PREFERRED STOCK PURCHASE AGREEMENT

EXECUTION COPY

This Preferred Stock Purchase Agreement is entered into and dated as of February 27, 2009 (this “ Agreement ”), by and among Paradigm Holdings, Inc., a Wyoming corporation (the “ Company ”), Hale Capital Partners, LP, a Delaware limited partnership (“ Hale Capital ”), and each of the other purchasers identified on the signature pages hereto (each, a “ Purchaser ” and, collectively with Hale Capital, the “ Purchasers ”).

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act of 1933, and rules promulgated thereunder, the Company desires to issue and sell to each Purchaser, and each Purchaser, severally and not jointly, desires to purchase from the Company, certain securities of the Company pursuant to the terms set forth herein.

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company and each Purchaser, severally and not jointly, agree as follows:

1.1            Definitions .  In addition to the terms defined elsewhere in this Agreement, the following terms shall have the meanings set forth in this Section 1.1 :

“ Affiliate ” of a Person means any other Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with the first Person.  Without limiting the foregoing with respect to a Purchaser, any investment fund or managed account that is managed on a discretionary basis by the same investment manager as such Purchaser will be deemed to be an Affiliate of such Purchaser.

“ Amended Certificate ” is defined in Section 4.19 .

“ Amendment Date ” is defined in Section 4.19 .

“ Available Underlying Shares ” is defined in Section 3.1(f) .

“ Business Day ” means any day except Saturday, Sunday and any day which is a federal legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

“ Certificate of Designations ”   means the Certificate of Designations of the Series A-1 Senior Preferred Stock in the form attached hereto as Exhibit A .

“ Class A Warrant ” means the Class A Warrants to be issued by the Company pursuant to this Agreement, in the form attached hereto as Exhibit B .

“ Class B Warrant ” means the Class B Warrants to be issued by the Company pursuant to this Agreement, in the form attached hereto as Exhibit C .

“ Closing ” is defined in Section 2.2 .

“ Closing Date ” is defined in Section 2.2 .

“ Closing Price ” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on an Eligible Market or any other national securities exchange, the closing bid price per share of the Common Stock for such date (or the nearest preceding date) on the primary Eligible Market or exchange on which the Common Stock is then listed or quoted; (b) if prices for the Common Stock are then reported in the “Pink Sheets” published by the National Quotation Bureau Incorporated (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of Common Stock so reported; or (c) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by Hale Capital.

“ Commission ”   means the U.S. Securities and Exchange Commission.

“ Common Stock ” means the common stock of the Company, par value $0.01 per share, and any securities into which such common stock may hereafter be reclassified or converted.

“ Common Stock Equivalents ” means, collectively, Options and Convertible Securities.

“ Company ” is defined in the Preamble hereto.

“ Company Counsel ” means K&L Gates LLP, counsel to the Company.

“ Convertible Securities ” means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for Common Stock.

“ EBITDA ” shall mean, for any period, net profit before taxes, interest expense (net of capitalized interest expense), depreciation expense and amortization expense, all in accordance with GAAP, but excluding any dividends, any cash or non-cash expenses payable or accrued with respect to any of the transactions contemplated by the Transaction Documents, any future non-cash income or expenses related to a change in the accounting treatment of any of the transactions contemplated by the Transaction Documents, any non-cash based compensation expenses and any income derived from extraordinary, non-recurring and non-cash events.

“ Effective Date ” means the date that a Registration Statement or Registration Statements covering all of the Registrable Securities have first been declared effective by the Commission.

“ Eligible Market ” means any of the New York Stock Exchange, the American Stock Exchange, Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or the over-the-counter bulletin board (“ OTC Bulletin Board ”).

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“ Excluded Stock ” means the issuance of (i) Common Stock upon the conversion of any Convertible Securities or Options outstanding as of the date hereof and set forth in Schedule 3.1(g) , pursuant to the terms of such Convertible Securities or Options, as applicable, as of the date hereof, (ii) Common Stock as a dividend on the Common Stock distributed pro rata to the holders thereof, (iii) Options (and the issuance of Common Stock upon exercise thereof) or restricted stock of the Company to employees, officers, directors or consultants of the Company pursuant to the Management Pool, (iv) Options (and the issuance of Common Stock upon exercise thereof) or restricted stock of the Company to employees, officers, directors or consultants of the Company pursuant to a stock option plan, restricted stock agreement or other incentive stock plan or pursuant to any employee benefit plan, in each case as in effect on the Closing Date and specified in Schedule 3.1(g) , (v) Options (and the issuance of Common Stock upon exercise thereof) or restricted stock of the Company to employees, officers, directors or consultants of the Company pursuant to a stock option plan, restricted stock agreement or other incentive stock plan or pursuant to any employee benefit plan, in each case, if not in effect on the Closing Date, as approved by the Company’s Board of Directors and, so long as any threshold in clauses (x) through (z) of Section 4.6(a) is met, as acceptable to Hale Capital; provided that in the cases of clauses (iv) and (v), in an aggregate amount not to exceed three percent (3%) of the outstanding Common Stock on a fully diluted basis in any 12 month period, (vi) Common Stock upon the exercise of the Noble Warrant and (vii) the Underlying Shares.

“ Filing Date ” means with respect to any Registration Statement required to be filed pursuant to Section 6.1 , the 60 ^th day following the date on which the Company receives a Registration Request.

“ Fundamental Transaction ” means the occurrence of any of the following in one or a series of related transactions: (i) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) under the Exchange Act), other than any Purchaser, of fifty percent (50%) or more of the voting rights or voting equity interests in the Company; (ii) Continuing Directors (as defined in the Certificate of Designations) cease to constitute more than one-half of the members of the Company’s Board of Directors, other than pursuant to Section 8 or Section 9(c) of the Certificate of Designations and/or the Side Letter; (iii) a merger or consolidation of the Company or any Subsidiary or a sale of all or substantially all of the assets of the Company or any Subsidiary in one or a series of related transactions, unless immediately following such transaction or series of transactions, the holders of the Company’s securities immediately prior to the first such transaction continue to hold at least one-half 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 Company or any Subsidiary that constitutes or results in a transfer of more than one-half of the voting rights or voting equity interests in the Company; (v) consummation of a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act with respect to the Company; (vi) any tender offer or exchange offer (whether by the Company 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 Company, directly or indirectly, immediately after the consummation thereof; (vii) the Company 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 Company of an agreement directly or indirectly providing for any of the foregoing events.  Notwithstanding the foregoing, no action taken for the purpose of changing the Corporation’s jurisdiction of incorporation pursuant to Section 4.19 of this Agreement or otherwise specifically contemplated by Section 4.19 or Section 4.20 of this Agreement for the purposes set forth therein shall constitute a Fundamental Transaction.

“ GAAP ” is defined in Section 3.1(h) .

“ Governmental Authority ” shall mean any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic.

“ Government Bid ” shall mean any offer to sell made by the Company or a Subsidiary prior to the Closing Date which, if accepted, would result in a Government Contract and for which an award has not been issued 30 days or more prior to the date of this Agreement.

“ Government Contract ” shall mean any prime contract, subcontract, teaming agreement or arrangement, joint venture, basic ordering agreement, pricing agreement, letter contract, grant, cooperative agreement or other similar arrangement of any kind, between the Company or a Subsidiary on one hand, and (i) any Governmental Authority, (ii) any prime contractor of a Governmental Authority in its capacity as a prime contractor, or (iii) any subcontractor at any tier with respect to a contract with a Governmental Authority if such subcontractor is acting in its capacity as a subcontractor, on the other hand.  A task, purchase or delivery order under a Government Contract shall not constitute a separate Government Contract, for purposes of this definition, but shall be part of the Government Contract to which it relates.

“ Hale Capital Partners ” is defined in the Preamble hereto.

“ Indebtedness ” of any Person means (i) all indebtedness representing money borrowed which is created, assumed, incurred or guaranteed in any manner by such Person or for which such Person is responsible or liable (whether by guarantee of such indebtedness, agreement to purchase indebtedness of, or to supply funds to or invest in, others or otherwise), (ii) any direct or contingent obligations of such Person arising under any letter of credit (including standby and commercial), bankers acceptances, bank guaranties, surety bonds and similar instruments, (iii) all Indebtedness secured by any Lien existing on property or assets owned by such Person and (iv) any shares of capital stock or other securities having a redemption feature; provided that the Preferred Shares, and any obligations due in respect thereof in accordance, as applicable, with the Certificate of Designations, as in effect on the date hereof, shall not be deemed to be Indebtedness pursuant to this definition.

“ Intellectual Property ” means all U.S. and foreign (a) inventions (whether patentable or whether or not reduced to practice), all improvements thereto, and all patents (including, without limitation, all U.S. and foreign patents, patent applications (including provisional applications) (“ Patents ”), invention disclosures and any and all divisions, continuations, continuations-in-part, reissues, re-examinations and extensions thereof) and design rights, (b) trademarks, trademark applications (including intent to use filings), trade names and service marks (whether or not registered), trade dress, logos, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith, (c) copyrightable works, registered copyrights, sui generis database rights and all applications, registrations, and renewals in connection therewith, (d) mask works and all applications, registrations, and renewals in connection therewith, (e) trade secrets and confidential business information (including source code, unpatented inventions, ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, financial information and business and marketing plans and proposals) (all of the foregoing collectively, “ Trade Secrets ”), (f) computer software programs or applications (including data and related documentation) in both source and object code forms, (g) copies and tangible embodiments of all of the foregoing (in whatever form or medium), and registrations and applications for any of the foregoing assets listed above in (a) through (g) and all other tangible and intangible proprietary information, materials and associated goodwill.

“ Lien ” is defined in Section 3.1(a) .

“ Losses ” means any and all damages, fines, penalties, deficiencies, liabilities, claims, losses (including loss of value), judgments, awards, settlements, taxes, actions, obligations and costs and expenses in connection therewith (including, without limitation, interest, court costs and reasonable fees and expenses of attorneys, accountants and other experts, or any other expenses of litigation or other Proceedings or of any default or assessment).

“ Management Pool ” means the management incentive plan of the Company to be established as promptly as practicable after the Closing which shall provide for the issuance of Options and/or restricted stock of the Company on terms reasonable satisfactory to Hale Capital.

“ Material Adverse Effect ” is defined in Section 3.1(b) .

“ Material Contract ” means (A) any agreement which requires future expenditures by the Company or any Subsidiary in excess of $500,000 or which might result in payments to the Company or any Subsidiary in excess of $500,000, (B) any purchase or task order which might result in payments to the Company or any Subsidiary in excess of $500,000, (C) any employment agreements (not including at-will employment letters with employees), and (D) any agreement that is or would be required to be filed as an exhibit to the SEC Reports pursuant to Item 601(b)(10) of Regulation S-K of the Commission.

“ Meeting ” is defined in Section 4.21(b) .

“ Noble Warrant ” means that certain warrant issued to Noble International Investments, Inc. to purchase 1,602,565 shares of Common Stock at an exercise price of $0.0780 per share, in the form of Exhibit H hereto.

“ Non-Active Subsidiary ” is defined in Section 3.1(a) .

“ Options ” means any rights, warrants or options to, directly or indirectly, subscribe for or purchase Common Stock or Convertible Securities.

“ Permitted Indebtedness ” is defined in Section 4.10(b)(vii) .

“ Permitted Issuances ” means any issuance by the Company of Common Stock, after each Purchaser, together with any transferee(s) of Preferred Shares by that Purchaser, has realized cash proceeds in the aggregate equal to or in excess of the Aggregate Purchase Price paid by that Purchaser as set forth on Schedule A for all Preferred Shares purchased by such Purchaser at the Closing, which issuance is made (i) at a price per share of Common Stock not less than 150% of the then current Exercise Price (as defined in the Class A Warrants) at the time of such transaction, (ii) with warrant coverage, if any, of not greater than 50% of the Common Stock issued by the Company in such transaction, and (iii) with respect to any warrants referred to in clause (ii) above, at an exercise price per share of Common Stock not less than 150% of the then current Exercise Price (as defined in the Class A Warrants) at the time of such transaction, and (iv) pursuant to customary documentation reasonably satisfactory to Hale Capital.

“ Permitted Liens ” is defined in Section 4.10(b)(viii) .

“ Person ” means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

“ Preferred Shares ” means the shares of Preferred Stock to be sold and issued by the Company to the Purchasers in accordance with and subject to the terms and conditions of this Agreement.

“ Preferred Stock ” means the Series A-1 Senior Preferred Stock of the Company, par value $0.01 per share, and all securities into which such preferred stock may be reclassified or converted.

“ Preferred Stock Exchange Agreement ” means the agreement in the form attached hereto as Exhibit E between the Company and the Persons holding Series A Preferred Stock of the Company listed on signature pages thereto

“ Preferred Stock Redemption Agreement ” means the agreement in the form attached hereto as Exhibit F between the Company, Semper Finance and USA Asset Acquisition Corp.

“ Proceeding ” means an action, claim, suit, inquiry, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or, to the Company’s knowledge, threatened.

“ Proposal ” is defined in Section 4.21(a) .

“ Prospectus ” means the prospectus included in the Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by the Registration Statement, and all other amendments and supplements to the Prospectus including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus.

“ Proxy Materials ” means the Proxy Statement and any exhibits or attachments thereto, together with any amendments or modifications thereto, required under the Exchange Act to be transmitted to shareholders of the Company and filed with the Commission in connection with the Meeting to approve the Proposal.

“ Purchase Price ” is defined in Section 2.1 .

“ Purchasers ” is defined in the Preamble hereto.

“ Registrable Securities ” means all Underlying Shares, together with any securities issued or issuable upon any stock split, dividend or other distribution, recapitalization or similar event with respect to the foregoing.

“ Registration Request ” means a written request that the Company file a Registration Statement under the Securities Act to register Registrable Securities, from one (1) or more holders thereof that in the aggregate possess thirty percent (30%) or more of the Registrable Securities then outstanding as of the date of such request, which request shall indicate the number of Registrable Securities to be registered thereunder.

“ Registration Statement ” means any registration statements on Forms S-1 or S-3 required to be filed under Sections 6.1 or 6.2 , including (in each case) the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement.

“ Required Approvals ” is defined in Section 3.1(e) .

“ Required Effectiveness Date ” means with respect to any Registration Statements that may be required pursuant to Section 6.1 , the 180 ^th day following the date on which the Company receives a Registration Request; provided, however, in the event the Company is notified by the Commission that one (1) of the above Registration Statements will not be reviewed or is no longer subject to further review and comments, the Required Effectiveness Date as to such Registration Statement shall be the fifth (5 ^th ) Trading Day following the date on which the Company is so notified if such date precedes the dates required above.

“ Rule 144, ” “ Rule 415, ” and “ Rule 424 ” means Rule 144, Rule 415 and Rule 424, respectively, promulgated by the Commission pursuant to the Securities Act, as such Rules may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

“ SEC Reports ” has the meaning set forth in Section 3.1(h) .

“ Securities ” means the Preferred Shares, the Warrants and the Underlying Shares issued or issuable (as applicable) to the Purchasers pursuant to the Transaction Documents.

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“ Senior Facility ” means those certain existing Loan and Security Agreements, dated March 13, 2007 among Silicon Valley Bank, the Company, Paradigm Solutions Corporation and the other parties named therein, or any replacement facility thereof pursuant to the terms set forth on the term sheet attached hereto as Annex B and pursuant to documentation reasonably acceptable to Hale Capital, in any case pursuant to which the Company may incur Indebtedness, together with all other Permitted Indebtedness pursuant to clauses (A) and (C) of the definition thereof, of no greater than $4,500,000 at all times after the Closing.

“ Shareholder Agreement ”   means the agreement in the form attached hereto as Exhibit G between the Purchasers and the Persons listed on Schedule I attached thereto.

“ Side Letter ” means that certain side letter dated as of the Closing Date between the Company, Hale Capital and the other Purchasers in the form attached hereto as Exhibit D .

“ Subsequent Placement ”   means any instance in which the Company or any Subsidiary offers, sells, grants any option to purchase, or otherwise disposes of (or announces any offer, sale, grant or any option to purchase or other disposition of) any of its or any Subsidiary’s evidence of its Indebtedness (other than Permitted Indebtedness) or equity or equity equivalent securities, including without limitation any Indebtedness, common stock or preferred stock of the Company, Common Stock Equivalent or other instrument or security that is, at any time during its life and under any circumstances, convertible into or exchangeable or exercisable for, or is issued as a unit within, any class of common stock or preferred stock of the Company, or Common Stock Equivalents.

“ Subsidiary ” is defined in Section 3.1(a) .

“ Trading Day ” means (a) any day on which the Common Stock is listed or quoted and traded on its primary Trading Market, or (b) if the Common Stock is not then listed or quoted and traded on any Trading Market, then any Business Day.

“ Trading Market ” means the OTC Bulletin Board or any other primary Eligible Market or any national securities exchange, market or trading or quotation facility on which the Common Stock is then listed or quoted.

“ Transaction Documents ” means this Agreement, the Certificate of Designations, the Warrants, the Side Letter, the Shareholder Agreement, the Preferred Stock Exchange Agreement, the Preferred Stock Redemption Agreement and any other documents, certificates or agreements executed or delivered in connection with the transactions contemplated hereby.

“ Underlying Shares ” means the shares of Common Stock issued or issuable (i) upon exercise of the Warrants, and (ii) in satisfaction of any other obligation or right of the Company to issue shares of Common Stock pursuant to the Transaction Documents, and in each case, any securities issued or issuable in exchange for or in respect of such securities.

“ Warrants ” means, collectively, the Class A Warrants and the Class B Warrants.

2.1            Purchase and Sale of the Securities .  Subject to the terms and conditions of this Agreement, each Purchaser agrees, severally and not jointly, to purchase from the Company, and the Company agrees to sell and issue to each Purchaser, at the Closing, the Preferred Shares, a Class A Warrant and a Class B Warrant in the respective amounts set forth opposite such Purchaser’s name on Schedule A hereto for the aggregate purchase price set forth opposite such Purchaser’s name on Schedule A hereto under the headings “Number of Preferred Shares,” “Number of Class A Warrant Shares” and “Number of Class B Warrant Shares,” respectively.  The purchase price for each Preferred Share shall be $1,000 (the “ Purchase Price ”).

2.2            Closing .  The purchase and sale of the Preferred Shares and the Warrants pursuant to the terms of this Agreement (the “ Closing ”) shall take place at the offices of Proskauer Rose LLP in New York City, New York, at 10:00 A.M. (New York City time) on the date each of the conditions set forth in Section 2.3 and Article 5 have been satisfied, or at such other time and place as the Company and the Purchasers mutually agree upon in writing (the “ Closing Date ”).

2.3            Closing Deliveries .

(a)          At the Closing, the Company shall deliver or cause to be delivered to each Purchaser the following:

(i)           a stock certificate representing the Preferred Shares registered in the name of such Purchaser (or one or more of its assignees or designees), in the amount indicated opposite such Purchaser’s name on Schedule A hereto, in proper form for transfer, and with any required stock transfer stamps affixed thereto;

(ii)           a Class A Warrant, registered in the name of such Purchaser, pursuant to which such Purchaser shall have the right to acquire such number of Underlying Shares indicated on Schedule A hereto under the heading “Number of Class A Warrant Shares”;

(iii)          a Class B Warrant, registered in the name of such Purchaser, pursuant to which such Purchaser shall have the right to acquire such number of Underlying Shares indicated on Schedule A hereto under the heading “Number of Class B Warrant Shares”;

(iv)          the Certificate of Designations, together with confirmation of filing and effectiveness with the Secretary of State of the State of Wyoming.

(v)           the legal opinion of Company Counsel, in the form attached hereto as Exhibit G , executed by such counsel and addressed to the Purchasers;

(vi)          a certificate dated as of the Closing Date and signed by the Chief Executive Officer of the Company certifying as to the fulfillment of each of the conditions set forth in Section 5.1 ;

(vii)         the Side Letter duly executed by the Company;

(viii)        certificates dated the Closing Date and signed by the Secretary of the Company certifying: (1) that attached thereto is a true and complete copy of all resolutions adopted by the Board of Directors or the stockholders of the Company or the Subsidiaries, as applicable, authorizing the execution, delivery and performance of each of the Transaction Documents, and that all such resolutions are in full force and effect and are all the resolutions adopted in connection with the transactions contemplated by this Agreement; (2) that attached thereto are true and complete copies of the articles of incorporation and by-laws (or other organizational or charter documents) of the Company and each Subsidiary (other than the Non-Active Subsidiary), and that such documents are in full force and effect; and (3) the signatures and titles of the officers of the Company and the Subsidiaries executing each of the Transaction Documents;

(ix)           the fees and expenses payable by the Company pursuant to Section 7.2 , in United States dollars and in immediately available funds, by wire transfer to accounts designated in writing by Hale Capital for such purpose; and

(x)           any other document reasonably requested by the Purchasers or their counsel.

(b)          At the Closing, each Purchaser shall deliver or cause to be delivered to the Company the following:  (i) the purchase price set forth opposite such Purchaser’s name on Schedule A hereto under the heading “Aggregate Purchase Price,” in United States dollars and in immediately available funds, by wire transfer to an account designated in writing by the Company for such purpose; and (ii) each Transaction Document to which such Purchaser is a signatory, duly executed by such Purchaser.

3.1            Representations and Warranties of the Company .  The Company hereby represents and warrants to, and agrees with, the Purchasers as follows:

(a)           Subsidiaries .  The Company does not directly or indirectly control or own any interest in any other Person other than those listed in Schedule 3.1(a) (each a “ Subsidiary ”, and collectively, the “ Subsidiaries ”).  The jurisdiction of organization of each Subsidiary is as set forth on Schedule 3.1(a) .  Except as disclosed in Schedule 3.1(a) , the Company owns, directly or indirectly, all of the capital stock of each Subsidiary free and clear of any lien, charge, claim, security interest, encumbrance, right of first refusal or other restriction (collectively, “ Liens ”), and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights.  The Company owns 49% of Unified Solutions LLC, a Maryland limited liability company (the “ Non-Active Subsidiary ”).  The Non-Active Subsidiary conducts no business and has no liabilities or assets contingent or otherwise.

(b)           Organization and Qualification .  Each of the Company and, except as set forth on Schedule 3.1(b) , the Subsidiaries is an entity duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its incorporation, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted.  Except as disclosed in Schedule 3.1(b) , neither the Company nor any Subsidiary is in violation or default of any of the provisions of its respective certificate or articles of incorporation or bylaws or other organizational or charter documents.  Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not reasonably be expected to, individually or in the aggregate, (i) adversely affect the legality, validity or enforceability of any Transaction Document, (ii) have or result in a material adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) adversely impair the Company’s or any Subsidiary’s ability to perform fully on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a “ Material Adverse Effect ”) and no Proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

(c)           Authorization; Enforcement .  The Company and each Subsidiary has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents to which it is a party and otherwise to carry out its respective obligations hereunder and thereunder, subject, with respect to the actions contemplated by the Proposal, to the Company’s receipt of shareholder approval of the Proposal as contemplated by Section 4.21 .  The execution and delivery by the Company and each Subsidiary of each of the Transaction Documents to which it is a party and the consummation by it of the transactions contemplated hereunder and thereunder have been duly authorized by all necessary action on the part of the Company and the Subsidiaries and no further consent or action is required by the Company or any Subsidiary, or their respective Board of Directors or shareholders, subject, with respect to the actions contemplated by the Proposal, to the Company’s receipt of shareholder approval of the Proposal as contemplated by Section 4.21 .  Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and/or the Subsidiaries, as applicable, and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company, and/or the Subsidiaries, as applicable, enforceable against the Company, and/or the Subsidiaries, as applicable, in accordance with its terms, subject to (i) laws of general application relating to bankruptcy, insolvency and the relief of debtors, or (ii) rules of law governing specific performance, injunctive relief or other equitable remedies.

(d)           No Conflicts .  Except as set forth on Schedule 3.1(d) , the execution, delivery and performance of the Transaction Documents by the Company and the Subsidiaries and the consummation by them of the transactions contemplated hereby and thereby do not and will not (i) conflict with or violate any provision of the Company’s or any Subsidiary’s certificate or articles of incorporation, bylaws or other organizational or charter documents, (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any Governmental Authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of clause (i) or (ii) above, as could not, reasonably be expected to have or result in, individually or in the aggregate, a Material Adverse Effect.

(e)           Filings, Consents and Approvals .  Neither the Company nor any Subsidiary is required to obtain any consent, waiver, authorization, permit or order of, give any notice to, or make any filing or registration with, any Governmental Authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than the filing by the Company with the Commission of the Registration Statement, the filing by the Company of a Notice of Sale of Securities on Form D with the Commission under Regulation D of the Securities Act, the filing of the Certificate of Designations, the filing of the Amended Certificate, the obtaining by the Company of shareholder approval of the Proposal as contemplated by Section 4.21 and state and applicable Blue Sky filings, and the consents, waivers, authorizations, permits, orders, notices, filings or registrations set forth on Schedule 3.1(e) (collectively, the “ Required Approvals ”).

(f)           Issuance of the Securities .  The Preferred Shares and the Warrants, and the maximum number of Underlying Shares available for issuance pursuant to the Company’s Articles of Incorporation (provided that shares of Common Stock shall not be considered available for issuance if they are (i) issued and outstanding as of the Closing Date, (ii) issuable pursuant to the Preferred Stock Exchange Agreement, (iii) issuable upon exercise of the Noble Warrant, (iv) issuable upon the conversion of any Options or Convertible Securities outstanding as of the Closing Date and set forth on Schedule 3.1(g) (other than those that shall be deemed repaid as of the Closing pursuant to Section 4.9 ) or (v) reserved for issuance pursuant to any agreements, stock option plans, restricted stock agreements, incentive stock plans or employee benefit plans as in effect on the Closing Date and set forth on Schedule 3.1(g) (other than those that shall be deemed repaid as of the Closing pursuant to Section 4.9 )) (the “ Available Underlying Shares ”), shall be duly authorized as of the Closing and all Underlying Shares shall be duly authorized as of the Amendment Date.  As of the Closing, the Preferred Shares and the Warrants shall be, and Underlying Shares when so issued in accordance with the terms of the applicable Transaction Documents will be, validly issued, fully paid and nonassessable and free of preemptive or similar rights.  As of the Closing, the Preferred Shares and the Warrants have been, and the Underlying Shares when so issued in accordance with the terms of the applicable Transaction Documents will be, issued in compliance with applicable securities laws, rules and regulations.  The issuance and sale of the Securities contemplated hereby does not conflict with or violate any rules or regulations of the Trading Market.  As of the Closing, the Company shall have reserved from its duly authorized capital stock the Available Underlying Shares, and, as of the Amendment Date, shall have reserved from its duly authorized capital stock the maximum number of shares of Common Stock to be issued as Underlying Shares.  As of the Closing, all of the Available Underlying Shares shall be eligible to vote (either by meeting or written consent) to approve the Proposal.  As of the Closing, the aggregate maximum number of votes in respect of all securities (including, securities on an as-converted basis) that shall be eligible to approve the Proposal is 50,000,000.

(g)           Capitalization .  The number of shares and type of all authorized, issued and outstanding capital stock of the Company and each Subsidiary is as specified on Schedule 3.1(g) .  Immediately following the Closing, there shall be no preferred stock of the Company or any Subsidiary issued or outstanding, other than the Preferred Stock.  No securities of the Company or any Subsidiary are entitled to preemptive or similar rights, and no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents.  Except as a result of the purchase and sale of the Securities and except as disclosed in Schedule 3.1(g) , there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock.  The issue and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Purchasers) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities, or to take any other action punitive to the Company or any Subsidiary.   Schedule 3.1(g) contains a list of all stock option plans, stock purchase plans and management grants, in each case as reflected as of the Closing Date, true and complete copies of which have been delivered to the Purchasers.  Except as disclosed on Schedule 3.1(g) , there are no existing agreements, arrangements or commitments relating to any shares of Common Stock that require or permit any shares of Common Stock to be voted by or at the discretion of anyone other than the record owner.  Immediately following the Closing, the Company shall have no Indebtedness other than Permitted Indebtedness.

(h)           SEC Reports; Financial Statements .  The Company has filed all reports, schedules, forms, applications and other documents, together with any amendments required to be made with respect thereto, required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the 12 months preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such materials) (the foregoing materials being collectively referred to herein as the “ SEC Reports ”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension.  As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with United States generally accepted accounting principles applied on a consistent basis during the periods involved (“ GAAP ”), except as may be otherwise specified in such financial statements or the notes thereto, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, immaterial (individually and in the aggregate), year-end audit adjustments and the absence of footnotes.

(i)           Taxes .  The Company and the Subsidiaries have prepared and filed all income tax returns and other material tax returns that are required to be filed, and have paid, or made provision in accordance with GAAP for the payment of, all taxes (including any interest or penalties thereon) that have or may have become due pursuant to said returns or pursuant to any assessments that have been received by the Company or the Subsidiaries.  All tax returns are true and correct in all material respects.  All taxes (including any interest or penalties thereon) shown to be due and payable by the Company or the Subsidiaries have been paid or will be paid prior to the time they become delinquent.  To the Company’s knowledge there is no liability for any tax to be imposed upon its or any of its Subsidiaries’ properties or assets as of the date of this Agreement for which adequate provision has not been made.  Except as set forth on Schedule 3.1(i) , no material tax returns of the Company have been audited, and to the Company’s knowledge, no deficiency assessment or proposed adjustment of the Company’s or the Subsidiaries material taxes is pending.

(j)           Material Changes .  Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has had or that could reasonably be expected to result in, individually or in the aggregate, a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables and accrued expenses incurred in the ordinary course of business and (B) liabilities not required to be reflected in the Company’s financial statements pursuant to GAAP (including, without limitation, the footnotes thereto) or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting or the identity of its auditors, (iv) except as set forth on Schedule 3.1(j) , the Company has not declared or made any dividend or distribution of cash or other property to its shareholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) the Company has not issued any equity securities to any officer, director or Affiliate, except as disclosed on Schedule 3.1(j) .  The Company does not have pending before the Commission any request for confidential treatment of information.  Except for the issuance of the Securities contemplated by this Agreement, no event, liability or development has occurred or exists with respect to the Company or its Subsidiaries or their respective business, properties, operations or financial condition, that would be required to be disclosed by the Company under applicable securities laws and regulations at the time this representation is made that has not been publicly disclosed at least one Trading Day prior to the date hereof.  Except as set forth in Schedule 3.1(j) , neither the Company nor, to the Company’s knowledge, any Affiliate of the Company (including, without limitation, any pension plan, employee stock option plan or similar plan) has purchased or sold any securities of the Company within the 90 days preceding the date hereof.

(k)           Litigation .  Except as set forth in Schedule 3.1(k) , there is no Proceeding pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties before or by any Governmental Authority.  Neither the Company nor any Subsidiary, nor, to the knowledge of the Company, any director or officer thereof (in his or her capacity as such), is or has been the subject of any Proceeding involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty.  There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the Commission involving the Company or any current or former director or officer of the Company (in his or her capacity as such).  The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

(l)           Labor Relations .  Except as set forth on Schedule 3.1(l) , no material labor dispute exists or, to the knowledge of the Company, is imminent with respect to any of the employees of the Company or any Subsidiary.  Except as set forth in Schedule 3.1(l) , no collective bargaining agreement is currently in force or is currently being negotiated by the Company, any Subsidiary or any other Person in respect of the business of the Company or any Subsidiary or any of the employees of the Company or any Subsidiary.  To the knowledge of the Company, there are no threatened or pending union organizing activities involving any of the employees of the Company or any Subsidiary.  There is no labor strike, dispute, work slowdown or stoppage pending or involving or, to the knowledge of the Company, threatened against the Company or any Subsidiary.

(m)          Employee Benefit Plans.

(i)           Except as set forth in Schedule 3.1(m)(i) , the Company and the Subsidiaries have no employment agreements, labor or collective bargaining agreements and there are no material employee benefit or compensation plans, agreements, arrangements or commitments (including “employee benefit plans,” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”)) or any other plans, policies, trust funds or arrangements (whether written or unwritten, insured or self-insured) established, maintained, sponsored or contributed to (or with respect to any obligation that has been undertaken) by the Company, any Subsidiary or any entity that would be treated as a single employer with the Company under Section 414(b), (c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the “ Code ”) or Section 4001 of ERISA (an “ ERISA Affiliate ”) for any employee, officer, director, consultant or shareholder or their beneficiaries of the Company or any Subsidiary or with respect to which the Company or any Subsidiary has liability, or makes or has an obligation to make contributions on behalf of any such employee, officer, director, consultant or shareholder or beneficiary (each a “ Company Employee Plan ” and collectively the “ Company Employee Plans ”).

(ii)           Except for medical reimbursement spending accounts under Code Section 125, each Company Employee Plan that is an employee welfare benefit plan as defined under Section 3(l) of ERISA is funded through an insurance company contract.  Except as set forth in Schedule 3.1(m)(ii) , each Company Employee Plan by its terms and operation is in material compliance with all applicable laws and all required filings, if any, with respect to such Company Employee Plan have been timely made.  Neither the Company, any Subsidiary nor any ERISA Affiliate has at any time maintained, contributed to or been required to contribute to or has (or has had) any liability with respect to, any plan subject to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA, including, without limitation, any “multiemployer plan” (within the meaning of Sections 3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code) or any single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) which is subject to Sections 4063, 4064 and 4069 of ERISA.  The Company’s various non-qualified deferred compensation plans satisfy the requirements of Section 201(2) of ERISA.  Except as set forth in Schedule 3.1(m)(ii) , the events contemplated by this Agreement (either alone or together with any other event) will not (A) entitle any employees, director or shareholder of the Company or any Subsidiary (whether current, former or retired) or their beneficiaries to severance pay, or any other payment pursuant to such Person’s employment agreement with the Company, unemployment compensation, or other similar payments under any Company Employee Plan or law, (B) accelerate the time of payment or vesting or increase the amount of benefits due under any Company Employee Plan or compensation to any employees of the Company or any Subsidiary or (C) result in any payments (including any payment that could be characterized as an “excess parachute payment” (as defined in Section 280G(b)(1) of the Code)) under any Company Employee Plan or applicable law becoming due to any employee, director or shareholder of the Company or any Subsidiary (whether current, former or retired) or their beneficiaries.  No amount payable under any Company Employee Plan would fail to be deductible under Code Section 162(m).  No severance payment or change of control payment or similar payment is currently payable to any executive officer or director of the Company, whether as a result of the transactions contemplated hereby or otherwise.

(iii)           With respect to each of the Company Employee Plans:  (1) each Company Employee Plan that is intended to be qualified under Section 401(a) of the Code has received a determination letter, opinion letter, advisory letter or notification letter, as applicable, from the Internal Revenue Service (the “ IRS ”) regarding its qualified status under the Code for all amendments required prior to the Economic Growth and Tax Relief Reconciliation Act of 2001 or, if reliance is permitted, relies on the favorable opinion letter or advisory letter of the master and prototype or volume submitter plan sponsor of such plan, and nothing has occurred, whether by action or by failure to act, that caused or could cause the loss of such qualification or the imposition of any penalty or tax liability; (2) all payments required by the Company Employee Plans, any collective bargaining agreement or other agreement, or by applicable law (including, without limitation, all contributions, insurance premiums or intercompany charges) with respect to all periods through the date of the Closing Date shall have been made prior to the Closing Date (on a pro rata basis where such payments are otherwise discretionary at year end) or provided for by the Company as applicable, in accordance with the provisions of each of the Company Employee Plans, applicable law and GAAP; (3) no action has been instituted or commenced or, to the knowledge of the Company, has been threatened or is anticipated against any of the Company Employee Plans (other than non-material routine claims for benefits and appeals of such claims), any trustee or fiduciaries thereof, the Company, any Subsidiary or any ERISA Affiliate, any director, officer or employee thereof, or any of the assets of any trust of any of the Company Employee Plans; and (4) no Company Employee Plan is or is expected to be under audit or investigation by the IRS, Department of Labor or any other governmental entity and no such completed audit, if any, has resulted in the imposition of any tax or penalty.

(n)           Compliance .  Except as set forth in Schedule 3.1(n) , neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any Governmental Authority, or (iii) is or has been in violation of any statute, rule or regulation of any Governmental Authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety, employment and labor matters or other laws applicable to its business; except in each case as could reasonably be expected to have or result in, individually or in the aggregate, a Material Adverse Effect.

(o)           Regulatory Permits .  The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits could not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any such permit.

(p)           Title to Assets .  Except as set forth on Schedule 3.1(p) , the Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them and good and marketable title in all personal property owned by them that is material in any respect to the business of the Company and the Subsidiaries, in each case free and clear of all Liens, except for Liens that do not materially affect the value of such property and do not materially interfere with the use made of such property by the Company and the Subsidiaries.  Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance in all material respects.

(q)           Patents and Trademarks .  The Company and the Subsidiaries own or possess a valid and enforceable written license to use all Intellectual Property that is necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so own or possess could reasonably be expected to have or result in, individually or in the aggregate, a Material Adverse Effect.  To the Company’s knowledge, the operation of the business of the Company and the Subsidiaries does not, and no product or service in development or which is marketed or sold (or proposed to be marketed or sold) by the Company or any Subsidiary, violates or will violate any license or infringe any Intellectual Property rights of any other party.  Except as set forth in Schedule 3.1(q) , other than with respect to commercially available software products which the Company or the Subsidiaries license under standard end-user object code license agreements, there are no outstanding options, licenses, agreements, claims, encumbrances or shared ownership interests of any kind relating to any Company Intellectual Property.  Except as set forth in Schedule 3.1(q) , neither the Company nor any Subsidiary is obligated to make to any third party any payments related to the Company Intellectual Property.  Neither the Company nor any Subsidiary has agreed to indemnify any third party with respect to any Intellectual Property.  No third party has made a claim, to the Company’s knowledge, that the Company or any Subsidiary has violated or, by conducting their business, would violate any Intellectual Property rights of any other person or entity, and to the knowledge of the Company, no third party has misappropriated or infringed or is misappropriating or infringing the Company Intellectual Property.  Each employee has assigned to the Company or the Subsidiaries all Intellectual Property rights he or she owns that are related to the respective businesses of the Company and the Subsidiaries as now conducted or as now proposed to be conducted.  All of the Company Intellectual Property which are registered or have been filed for registration with any third party are in good standing and all of the fees and filings due with respect thereto have been duly made, and the Company has previously provided true and correct copies of all of the foregoing to Purchasers.   Schedule 3.1(q) lists all patents, patent applications, registered trademarks, trademark applications, registered service marks, service mark applications, registered copyrights and domain names included in the Company Intellectual Property.  No open source or public library software, including any version of any software licensed pursuant to any GNU or other public license, is, in whole or in part, embodied or incorporated in the Company Intellectual Property, and the Company is not otherwise bound by any terms thereof.  Neither the Company nor any of its Subsidiaries is or, as a result of the execution or delivery of this Agreement, or the performance of the Company’s obligations hereunder, will be in violation of any license, sublicense, agreement or instrument involving Company Intellectual Property to which the Company or any of its Subsidiaries is a party or otherwise bound (an “ Intellectual Property Agreement ”), nor will the execution or delivery of this Agreement, or the performance of the Company’s obligations hereunder, cause the diminution, license, transfer,  termination or forfeiture of the Company’s or any of its Subsidiaries’ rights in any Company Intellectual Property.  Each of the Company and the Subsidiaries has taken commercially reasonable measures to protect the proprietary nature of the Company Intellectual Property and to maintain in confidence all trade secrets and confidential information owned or used by the Company or any of its Subsidiaries and included in the Company Intellectual Property.  Except as set forth on Schedule 3.1(q) , the source code and system documentation relating to any software programs included in or developed for inclusion in the Company’s or any of its Subsidiaries’ products (including all software programs embedded or incorporated in the Company’s or any of its Subsidiaries’ products) (i) have at all times been maintained in confidence, (ii) have been disclosed by the Company and its Subsidiaries only to employees or third parties who are bound by appropriate nondisclosure obligations, (iii) have not been licensed or sold to any third party, and (iv) are not the subject of any escrow or similar agreement or arrangement giving any third party rights in or to such source code and/or system documentation upon the occurrence of certain events, other than any such rights that (A) are not material, (B) do not impair the use by the Company or any Subsidiary of any of the Company Intellectual Property or (C) require the Company to make any payments to such third parties.

(r)           Insurance .  The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are reasonably prudent and customary in the businesses in which the Company and the Subsidiaries are engaged.  Neither the Company nor any Subsidiary has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business on terms consistent with the market for the Company’s and such Subsidiaries’ respective lines of business.

(s)           Transactions With Affiliates and Employees .  Except as set forth in the SEC Reports, none of the officers or directors of the Company or any Subsidiary and, to the knowledge of the Company, none of the employees of the Company or any Subsidiary is presently a party to any transaction or agreement (other than the Shareholder Agreement, the Preferred Stock Exchange Agreement and the Preferred Stock Redemption Agreement) with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

(t)           Internal Accounting Controls .  The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.  The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by the Company’s most recently filed periodic report under the Exchange Act (such date, the “ Evaluation Date ”).  The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no changes in the Company’s internal control over financial reporting (as such term is defined in the Exchange Act) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

(u)           Solvency .  The Company believes that, based on the financial condition of the Company immediately following the Closing Date, (i) the Company’s fair saleable value of its assets exceeds the amount that will be required to be paid on or in respect of the Company’s existing debts and other liabilities (including known contingent liabilities) as they mature; (ii) the Company’s assets do not constitute unreasonably small capital to carry on its business for the current fiscal year as now conducted and as proposed to be conducted including its capital needs taking into account the particular capital requirements of the business conducted by the Company, and projected capital requirements and capital availability thereof; and (iii) the current cash flow of the Company, together with the proceeds the Company would receive, were it to liquidate all of its assets, after taking into account all anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of its debt when such amounts are required to be paid.  Following the Closing Date, the Company does not intend to incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be payable on or in respect of its Indebtedness).

(v)           Certain Fees .  Except as set forth in Schedule 3.1(v) , no brokerage or finder’s fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement.  The Purchasers shall have no obligation with respect to any fees or with respect to any claims (other than such fees or commissions owed by a Purchaser pursuant to written agreements executed by such Purchaser which fees or commissions shall be the sole responsibility of such Purchaser) made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement.  The Company shall indemnify and hold harmless the Purchasers, their employees, officers, directors, agents, and partners, and their respective Affiliates, from and against all claims, losses, damages, costs (including the costs of preparation and attorney’s fees) and expenses suffered in respect of any such claimed or existing fees, as such fees and expenses are incurred.

(w)           Private Placement .  Assuming the accuracy of each Purchaser’s representations and warranties set forth in Section 3.2(b)-(e) , (i) no registration under the Securities Act is required for the offer and sale of the Securities by the Company to the Purchasers under the Transaction Documents, and (ii) the issuance and sale of the Securities hereunder does not contravene the rules and regulations of the Trading Market.

(x)           Listing and Maintenance Requirements .  The Company has not, in the two (2) years preceding the date hereof, received notice (written or oral) from any Eligible Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Eligible Market.  The Company is in compliance with all such listing and maintenance requirements.

(y)           Registration Rights .  Except as set forth in Schedule 3.1(y) , other than the registration rights granted to each of the Purchasers pursuant to this Agreement, the Company has not granted or agreed to grant to any Person any rights (including “piggy back” registration rights) to have any securities of the Company registered with the Commission or any other Governmental Authority that have not been satisfied.

(z)           Application of Takeover Protections .  The Company and its Board of Directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company’s Certificate of Incorporation or the laws of its jurisdiction of incorporation that is or could become applicable to the Purchasers as a result of the Purchasers and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation as a result of the Company’s issuance of the Securities and the Purchasers’ ownership of the Securities.

(aa)           Disclosure .  All disclosure provided to the Purchasers regarding the Company, its business and the transactions contemplated hereby, including the Schedules to this Agreement, furnished by or on behalf of the Company are true and correct in all material respects and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

(bb)           Acknowledgment Regarding Purchasers’ Purchase of Securities .  The Company acknowledges and agrees that each of the Purchasers is acting solely in the capacity of an arm’s length purchaser with respect to this Agreement and the transactions contemplated hereby.  The Company further acknowledges that no Purchaser is acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by any Purchaser or any of their respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to such Purchaser’s purchase of the Securities.  The Company further represents to each Purchaser that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.  The Company further acknowledges that no Purchaser has made any promises or commitments other than as set forth in this Agreement, including any promises or commitments for any additional investment by any such Purchaser in the Company.

(cc)           Investment Company .  The Company is not, and is not an Affiliate of, an investment company within the meaning of the Investment Company Act of 1940, as amended.

(dd)           Sarbanes-Oxley Act .  The Company is in compliance in all material respects with all applicable requirements of the Sarbanes-Oxley Act of 2002 and all applicable rules and regulations promulgated by the Commission thereunder in effect as of the date of this Agreement.

(ee)         Material Contracts.

(i)           Assuming the due execution and delivery by the other parties thereto, each of the Material Contracts is as of the date hereof legal, valid and binding, and in full force and effect, and enforceable in accordance with its terms, subject to (A) laws of general application relating to bankruptcy, insolvency, and relief of debtors, and (B) rules of law governing specific performance, injunctive relief, or other equitable remedies.  Except as set forth in Schedule 3.1(ee) , there is no material breach, violation or default by the Company or any of the Subsidiaries (or, to the Company’s knowledge, any other party) under any such Material Contract, and no event (including, without limitation, the transactions contemplated by the Transaction Documents) has occurred which, with notice or lapse of time or both, would (1) constitute a material breach, violation or default by the Company or any Subsidiary (or, to the Company’s knowledge, any other party) under any such Material Contract, or (2) give rise to any Lien (other than Permitted Liens) or right of termination, modification, cancellation, prepayment, suspension, limitation, revocation or acceleration against the Company or any Subsidiary under any such Material Contract.  Except as set forth in Schedule 3.1(ee)(i) , neither the Company nor any Subsidiary is and, to the Company’s knowledge, no other party to any such Material Contract is in arrears in respect of the performance or satisfaction of any material terms or conditions on its part to be performed or satisfied under any of such Material Contract, and neither the Company nor any Subsidiary has and, to the Company’s knowledge, no other party thereto has granted or been granted any material waiver or indulgence under any of such Material Contract or repudiated any provision thereof.

(ii)           The Company has provided or made available to the Purchasers complete copies of each of the Material Contracts, including all schedules, exhibits and attachments thereto.

(ff)           Suppliers and Customers .  Since January 1, 2006 none of the Company’s or any Subsidiaries’ suppliers, vendors, customers or lenders has:  (i) terminated or cancelled a Material Contract or business relationship involving an amount in excess of $250,000; (ii) threatened to terminate or, in any material respect, diminish a Material Contract or business relationship involving an amount in excess of $250,000; (iii) expressed dissatisfaction, in writing to the Company or any Subsidiary, with the performance of the Company or any Subsidiary with respect to a Material Contract or business relationship involving an amount in excess of $250,000; or (iv) demanded any termination or limitation of a Material Contract or business relationship involving an amount in excess of $250,000 with the Company or any Subsidiary.  The Company has provided to the Purchasers a list of the 10 largest suppliers and 10 largest customers of the Company and the Subsidiaries as of the date hereof, based on the dollar amount of sales for the period from January 1, 2006 through December 1, 2008.

(gg)        Environmental Matters.

(i)           The Company and the Subsidiaries comply and have at all times complied with all federal, state and local laws, judgments, decrees, orders, consent agreements, authorizations, permits, licenses, rules, regulations, common or decision law (including, without limitation, principles of negligence and strict liability) relating to the protection, investigation or restoration of the environment (including, without limitation, natural resources) or the health or safety matters of humans and other living organisms, including the Resource Conservation and Recovery Act, as amended, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Federal Clean Water Act, as amended, the Federal Clean Air Act, as amended, the Toxic Substances Control Act, or any state and local analogue (hereinafter “ Environmental Laws ”), except where the failure to comply could not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect.

(ii)           (A) The Company has no knowledge of any claim, and neither it nor any Subsidiary has received notice of a written complaint, order, directive, claim, request for information or citation, and to the Company’s knowledge no proceeding has been instituted raising a claim against the Company or any predecessor or any of their respective real properties, formerly owned, leased or operated or other assets indicating or alleging any damage to the environment or any liability or obligation under or violation of any Environmental Law and (B) neither the Company nor any Subsidiary is subject to any order, decree, injunction or other directive of any Governmental Authority.

(iii)           (A) Neither the Company nor any Subsidiary has used and, to the Company’s knowledge, no other person has used any portion of any property currently used or formerly owned, operated or leased by the Company or any Subsidiary for the generation, handling, processing, treatment, storage or disposal of any hazardous materials except in accordance with applicable Environmental Laws; (B) neither the Company nor any Subsidiary owns or operates any underground tank or other underground storage receptacle for hazardous materials, any asbestos-containing materials or polychlorinated biphenyls, and, to the Company’s knowledge, no underground tank or other underground storage receptacle for hazardous materials, asbestos-containing materials or polychlorinated biphenyls is located in any portion of any property currently owned, operated or leased by the Company and (C) to the Company’s knowledge, the Company has not caused or suffered to occur any releases or threatened releases of hazardous materials on, at, in, under, above, to, from or about any property currently used or formerly owned, operated or leased by the Company or any Subsidiary.

(hh)           Export Controls .  None of the Company, any Subsidiary or, to the Company’s knowledge, the Company’s or a Subsidiary’s employees have violated any law pertaining to export controls, technology transfer or industrial security including, without limitation, the Export Administration Act, as amended, the International Emergency Economic Powers Act, as amended, the Arms Export Control Act, as amended, the National Industrial Security Program Operating Manual, as amended, or any regulation, order, license or other legal requirement issued pursuant to the foregoing (including, without limitation, the Export Administration Regulations and the International Traffic in Arms Regulations).  Neither the Company, any Subsidiary nor, to the Company’s knowledge, any employee of the Company or any Subsidiary is the subject of an action by a Governmental Authority that restricts such person’s ability to engage in export transactions.

(ii)           Foreign Corrupt Practices Act .  Neither the Company, any Subsidiary nor, to the Company’s knowledge, any employee of the Company or any Subsidiary has violated the United States Foreign Corrupt Practices Act, as amended, in any material respect.  To the Company’s knowledge, no shareholder, director, officer, employee or agent of the Company or of a Subsidiary has, directly or indirectly, made or agreed to make, any unlawful or illegal payment, gift or political contribution to, or taken any other unlawful or illegal action, for the benefit of any customer, supplier, governmental employee or other Person who is or may be in a position to assist or hinder the business of the Company or a Subsidiary.

(jj)           Government Contracts .

(i)            Schedule 3.1(jj)(i) accurately lists each Government Contract which is in effect as of the date of this Agreement and each Government Bid, and with respect to each, as applicable, lists: (A) the award date, (B) the customer, (C) the contract end date and option(s) and/or recompetition date(s), (D) the type of pricing, (E) associated teaming partners, and (F) whether such contract is based on the Company’s small business status, small disadvantaged business status, protégé status or other preferential status.

(ii)           (A) The Company and each Subsidiary has fully complied, in all material respects, with the terms and conditions of each Government Contract and Government Bid to which it is a party; (B) the Company and each Subsidiary has complied in all material respects with all requirements of any law pertaining to such Government Contract or Government Bid; (C) all representations and certifications made by the Company and each Subsidiary with respect to such Government Contract or Government Bid were accurate, current and complete in all material respects as of their effective date; (D) neither the Company nor any Subsidiary is in violation, or currently alleged to be in violation, in any material respect of the False Statements Act, the False Claims Act, the Service Contract Act, the Contract Disputes Act, the Procurement Integrity Act, the Federal Procurement Act and the Administrative Services Act, in each case as amended, or any other federal requirement relating to the communication of false statements or submission of false claims to a Governmental Authority; and (E) no termination or default notice, cure notice or show cause notice has been issued to the Company or any Subsidiary and remains unresolved, and the Company has no knowledge of any plan or proposal of any entity to issue any such notice.

(iii)           Except as set forth on Schedule 3.1(jj)(iii) , (A) To the Company’s knowledge, none of the Company’s or a Subsidiary’s employees, consultants or agents is (or during the last five (5) years has been) under administrative, civil or criminal investigation or indictment by any Governmental Authority with respect to the conduct of the business of the Company or a Subsidiary; (B) to the Company’s knowledge, there is no pending audit or investigation of the Company or any of its officers, employees or representatives or a Subsidiary or any of its officers, employees or representatives nor within the last five years has there been any audit or investigation of the Company or any of its officers, employees or representatives or a Subsidiary or any of its officers, employees or representatives resulting in an adverse finding with respect to any alleged irregularity, misstatement or omission arising under or relating to any Government Contract or Government Bid; and (C) during the last five years, neither the Company nor any Subsidiary has made any voluntary disclosure in writing to the Government or any other Governmental Authority with respect to any alleged irregularity, misstatement or omission arising under or relating to a Governmental Contract or Government Bid that has led to any of the consequences set forth in clause (A) or (B) of the immediately preceding sentence or any other material damage, penalty assessment, recoupment of payment or disallowance of cost.

(iv)          Except as set forth on Schedule 3.1(jj)(iv) , there are (A) no outstanding audits, investigations or written claims against the Company, either by any Governmental Authority or by any prime contractor, subcontractor, vendor or other third party arising under or relating to any Government Contract or Government Bid, (B) to the Company’s knowledge, no outstanding disputes (i) between the Company or a Subsidiary, on the one hand, and the Government or any Governmental Authority, on the other hand, under the Contract Disputes Act or any other Federal statute, or (ii) between the Company or a Subsidiary, on the one hand, and any prime contractor, subcontractor or vendor, on the other hand, arising under or relating to any Government Contract or Government Bid, or (C) requests for contract price adjustments, requests for equitable adjustment or claims of defective pricing, either by any Governmental Authority or by any prime contractor, subcontractor, vendor or other third party arising under or relating to any Government Contract or Government Bid.

(v)           No termination for default or convenience, cure notice or show cause notice has been issued in writing by any Governmental Authority or by any prime contractor, subcontractor, vendor or other third party with respect to any Government Contract or Government Bid.

(vi)           None of the Government Contracts are subject to termination by a Governmental Authority as a result of the consummation of the transactions contemplated by the Transaction Documents.

(vii)        The facility security clearances held by the Company and all personnel security clearances held by any director, officer or employee of the Company are all of the facility and personnel security clearances necessary to conduct the business of the Company as currently conducted.

(kk)           No Suspension or Debarment .  Neither the Company nor any Subsidiary during the last five (5) years has been and, to the Company’s knowledge, none of their respective employees, consultants or agents during the last five years has been suspended or debarred from eligibility for award of contracts with any Governmental Authority or is or was the subject of a finding of non-responsibility or ineligibility for government contracting.  During the past five years, no government contracting suspension or debarment action has been threatened or commenced against the Company or a Subsidiary, or, to the Company’s knowledge, any of its officers or employees.  The Company does not have knowledge of a valid basis, nor specific circumstances that are or, with the passage of time, would likely become a basis for the Company’s or a Subsidiary’s suspension or debarment from award of contracts with any Government Authority.

(ll)           No Event of Default .  After giving effect to the transactions contemplated by this Agreement to occur at the Closing, no Event of Default (as defined in the Certificate of Designations) has occurred and is continuing.

(mm)       No Disagreements with Accountants and Lawyers .  There are no disagreements of any kind presently existing, or reasonably anticipated by the Company to arise, between the Company and the accountants and lawyers formerly or presently employed by the Company and the Company is current with respect to any fees owed to its accountants and lawyers.

(nn)           Acknowledgement Regarding Purchasers’ Trading Activity .  Anything in this Agreement or elsewhere herein to the contrary notwithstanding, it is understood and acknowledged by the Company (i) that none of the Purchasers have been asked to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities for any specified term; (ii) that past or future open market or other transactions by any Purchaser, including short sales, and specifically including, without limitation, short sales or “derivative” transactions, before or after the Closing Date or future private placement transactions, may negatively impact the market price of the Company’s publicly-traded securities; (iii) that any Purchaser, and counter-parties in “derivative” transactions to which any such Purchaser is a party, directly or indirectly, presently may have a “short” position in the Common Stock, and (iv)&nbs