder delivered before the
90th
day after such Fundamental Transaction, the Company (or any such successor or
surviving entity) will purchase this Warrant from the Holder for a purchase
price, payable in cash within five (5) Trading Days after such request (or, if
later, on the effective date of the Fundamental Transaction), equal to the
greater of (A) the Original Issuance Value (as defined below), and (B) the then
current Black-Scholes value of the remaining unexercised portion of this Warrant
on the date of such payment, without regard to any limitations on the exercise
hereof and as determined in accordance with Annex A attached to
the Purchase Agreement (such purchase price, the “Repurchase
Price”).  For purposes of this Warrant, the “Original Issuance Value” means
$456,631 multiplied by a fraction the denominator of which is the total number
of shares of Common Stock issuable upon exercise of all outstanding Class B
Warrants on the date hereof (without regard to any limitations on the exercise
thereof) and the numerator of which is the total number of shares of Common
Stock issuable upon exercise of this Warrant on the date of such payment
(without regard to any limitations on the exercise hereof).  For
purposes of clarity, in no event shall the Holder be entitled to receive both
the Repurchase Price hereunder and the “Repurchase Price” pursuant to Section 6
of the Certificate of Designations in respect of this Warrant.  In
addition to the foregoing, upon the occurrence of any Event of Default pursuant
to the Certificate of Designations (whether or not such Event of Default is a
Fundamental Transaction), each Holder may elect by written notice to the
Corporation to require the Corporation to purchase this Warrant from the Holder
for a purchase price, payable in cash within five (5) Trading Days after such
request equal to the Repurchase Price.  Upon payment in full of the
Repurchase Price pursuant to this paragraph, this Warrant shall be deemed
repurchased by the Company and no longer exercisable.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    (d)           Subsequent Equity
Sales.

     

    (i)           If,
at any time while this Warrant is outstanding, the Company or any Subsidiary
issues additional shares of Common Stock or rights, warrants, options or other
securities or debt convertible, exercisable or exchangeable for shares of Common
Stock or otherwise entitling any Person to acquire shares of Common Stock
(collectively, “Common Stock
Equivalents”) at an effective price to the Company (net of any rebates,
discounts, fees, commissions or expenses, other than customary expenses) per
share of Common Stock (the “Effective Price”) less than
the Exercise Price (as adjusted hereunder to such date), then the Exercise Price
shall be reduced to equal the Effective Price.  For purposes of this
paragraph, in connection with any issuance of any Common Stock Equivalents, (A)
the maximum number of shares of Common Stock potentially issuable at any time
upon conversion, exercise or exchange of such Common Stock Equivalents (the
“Deemed Number”) shall
be deemed to be outstanding upon issuance of such Common Stock Equivalents, (B)
the Effective Price applicable to such Common Stock shall equal the minimum
dollar value of consideration payable to the Company to purchase such Common
Stock Equivalents and to convert, exercise or exchange them into Common Stock
(net of any rebates, discounts, fees, commissions and expenses, other than
customary expenses), divided by the Deemed Number, and (C) no further adjustment
shall be made to the Exercise Price upon the actual issuance of Common Stock
upon conversion, exercise or exchange of such Common Stock
Equivalents.

     

    (ii)           If,
at any time while this Warrant is outstanding, the Company directly or
indirectly issues Common Stock Equivalents with an Effective Price or a number
of underlying shares that floats or resets or otherwise varies or is subject to
adjustment based (directly or indirectly) on market prices of the Common Stock
(a “Floating Price
Security”), then for purposes of applying the preceding paragraph in
connection with any subsequent exercise, the Effective Price will be determined
separately on each Exercise Date and will be deemed to equal the lowest
Effective Price at which any holder of such Floating Price Security is entitled
to acquire Common Stock on such Exercise Date (regardless of whether any such
holder actually acquires any shares on such date).

     

    (iii)           The
Company shall not issue any Common Stock Equivalents at an Effective Price less
than the Exercise Price (as adjusted hereunder to such date) unless prior to
such issuance (A) the Holder has consented to such issuance in writing and
(B) the Company shall have obtained all necessary shareholder and other
approvals required for the Conversion Price under this Warrant to be reduced to
such Effective Price.

     

    (iv)           Notwithstanding
the foregoing, no adjustment will be made under this paragraph (d) in respect of
any issuances of Common Stock or Common Stock Equivalents made pursuant to the
definition of Excluded Stock.

    
      
         

      

      
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    (e)           Number of Warrant
Shares.  Simultaneously with any adjustment to the Exercise
Price pursuant to paragraphs (a), (b) or (d) of this Section 9, the number
of Warrant Shares that may be purchased upon exercise of this Warrant shall be
increased or decreased proportionately, so that after such adjustment the
aggregate Exercise Price payable hereunder for the increased or decreased number
of Warrant Shares shall be the same as the aggregate Exercise Price in effect
immediately prior to such adjustment.

     

    (f)           Calculations.  All
calculations under this Section 9 shall be
made to the nearest cent or the nearest 1/100th of a share, as
applicable.  The number of shares of Common Stock outstanding at any
given time shall not include shares owned or held by or for the account of the
Company, and the disposition of any such shares shall be considered an issue or
sale of Common Stock.

     

    (g)           Notice of
Adjustments.  Upon the occurrence of each adjustment pursuant
to this Section
9, the Company at its expense will promptly compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment, including a statement of the adjusted Exercise Price and
adjusted number or type of Warrant Shares or other securities issuable upon
exercise of this Warrant (as applicable), describing the transactions giving
rise to such adjustments and showing in detail the facts upon which such
adjustment is based.  Upon written request, the Company will promptly
deliver a copy of each such certificate to the Holder and to the Company’s
Transfer Agent.

     

    (h)           Notice of Corporate
Events.  If the Company  (i) declares a dividend or
any other distribution of cash, securities or other property in respect of its
Common Stock, including without limitation any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any Subsidiary,
(ii) authorizes or approves, enters into any agreement contemplating or solicits
stockholder approval for a Fundamental Transaction or (iii) authorizes the
voluntary dissolution, liquidation or winding up of the affairs of the Company,
then the Company shall deliver to the Holder a notice describing the material
terms and conditions of such transaction, at least 20 calendar days prior to the
applicable record or effective date on which a Person would need to hold Common
Stock in order to participate in or vote with respect to such transaction, and
the Company will take all steps reasonably necessary in order to insure that the
Holder is given the practical opportunity to exercise this Warrant prior to such
time so as to participate in or vote with respect to such transaction; provided,
however, that the failure to deliver such notice or any defect therein shall not
affect the validity of the corporate action required to be described in such
notice.

     

    10.           Payment of Exercise
Price.  The Holder, at its election, may either pay the
Exercise Price in immediately available funds, or satisfy its obligation to pay
the Exercise Price through a “cashless exercise,” in which event the Company
shall issue to the Holder the number of Warrant Shares determined as
follows:

     

    
      	 
      	
              X =
      Y [(A-B)/A]

            
	
              where:

            	 
      
	 
      	
              X =
      the number of Warrant Shares to be issued to the
Holder.

            
	 
      	 
      
	 
      	
              Y =
      the number of Warrant Shares with respect to which this Warrant is being
      exercised.

            

    

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    

    
      
        
          	 
      	
                  A =
      the Current Market Price (as of the date of
      such calculation) of one share of Common Stock .

                
	 
      	 
      
	 
      	
                  B =
      the Exercise Price (as adjusted to the date of such
      calculation).

                

        

      

    

    

    For purposes of this Warrant, the
“Current Market Price”
of one share of the Company’s Common Stock as of a particular date shall be
determined as follows: (a) if traded on a national securities exchange or
through the Nasdaq Stock Market, the Current Market Price shall be deemed to be
the arithmetic average of the VWAPs for the five (5) consecutive Trading Days
immediately preceding the applicable date; (b) if traded over-the-counter but
not on the Nasdaq Stock Market, the Current Market Price shall be deemed to be
the average of the closing bid and asked prices as of five (5) Business Days
immediately prior to the date of exercise indicated in the Notice of Exercise;
and (c) if there is no active public market, the Current Market Price shall be
the fair market value of the Common Stock as of the date of exercise, as
determined by an independent appraiser selected in good faith by the
Holder.

     

    For purposes of Rule 144 promulgated
under the Securities Act, it is intended, understood and acknowledged that the
Warrant Shares issued in a cashless exercise transaction shall be deemed to have
been acquired by the Holder, and the holding period for the Warrant Shares shall
be deemed to have commenced, on the date this Warrant was originally issued
pursuant to the Purchase Agreement.

     

    11.           [Intentionally
Omitted.]

     

    12.           Limitation on
Exercise.  This Section 12, or any
provision hereof, shall be effective after, and only after, the Holder has
delivered written notice to the Company of its election that this Section 12, or any
provision hereof, shall become effective with respect to such
Holder:

     

    (a)           Subject
to Section
12(b), the number of shares of Common Stock that may be acquired by a
Holder upon any exercise of Warrants (or otherwise in respect hereof) shall be
limited to the extent necessary to insure that, following such exercise (or
other issuance), the total number of shares of Common Stock then beneficially
owned by such Holder and its Affiliates and any other Persons whose beneficial
ownership of Common Stock would be aggregated with such Holder’s for purposes of
Section 13(d) of the Exchange Act, does not exceed 4.999% of the total number of
issued and outstanding shares of Common Stock (including for such purpose the
shares of Common Stock issuable upon such conversion) (the “Threshold
Percentage”).  For such purposes, beneficial ownership shall be
determined in accordance with Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder.

     

    (b)           Notwithstanding
the provisions of Section 12(a), the
Holder shall have the right at any time and from time to time, to waive the
provisions of this Section insofar as they relate to the Threshold Percentage or
to increase its Threshold Percentage (but not in excess of 9.999% (or such lower
percentage if Section 16 of the Exchange Act or the rules promulgated thereunder
(or any successor statute or rules) is changed to reduce the beneficial
ownership percentage threshold thereunder to a percentage less than 9.999%)) by
written instrument delivered to the Company, but (i) any such waiver or increase
will not be effective until the 61st day after such notice is delivered to the
Company, and (ii) any such waiver or increase or decrease will apply only to the
Holder and not to any other holder of Warrants.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    (c)           Notwithstanding
anything to the contrary contained herein, if the Trading Market is the Nasdaq
Small-Cap Market or any other market or exchange with similar applicable rules,
then the maximum number of shares of Common Stock that the Company may issue
pursuant to the Transaction Documents at an effective purchase price less than
the Closing Price on the Trading Day immediately preceding the Closing Date
equals 19.99% of the outstanding shares of Common Stock immediately preceding
the Closing Date (the “Issuable
Maximum”), unless the Company obtains stockholder
approval.  If, at the time any Holder requests an exercise of any of
the Warrants (or the Company is required or permitted to pay in shares of Common
Stock any payment due under the Series A-1 Preferred Shares), the Actual Minimum
would cause the Issuable Maximum to be exceeded (and if the Company has not
previously obtained the required stockholder approval), then the Company shall
issue to the Holder requesting such exercise and/or such conversion (and/or such
payment of principal or interest) a number of shares of Common Stock not
exceeding such Holder’s pro-rata portion of the Issuable Maximum (based on such
Holder’s share (vis-à-vis other Holders) of the aggregate purchase price paid
under the Purchase Agreement and taking into account any Warrant Shares
previously issued to such Holder).  For the purposes hereof, “Actual Minimum” shall mean, as
of any date, the maximum aggregate number of shares of Common Stock then issued
or potentially issuable in the future pursuant to the Transaction Documents,
including any Underlying Shares issuable upon exercise in full of all Warrants,
without giving effect to (x) any limits on the number of shares of Common Stock
that may be owned by a Holder at any one time, or (y) any additional Underlying
Shares that could be issuable as a result of any future possible adjustments
made under Section
9(d).

     

    13.           Fractional
Shares.  The Company shall not be required to issue or cause to
be issued fractional Warrant Shares on the exercise of this
Warrant.  If any fraction of a Warrant Share would, except for the
provisions of this Section, be issuable upon exercise of this Warrant, the
number of Warrant Shares to be issued will be rounded up to the nearest whole
share or right to purchase the nearest whole share, as the case may
be.

     

    14.           Notices.  Any
and all notices or other communications or deliveries hereunder (including
without limitation any Exercise Notice) shall be in writing and shall be deemed
given and effective on the earliest of (i) the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section prior to 6:30 p.m. (New York City time) on a Trading
Day, (ii) the next Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number specified in
this Section on a day that is not a Trading Day or later than 6:30 p.m. (New
York City time) on any Trading Day, (iii) the Trading Day following the date of
mailing, if sent by a nationally recognized overnight courier service specifying
next Business Day delivery, or (iv) upon actual receipt by the party to whom
such notice is required to be given, if by hand delivery.  The address
and facsimile number of a party for such notices or communications shall be as
set forth in the Purchase Agreement, unless changed by such party by two (2)
Trading Days’ prior notice to the other party in accordance with this Section
14.

    
      
         

      

      
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    15.           Warrant
Agent.  The Company shall serve as warrant agent under this
Warrant.  Upon 30 days’ notice to the Holder, the Company may appoint
a new warrant agent.  Any corporation into which the Company or any
new warrant agent may be merged or any corporation resulting from any
consolidation to which the Company or any new warrant agent shall be a party or
any corporation to which the Company or any new warrant agent transfers
substantially all of its corporate trust or stockholders services business shall
be a successor warrant agent under this Warrant without any further
act.  Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder’s last address as shown on the Warrant
Register.

     

    16.           Extension of Expiration
Date. At the option of the Holder, the Expiration Date may be extended
for the number of Trading Days during any period occurring after the Required
Effectiveness Date in which (i) trading in the Common Stock is suspended by any
Trading Market, (ii) any Registration Statement is not effective when required
pursuant to the Purchase Agreement, or (iii) the prospectus included in the
Registration Statement may not be used by the Holders for the resale of
Registrable Securities thereunder.

     

    17.           Miscellaneous.

     

    (a)           Subject
to the restrictions on transfer set forth on the first page hereof and in Section 3, this
Warrant may be assigned by the Holder.  This Warrant may not be
assigned by the Company except to a successor in the event of a Fundamental
Transaction, pursuant to Section 4.19 of the Purchase Agreement or with the
prior written consent of the Holder.  This Warrant shall be binding on
and inure to the benefit of the parties hereto and their respective successors
and assigns.  Subject to the preceding sentence, nothing in this
Warrant shall be construed to give to any Person other than the Company and the
Holder any legal or equitable right, remedy or cause of action under this
Warrant.  This Warrant, together with the other Transaction Documents,
constitutes the entire agreement of the parties with respect to the subject
matter hereof.  This Warrant may be amended only in writing signed by
the Company and the Holder and their successors and assigns.  The
restrictions set forth in Section 12 hereof,
upon becoming effective, may not be amended or waived.

     

    (b)           The
Company will not, by amendment of its governing documents or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder against impairment.  Without limiting the
generality of the foregoing, the Company (i) will not increase the par value of
any Warrant Shares above the amount payable therefor on such exercise, (ii) will
take all such action as may be reasonably necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable Warrant
Shares on the exercise of this Warrant, and (iii) will not close its stockholder
books or records in any manner which interferes with the timely exercise of this
Warrant.

    
      
         

      

      
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    (c)           Governing Law; Venue; Waiver
Of Jury Trial.  all questions concerning the construction,
validity, enforcement and interpretation of this warrant shall be governed by
and construed and enforced in accordance with the laws of the state of new york
(except for matters governed by corporate law in the state of
Wyoming).  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
improper.  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 via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address in
effect for notices to it under this agreement and agrees that such service shall
constitute good and sufficient service of process and notice thereof. nothing
contained herein shall be deemed to limit in any way any right to serve process
in any manner permitted by law.  the company hereby waives all rights
to a trial by jury.

     

    (d)           The
headings herein are for convenience only, do not constitute a part of this
Warrant and shall not be deemed to limit or affect any of the provisions
hereof.

     

    (e)           In
case any one or more of the provisions of this Warrant shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Warrant shall not in any way be affected or
impaired thereby and the parties will attempt in good faith to agree upon a
valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute
provision in this Warrant.

    

    [Signature
page follows.]

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the undersigned has caused this Class B Warrant to be duly
executed by its authorized officer as of the date first indicated
above.

     

    
      
        
          
            
              
                	
                        PARADIGM
      HOLDINGS, INC.

                      
	 
      	 
      
	
                        By:

                      	   
      
	
                        Name:

                      	  
      
	
                        Title:

                      	  
      

              

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    FORM OF
EXERCISE NOTICE

     

    (To be
executed by the Holder to exercise the right to purchase shares of Common Stock
under the foregoing Warrant)

     

    To:  PARADIGM
HOLDINGS, INC.

     

    The
undersigned is the Holder of Class B Warrant No. _______ (the “Warrant”) issued by PARADIGM
HOLDINGS, INC., a Wyoming corporation (the “Company”).  Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Warrant.

     

    
      	
              1.

            	
              The
      Warrant is currently exercisable to purchase a total of ______________
      Warrant Shares.

            

    

     

    
      	
              2.

            	
              The
      undersigned Holder hereby exercises its right to purchase
      _________________ Warrant Shares pursuant to the
  Warrant.

            

    

     

    
      	
              3.

            	
              The
      Holder intends that payment of the Exercise Price shall be made as (check
      one):

            

    

     

    ____     “Cash
Exercise” under Section 10 of the
Warrant

     

    ____     “Cashless
Exercise” under Section 10 of the
Warrant

     

    
      	
              4.

            	
              If
      the Holder has elected a Cash Exercise, the Holder shall pay the sum of
      $____________ to the Company in accordance with the terms of the
      Warrant.

            

    

     

    
      	
              5.

            	
              Pursuant
      to this exercise, the Company shall deliver to the Holder _______________
      Warrant Shares in accordance with the terms of the
  Warrant.

            

    

     

    
      	
              6.

            	
              Following
      this exercise, the Warrant shall be exercisable to purchase a total of
      ______________ Warrant Shares.

            

    

     

    

    
      
        
          
            
              
                	
                        Dated:
      _________________, ________

                      	 
      	
                        Name
      of Holder:

                      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                        (Print)

                      	   
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                        By:

                      	   
      
	 
      	 
      	
                        Name:

                      	   
      
	 
      	 
      	
                        Title:

                      	   
      
	 
      	 
      	 
      	 
      
	 
      	 
      	
                        (Signature
      must conform in all respects to name of holder as specified on the face of
      the
Warrant)

                      

              

            

          

        

      

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    FORM OF
ASSIGNMENT

     

    (To be
completed and signed only upon transfer of Warrant)

     

    FOR VALUE
RECEIVED, the undersigned hereby sells, assigns and transfers unto
________________________________ the right represented by the within Class B
Warrant to purchase ____________ shares of Common Stock of PARADIGM HOLDINGS,
INC. to which the within Class B Warrant relates and appoints ________________
attorney to transfer said right on the books of PARADIGM HOLDINGS, INC. with
full power of substitution in the premises.

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          	
                                  Dated:
      ____________________, _______

                                	 	 
      
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	
                                  (Signature
      must conform in all respects to name of holder as specified on the face of
      the Warrant)

                                
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	
                                  Address
      of Transferee

                                
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	 
      
	 
      	 	 
      
	
                                  In
      the presence of:

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00154-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00154-of-00352.parquet"}]]