PARADIGM4 INC, S-1, 2000-04-19

PARADIGM4 INC
S-1, 2000-04-19

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 19, 2000.

REGISTRATION NO. 333-
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549
------------------------
FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PARADIGM4, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

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<S> <C> <C>
DELAWARE 7373 22-3415573
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>

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100 WELLS STREET
HARTFORD, CONNECTICUT 06103
(860) 249-2211
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
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MR. J. BRUCE BOISTURE
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
PARADIGM4, INC.
100 WELLS STREET
HARTFORD, CONNECTICUT 06103
(860) 249-2211
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE OF
AGENT FOR SERVICE)
------------------------
COPIES TO:

<TABLE>
<S> <C>
BABAK YAGHMAIE, ESQ. GARY I. HOROWITZ, ESQ.
DAVID L. CONCANNON, ESQ. EDWARD P. TOLLEY III, ESQ.
BROBECK, PHLEGER & HARRISON LLP SIMPSON THACHER & BARTLETT
1633 BROADWAY, 47TH FLOOR 425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10019 NEW YORK, NEW YORK 10017
(212) 581-1600 (212) 455-2000
</TABLE>

------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
- ---------------

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
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CALCULATION OF REGISTRATION FEE

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<CAPTION>
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PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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<S> <C> <C>
Common stock, par value $0.001 per share............. $125,000,000 $33,000
- ---------------------------------------------------------------------------------------------------------------------
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</TABLE>

(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o).
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER
OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED APRIL 19, 2000

[PARADIGM4 LOGO]
Common Stock

------------------

Prior to this offering, there has been no public market for our common
stock. All of the shares are being sold by us. The initial public offering
price of the common stock is expected to be between $ and $ per
share. We intend to apply to list our common stock on The Nasdaq Stock Market's
National Market under the symbol "PFOR".

The underwriters have an option to purchase a maximum of additional
shares to cover over-allotments of shares.

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" STARTING
ON PAGE 6.

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<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS PARADIGM4
---------------------- ---------------------- ----------------------
<S> <C> <C> <C>
Per Share............................................ $ $ $
Total................................................ $ $ $
</TABLE>

Delivery of the shares of common stock will be made on or about
, 2000.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.

CREDIT SUISSE FIRST BOSTON DONALDSON, LUFKIN & JENRETTE

CHASE H&Q

The date of this prospectus is , 2000.
<PAGE> 3

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TABLE OF CONTENTS

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PAGE
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PROSPECTUS SUMMARY...................... 1
RISK FACTORS............................ 5
FORWARD-LOOKING STATEMENTS.............. 15
USE OF PROCEEDS......................... 16
DIVIDEND POLICY......................... 16
CAPITALIZATION.......................... 17
DILUTION................................ 18
SELECTED CONSOLIDATED FINANCIAL DATA.... 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................ 21
BUSINESS................................ 28
MANAGEMENT.............................. 39
CERTAIN TRANSACTIONS.................... 47
</TABLE>

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PAGE
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PRINCIPAL STOCKHOLDERS.................. 52
DESCRIPTION OF CAPITAL STOCK............ 54
SHARES ELIGIBLE FOR FUTURE SALE......... 57
UNITED STATES TAX CONSEQUENCES TO
NON-UNITED STATES HOLDERS............. 59
UNDERWRITING............................ 62
NOTICE TO CANADIAN RESIDENTS............ 65
LEGAL MATTERS........................... 66
EXPERTS................................. 66
CHANGE OF AUDITORS...................... 66
WHERE YOU CAN FIND ADDITIONAL
INFORMATION........................... 66
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS............................ F-1
</TABLE>

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YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO
WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT. THIS DOCUMENT MAY ONLY BE USED WHERE IT IS LEGAL
TO SELL THESE SECURITIES. THE INFORMATION IN THIS DOCUMENT MAY ONLY BE ACCURATE
ON THE DATE OF THIS DOCUMENT.

------------------

WE ARE PURSUING TRADEMARK AND/OR SERVICE MARK REGISTRATIONS FOR, AMONG
OTHERS, THE MARKS "PARADIGM4," "PARADIGM4 WIRELESS DATANET," "SMARTPARTNER" AND
THE PARADIGM4 LOGO WITH THE TAG LINE "IMAGINATION GONE WIRELESS." OTHER
TRADEMARKS AND SERVICE MARKS APPEARING IN THIS PROSPECTUS ARE THE PROPERTY OF
THEIR RESPECTIVE HOLDERS.

------------------

DEALER PROSPECTUS DELIVERY OBLIGATION

UNTIL , 2000 (25 DAYS AFTER THE COMMENCEMENT OF THIS OFFERING),
ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALER'S OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
<PAGE> 4

PROSPECTUS SUMMARY

Because this is only a summary, it does not contain all of the information
that may be important to you. You should read the entire prospectus, including
"Risk Factors" and the financial statements and the notes to the financial
statements, before deciding whether to invest in our common stock. Unless
otherwise indicated, the presentation of financial information in this
prospectus relates only to our continuing operations and assumes the
discontinuation of certain business operations as described in footnote 1 to our
consolidated financial statements appearing elsewhere in this prospectus.

PARADIGM4, INC.

We provide our customers with a broad range of solutions that enable them
to access and exchange information on a wireless basis. Our services link our
customers' mobile workforce and remote locations to our customers' and
third-party data bases. Our solutions use the sophisticated capabilities of our
proprietary platform, the Paradigm4 Wireless DataNet, as well as our extensive
industry experience, to facilitate the exchange of information on a timely,
reliable, secure and cost-effective basis.

The Paradigm4 Wireless DataNet increases productivity for our customers by
providing employees in the field reliable, wireless access to information and
applications. We also offer advanced interoperability, enabling a more extensive
network that allows wireless data users to move smoothly between the coverage
areas of different wireless carriers. Our wireless data solutions are
carrier-neutral and operate on a broad array of end-user devices. We also
develop customized applications for specific industries, and provide our
customers with more general applications such as wireless e-mail, calendar and
contact information. We are able to host, manage and monitor these applications
on our network. Our engineering teams have extensive experience engineering and
implementing complex wireless data solutions.

The market for wireless data solutions is expected to grow rapidly. The
convergence of wireless communications and the Internet has created new demand
for data connections that free users from their desktop personal computers.
DataQuest, a market research firm, estimates that the number of wireless data
subscribers worldwide will grow from approximately 14 million at the end of 1998
to approximately 103 million at the end of 2003. However, wireless data
solutions remain complex due to incompatible devices and networks, slow data
speeds and uncertain security.

We offer a comprehensive solution to our customers' wireless data needs. We
research, analyze, design, develop and implement industry-specific wireless data
applications. For example, we maintain a leading market position in the public
safety sector, an early adopter of wireless data services. Our wireless data
applications enable law enforcement officers to access state and federal law
enforcement databases using wireless devices in the field. We have identified
specific industry segments that would benefit from access to wireless data, such
as the insurance, healthcare, financial services, legal and public utility
industries. We have recently begun to devote significant marketing and
development resources to target these industries.

In addition to industry-specific applications, we provide wireless data
applications that appeal to a broad range of industries. We have a strategic
relationship with Wireless Knowledge Inc., a joint venture of Microsoft
Corporation and Qualcomm, Inc., to develop and market Wireless Knowledge's
Workstyle Server products and services. Workstyle Server facilitates real-time
wireless access to the e-mail, calendar and contact-information features of
Microsoft Exchange using Internet-enabled devices, such as smartphones. We are
currently the exclusive reseller of Workstyle Server to the government sector in
North America and a non-exclusive reseller to all other North American sectors.
Under our arrangement with Wireless Knowledge, we act as exclusive
managed-service provider of Workstyle Server, which includes support, monitoring
and management services for Workstyle Server users.

Information for wireless mobile users needs to be exchanged differently
from information exchanged on a wireline basis, due primarily to incompatible
standards and data transmission capacity constraints. Our Paradigm4 Wireless
DataNet platform links wireless mobile users using hand-held devices to their
enterprise databases and applications through numerous wireless carriers. We
provide security for customer
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data using authentication and encryption. Our patented enterprise messaging
system middleware translates content between various protocols and operating
systems such as DOS, Windows CE and UNIX, and is compatible with the following
wireless networks: CDPD, Mobitex, DataRadio, ARDIS and Bell South Wireless Data.
Our middleware also compresses data and removes unnecessary information to
optimize data transport. The Paradigm4 Wireless DataNet architecture is
configured for interconnection among the wireless carriers and networks to
create an extensive network that allows wireless data users to move smoothly
between the coverage areas of different wireless carriers.

We intend to become the leading provider of wireless data services to
commercial and other enterprises. We intend to achieve our objectives through
the following strategies:

- continue to broaden the scope of our services;

- maintain market leadership in the public safety sector;

- expand to new markets;

- seek additional connections to carriers;

- increase our market penetration and brand recognition through enhanced
sales and marketing efforts; and

- expand technologies and capabilities through strategic acquisitions and
alliances.

We were incorporated in Delaware on December 18, 1995 and commenced
commercial operations in January 1996. Our principal executive offices are
located at 100 Wells Street, Hartford, Connecticut 06103. Our telephone number
at that location is (860) 249-2211.

2
<PAGE> 6

THE OFFERING

Common stock offered by us.......... shares

Common stock to be outstanding after
this offering....................... shares

Use of proceeds..................... We intend to use the net proceeds from
this offering to develop and expand our
service offerings, expand our sales and
engineering staff, expand our network
operations center, increase our sales
and marketing activities and for
working capital and other general
corporate purposes. We may also use a
portion of the net proceeds for
acquisitions, strategic alliances or
joint ventures.

Proposed Nasdaq National Market
symbol.............................. "PFOR"

The outstanding share information is based on our shares outstanding as of
March 31, 2000. This information excludes:

- 6,206,953 shares of common stock issuable upon the exercise of stock
options outstanding under our employee stock option plans with a weighted
average exercise price of $3.37 per share; and

- 2,908,912 shares of common stock issuable upon the exercise of warrants
with a weighted average exercise price of $2.52 per share.

Except as otherwise indicated, information in this prospectus assumes:

- the conversion of all outstanding shares of our convertible preferred
stock into an aggregate of 28,416,485 shares of common stock upon the
closing of this offering; and

- no exercise of the underwriters' over-allotment option.

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SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT SHARE DATA)

The following table sets forth certain summary consolidated financial data
for Paradigm4. In 1999, we decided to hold for sale a software development
contract with the City of New York. Accordingly, we have reported the net income
or loss on this contract under the line item discontinued operations of contract
held for sale. We have not allocated any research and development, selling and
marketing, depreciation and amortization or interest expense to calculate
discontinued operations of contract held for sale. See note 1 to our
consolidated financial statements. You should read this information together
with our consolidated financial statements and the notes to those statements
appearing elsewhere in this prospectus and the information under "Consolidated
Selected Financial Data" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."

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<CAPTION>
YEAR ENDED DECEMBER 31,
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1997 1998 1999
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<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues(1):
Services revenues...................................... $ 6,693 $ 948 $ 6,296
Hardware and third party software sales................ 4,935 2,711 3,735
--------- --------- ----------
Total revenues...................................... 11,628 3,659 10,031
Gross profit (loss)...................................... 5,508 (7,534) (5,115)
Loss from continuing operations.......................... (4,869) (22,067) (21,957)
Discontinued operations of contract held for sale........ (23) 1,041 (475)
Net loss................................................. $ (4,892) $ (21,026) $ (22,432)
========= ========= ==========
Basic and diluted (loss) earnings per common share:
Continuing operations............................... $ (1.89) $ (8.42) $ (8.03)
Discontinued operations............................. (0.01) 0.40 (0.17)
--------- --------- ----------
Net loss............................................ $ (1.90) $ (8.02) $ (8.20)
========= ========= ==========
Weighted average shares outstanding...................... 2,568,826 2,619,424 2,733,995
========= ========= ==========
Pro forma net loss per share............................. $ (0.72)
==========
Shares used in computing pro forma net loss per share.... 31,150,480
==========
</TABLE>

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(1) Our 1998 and 1999 revenues were significantly affected by changes in our
estimates of costs required to complete certain contracts subsequent to
recognizing revenues based on the percentage-of-completion accounting
method. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview."

Pro forma net loss per share has been computed assuming the conversion as
of January 1, 1999 of all outstanding convertible preferred stock, including the
series G convertible preferred stock issued in February 2000, into an aggregate
of 28,416,485 shares of common stock. See note 2 to our consolidated financial
statements for an explanation of the determination of the number of shares used
in computing basic and diluted net loss per share.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-------------------------------------
PRO FORMA AS
ACTUAL PRO FORMA ADJUSTED
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<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................ $ 1,842 $ 30,542 $
Working capital.......................................... (16,305) 15,095
Total assets............................................. 18,802 47,502
Total stockholders' (deficit) equity..................... (11,830) 19,570
</TABLE>

The pro forma balance sheet data assume the conversion as of December 31,
1999 of all of our outstanding convertible preferred stock, including the series
G preferred stock issued in February 2000, into an aggregate of 28,416,485
shares of common stock. The pro forma as adjusted balance sheet data further
reflect our receipt of the estimated net proceeds from the sale of the
shares offered by us at an assumed offering price of $ per share, after
deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us.

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RISK FACTORS

An investment in our common stock involves a high degree of risk. You
should consider carefully the following information about these risks, together
with the other information contained in this prospectus, before you decide to
buy our common stock.

RISKS RELATED TO OUR BUSINESS

BECAUSE WE HAVE A LIMITED OPERATING HISTORY, IT WILL BE DIFFICULT FOR YOU TO
EVALUATE OUR BUSINESS AND PROSPECTS.

Your evaluation of our business and its prospects will be more difficult
because of our limited operating history. We began our operations in January
1996, so there is only a limited operating history upon which an evaluation of
our business and its prospects can be based. When making your investment
decision, you should consider the risks, expenses and difficulties that we may
encounter or incur as a young company in a new and rapidly evolving market, and
our need to manage expanding operations. Our business strategy may not be
successful, and we may not successfully address these risks.

WE HAVE HISTORICALLY INCURRED LOSSES, AND THESE LOSSES ARE LIKELY TO CONTINUE
AND INCREASE IN THE FUTURE.

We reported total net losses, including losses from discontinued operations
of contract held for sale, of approximately $3.3 million, $4.9 million, $21.0
million and $22.4 million for the years ended December 31, 1996, 1997, 1998 and
1999, respectively. Because we expect to continue to incur significant sales and
marketing, systems development, product development and administrative expenses,
we will likely continue to incur losses and we will need to generate significant
revenue to become profitable and sustain any profitability. We may not achieve
or sustain our revenue or profit goals and our losses may continue or grow in
the future. As a result, we may not be able to pursue our business strategy
effectively.

OUR BUSINESS WILL NOT GROW IF THE USE OF WIRELESS DATA SERVICES DOES NOT
CONTINUE TO GROW.

The markets for wireless data services and related products are still
emerging, and growth in acceptance of these services remains uncertain. Current
barriers to market acceptance of these services include carrier coverage,
compatibility, interoperability, cost, speed, security and distribution channel
constraints. We cannot be certain that these barriers will be overcome. Because
the market for our wireless data services is new and evolving, it is difficult
to predict the size of this market or its future growth rate, if any. Our future
financial performance will depend in large part upon the increase in demand for
data through wireless devices. We cannot assure you that a sufficient volume of
subscribers will demand wireless data services. If the market for wireless data
services grows more slowly than we currently anticipate, our revenue may not
grow, which would adversely affect our results of operations and financial
condition.

WE WILL LIKELY NOT ACHIEVE PROFITABILITY IF THE WIRELESS DATA SERVICES WE OFFER
FAIL TO ACHIEVE SIGNIFICANT MARKET ACCEPTANCE.

Our services will have to achieve significant market acceptance for us to
achieve profitability. Even if we do achieve significant market acceptance, we
could lose that market acceptance if we fail to meet evolving customer
technological or functional requirements on a timely basis. As a result of the
complexities inherent in our service offerings, new wireless data services and
service enhancements require significant development and testing periods. We may
experience difficulties that could delay or prevent the successful development,
introduction or marketing of new services or service enhancements.

Additionally, any new services and service enhancements may not achieve
market acceptance due to customer preferences for competing service offerings.
If we cannot effectively maintain, improve and develop services to achieve and
maintain significant market acceptance, we may not be able to recover our fixed
costs or otherwise become profitable.

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MOST OF OUR REVENUE IS FROM NON-RECURRING PROJECTS, AND WE MAY NOT BE ABLE TO
REPLACE THESE REVENUES WITH RECURRING REVENUES FROM SALES OF NEW PRODUCTS TO NEW
MARKETS.

Over 90% of our 1999 revenues was from non-recurring systems integration
projects. We have limited experience providing wireless data services to
customers, particularly to commercial customers. We intend over the next several
quarters to significantly increase the percentage of our overall revenue that is
derived from wireless data services. Providing wireless data services requires
different skills on our part, including, but not limited to, marketing and
sales. In addition, we intend, at the same time, to increase the percentage of
revenue that is derived from commercial customers as opposed to public safety
customers. It is not certain that we will be able to train our current employees
to change successfully our operational focus, or be able to attract highly
qualified employees for this business. The failure to attract recurring-revenue
business will likely have an adverse effect on our business.

WE DEPEND HEAVILY ON PUBLIC-SECTOR CONTRACT WORK, WHICH IS SUBJECT TO PUBLIC
CONTRACTING UNCERTAINTIES.

Approximately 90% of our 1999 revenues came from the public sector,
particularly from law enforcement agencies. The capacity of public sector
entities to pay for the services we offer hinges on the public sector budget,
which to a large extent is determined by the political process. Pursuant to our
contracts with public sector entities, the funding for such contracts may be
reduced or eliminated and the applicable contract terminated. In addition, many
of our agreements with public sector entities provide that the agreements may be
terminated for the convenience of the public sector entity. Thus, there is an
element of unpredictability in our most significant customer base.

WE DEPEND ON A LIMITED NUMBER OF CUSTOMERS FOR A SIGNIFICANT MAJORITY OF OUR
REVENUES.

To date, a small number of customers have accounted for a significant
majority of our revenues and will continue to do so for the foreseeable future.
For the year ended December 31, 1999, we provided engineering services to the
state of Delaware and the Florida Department of Law Enforcement, which accounted
for approximately 16% and 15% of our revenues, respectively. Our five largest
customers, in the aggregate, accounted for approximately 52% of our revenues
during that period. For the year ended December 31, 1998, our four largest
customers accounted for approximately 98% of our revenues. As of December 31,
1998, two customers accounted for 90% of accounts receivable and costs and
estimated earnings in excess of billings under uncompleted contracts. If we lose
one or more of our significant customers and do not attract additional
customers, we may not generate sufficient revenues to offset this loss of
revenues and our net loss will increase. In addition, if a significant customer
fails to pay amounts it owes us, or does not pay those amounts on time, our
revenues, operating results and financial position could suffer.

WE OFFER FIXED-PRICE CONTRACTS; IF WE FAIL TO ESTIMATE ACCURATELY THE RESOURCES
NECESSARY TO COMPLETE THESE CONTRACTS, WE MAY BE REQUIRED TO ABSORB COST
OVERRUNS, WHICH WOULD ADVERSELY AFFECT OUR OPERATING RESULTS.

Our engineering and implementation services contracts, which accounted for
over 90% of our revenues in 1999, are fixed-price contracts, rather than time
and materials contracts. These contracts involve risk because they require us to
bear possible cost overruns, some of which may be beyond our control. Any such
overruns would cause our net losses to increase.

OUR REPORTED REVENUE NUMBERS MAY NOT PROVE TO BE COMPARABLE TO PRIOR OR FUTURE
PERIODS BECAUSE ACCOUNTING FOR OUR REVENUES ON FIXED-COST CONTRACTS REQUIRES US
TO ESTIMATE FUTURE COSTS, WHICH ARE UNCERTAIN.

We account for our fixed-price contracts on a percentage-of-completion
basis. This accounting method requires that, for each fixed-price contract in
each period, we recognize expenses as incurred on the contract and recognize
revenue based on a comparison of actual costs incurred for the project to our
then-estimated total costs. Accordingly, the revenue we recognize in any given
period depends to a significant extent on our estimate of the total remaining
costs to complete individual projects. As with any estimates, our estimates of
costs of completion are subject to numerous risks and uncertainties, including
risks of
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increased costs for, or the unavailability of, personnel, communications
hardware or wireless data airtime as well as technological risks in implementing
our services on a timely basis. If in any period we significantly increase our
estimate of the total cost to complete a project, we may recognize very little
or no additional revenue with respect to that project. As a result, our gross
margin in such period may not be directly comparable to prior or future periods
and in such period and future periods may be significantly reduced. In some
cases we may recognize a loss on individual projects prior to their completion.
In 1998 and 1999, we increased our reserves for costs of completing existing
contracts by approximately $2.6 million and $2.4 million, respectively.

WE ARE NEGOTIATING THE ASSIGNMENT TO A THIRD PARTY OF A SIGNIFICANT SYSTEMS
INTEGRATION CONTRACT THAT WE ACCOUNT FOR AS A DISCONTINUED OPERATION.

Since 1996, we have been providing engineering and implementation services
under a fixed-price contract with the City of New York to design and implement a
payroll system. We recorded revenues of $440,000, $2.9 million and $5.7 million
under this contract in 1997, 1998 and 1999, respectively. Total payments to us
under the contract are scheduled to be $63.0 million from January 2000 to the
expected completion of the project in 2003, assuming we meet specified
performance milestones. In April 2000, we received a non-binding letter of
intent relating to the assignment of our obligations under this contract. The
letter of intent is subject to the assignee's due diligence and other
conditions. Although we intend to assign this contract, we may experience
difficulties that could delay or prevent the successful assignment of the
contract. Some of these possible difficulties are beyond our control. For
example, the City of New York must consent to any assignment of our obligations
under the contract to a third party. Any delay in, or failure to complete, the
assignment of this contract could disrupt our ongoing business, distract our
management and employees, increase our expenses and adversely affect our results
of operations.

HIGHLY-SKILLED EMPLOYEES, PARTICULARLY PROJECT MANAGERS AND OTHER SENIOR
TECHNICAL PERSONNEL, ARE DIFFICULT TO ATTRACT AND RETAIN AND OUR FAILURE TO
ATTRACT AND RETAIN THESE PERSONNEL WOULD IMPAIR OUR ABILITY TO COMPLETE PROJECTS
AND EXPAND OUR BUSINESS.

Our business is labor-intensive. Our success will depend significantly upon
our ability to attract, retain, train, and motivate highly-skilled employees,
particularly project managers and other senior technical personnel. Any failure
on our part to do so would impair our ability to adequately manage and complete
our existing projects, bid for and obtain new projects, and expand our business
into wireless data applications and related services. If our employees are
unable to achieve expected performance levels, our business and strategies will
suffer. There exists significant competition for employees with the skills
required to perform the services we offer. Qualified project managers and senior
technical staff are in great demand and are likely to remain a limited resource
for the foreseeable future. There can be no assurance that we will be successful
in attracting a sufficient number of highly-skilled employees in the future, or
that we will be successful in retaining, training, and motivating the employees
we are able to attract.

ANY RAPID GROWTH MAY STRAIN OUR RESOURCES AND HINDER OUR ABILITY TO IMPLEMENT
OUR BUSINESS STRATEGY.

Our historical growth has been limited. Significant future growth would
place a significant strain on our resources. Our ability to achieve and maintain
profitability will depend on our ability to manage our growth effectively, to
implement and expand operational and customer support systems and to hire
personnel. We may not be able to augment or improve existing systems and
controls or implement new systems and controls to respond to any future growth.
In addition, future growth may result in increased responsibilities for our
management personnel, which may limit their ability to manage our business
effectively.

BECAUSE WE HAVE ONLY RECENTLY ASSEMBLED OUR MANAGEMENT TEAM, WE CANNOT ASSURE
YOU THAT THEY CAN EFFECTIVELY WORK TOGETHER TO OPERATE OUR BUSINESS.

We have recently expanded our management team significantly, adding new
executive officers in numerous functions. These individuals have generally not
worked with one another before, and we may not
7
<PAGE> 11

be able to forge an effective working relationship among them. Moreover, all of
our new managers are still learning about our company and our industry. If our
senior management cannot work together effectively, then our business and
strategies will be harmed and we will incur additional costs in seeking and
retaining new management personnel.

THE LOSS OF OUR KEY EXECUTIVES WOULD DISRUPT OUR BUSINESS.

We rely on the leadership and vision of key members of our senior
management team, particularly Bruce Boisture, our Chairman, Chief Executive
Officer and President. The members of our senior management team are
instrumental to the management and growth of our business. The loss of any of
these executives would disrupt our growth or result in lost revenues or an
increase in net losses. We do not currently maintain key-man life insurance
policies covering any of our senior executives.

IF WE DO NOT RESPOND EFFECTIVELY AND ON A TIMELY BASIS TO RAPID TECHNOLOGICAL
CHANGE AFFECTING OUR MARKETS, OUR SERVICES MAY BECOME OBSOLETE AND WE MAY LOSE
SALES.

The wireless and data communications industries are characterized by
rapidly changing technologies, industry standards, customer needs and
competition, as well as by frequent, new, and often increasingly sophisticated,
product and service introductions. Our services are integrated with wireless
devices and the computer systems of our customers. Our services must also be
compatible with the data networks of wireless carriers. We must respond to
technological changes affecting both our customers and suppliers to ensure that
our services are and remain compatible with the technologies they use. We may
not be successful in developing and marketing, on a timely and cost-effective
basis, new services that respond to these technological changes, evolving
industry standards or changing customer requirements and as a result, we would
lose sales and our results of operations and financial condition would suffer.

BECAUSE WE RELY HEAVILY ON THE SUCCESSFUL OPERATION OF OUR NETWORK OPERATIONS
CENTER, DISRUPTIONS IN ITS OPERATIONS WOULD ADVERSELY AFFECT OUR ABILITY TO
PROVIDE SERVICES TO OUR CUSTOMERS.

Our network operations center is a central aspect of our provision of
services to our customers, particularly our hosting services. Any disruption in
the operation of our network operations center as a result of accidental or
intentional security breaches, improper access to or transmission of customer
data, any systems failure or for any other reason would negatively impact our
operations. We may not be able to avoid any such disruption. Maintaining and
upgrading our network operations center to ensure adequate reliability and
functionality, particularly in light of the rapidly changing technologies in the
wireless data services market, will require significant future capital
expenditures and other resources.

WE DEPEND UPON WIRELESS NETWORKS OWNED AND CONTROLLED BY OTHERS. IF WE DO NOT
HAVE CONTINUED ACCESS TO SUFFICIENT CAPACITY ON RELIABLE NETWORKS AT PRICES
ATTRACTIVE TO OUR CUSTOMERS, WE MAY BE UNABLE TO DELIVER OUR SERVICES.

Our ability to grow and achieve profitability partly depends on our ability
to buy sufficient capacity on the networks of wireless carriers such as AT&T
Wireless Services or Bell Atlantic Mobile and on the reliability and security of
their systems. All of our services are delivered using airtime purchased from
third parties. We depend on these companies to provide uninterrupted and "bug
free" service and would not be able to satisfy our customers' needs if they
failed to provide the required capacity or needed level of service. In addition,
our expenses and our net loss would increase materially if wireless carriers
were to increase the prices of their services, because some of our customer
contracts would not permit us to charge these increased costs to the customer.
Also, some of these wireless carriers are, or could become, our competitors, and
if they compete with us they may choose not to provide us with their services or
raise their prices.

8
<PAGE> 12

OUR NETWORK SOFTWARE MAY CONTAIN DEFECTS OR ERRORS, AND OUR SALES WOULD DECREASE
IF THIS INJURES OUR REPUTATION.

The Paradigm4 Wireless DataNet network is complex and must meet the
stringent technical requirements of our customers. We must develop our services
quickly to keep pace with the rapidly changing software and telecommunications
markets. Software as complex as ours is likely to contain undetected errors or
defects, especially when first introduced or when new versions are released. Our
software may not be free from errors or defects after delivery to customers has
begun, which could result in the rejection of our software or services, damage
to our reputation, deferred or lost revenue, diverted development resources and
increased development, service and warranty costs.

WE MAY ACQUIRE TECHNOLOGIES OR COMPANIES IN THE FUTURE, AND THESE ACQUISITIONS
COULD DISRUPT OUR BUSINESS AND DILUTE YOUR HOLDINGS IN OUR COMPANY.

We may acquire technologies or companies in the future, especially to
establish our wireless data services. Entering into an acquisition entails many
risks, any of which could materially harm our business, including:

- diversion of management's attention from other business concerns;

- failure to assimilate effectively the acquired technology or company into
our business;

- the loss of key employees from either our current business or the
acquired business; and

- assumption of significant liabilities of the acquired company.

To date, we have not completed any material acquisitions, and we may not be
able to do so in an effective manner. In addition, it is likely that we will
issue equity securities to pay the costs of certain acquisitions, and your
holdings in our company will be diluted if we do so.

WE EXPECT TO RELY ON STRATEGIC PARTNERSHIPS TO ATTRACT AND RETAIN CUSTOMERS.

Our business strategy requires us to establish strategic relationships with
application developers such as Wireless Knowledge Inc., a joint venture of
Microsoft Corporation and Qualcomm, Inc., and others. Such relationships are
expected to allow us to offer our customers a broad product selection and
products that have already gained wide market acceptance. There can be no
assurance that we will be able to establish and maintain necessary strategic
relationships. If we fail to establish or maintain necessary strategic
relationships in the future, we may be unable to attract additional customers or
retain our current customers, and our revenue and results of operations could be
adversely affected.

Under certain circumstances, others may have the ability to resell Wireless
Knowledge's Workstyle Server product to the government sector in North America
and to provide a similar, or the same, managed service to all North American
sectors. In addition, Microsoft Corporation and Qualcomm, Inc., as part of the
joint venture that formed Wireless Knowledge, retain rights to Wireless
Knowledge technology and could offer competing products or services themselves.
If Microsoft, Qualcomm or others devoted substantial resources to marketing
Workstyle Server, the value of our strategic relationship with Wireless
Knowledge would be diminished and our business would suffer. As part of the
agreement, we have committed to purchase for resale 150,000 Workstyle Server
licenses over a 42-month period.

OUR FAILURE TO DEVELOP RECOGNITION FOR THE PARADIGM4 BRAND COULD PREVENT US FROM
ACHIEVING A PROFITABLE LEVEL OF SALES.

Our selling and marketing activities to date have been limited and, as a
result, there is very limited customer awareness of our service offerings,
particularly in the commercial market for wireless data services. Our selling
and marketing expenses were $3.7 million for the year ended December 31, 1998
and $3.6 million for the year ended December 31, 1999. We will seek to increase
the market presence of our brand over time, which will require us to increase
the amount we spend on selling and marketing significantly. We may lose existing
customers or fail to attract new customers if the Paradigm4 brand is not well
received by our customers, if our marketing efforts are not productive, if we
are otherwise unsuccessful in increasing our brand awareness or if our
competition has greater brand recognition.

9
<PAGE> 13

WE INTEND TO SUPPLEMENT OUR INTERNAL MARKETING AND SALES EFFORTS THROUGH
ARRANGEMENTS WITH THIRD PARTIES. IF THE MARKETING EFFORTS OF THESE THIRD PARTIES
ARE NOT EFFECTIVE, WE WILL BE UNLIKELY TO ACHIEVE A PROFITABLE LEVEL OF SALES.

We intend to rely significantly on the efforts of others, such as wireless
service providers, systems integrators, hardware manufacturers, resellers and
software developers, to supplement our internal sales and marketing efforts. We
are in the early stage of developing our relationships with many of these
developers, and we cannot control how they perform or whether their performance
will be satisfactory. If these third parties fail to market our services or
their efforts fail to result in new customers, we may be unable to attract new
customers and our revenue would be adversely affected. If these third parties
fail to market our services adequately, we would be forced to increase our sales
and marketing staff, which would materially increase our fixed costs.

WE MAY FAIL TO SUPPORT GROWTH IN OPERATIONS, WHICH COULD REDUCE DEMAND FOR OUR
SERVICES AND MATERIALLY ADVERSELY AFFECT OUR REVENUE.

Our business strategy assumes that our number of customers, the amount of
information they want to receive and the number of services we offer will all
increase. We must continue to develop and expand our systems and operations to
accommodate this assumed growth. The expansion and adaptation of our wireless
data services requires substantial financial, operational and management
resources. We may be unable to expand our operations for one or more of the
following reasons:

- we may not be able to locate or hire at reasonable compensation rates
qualified engineers and other employees necessary to expand our capacity;

- we may not be able to obtain the hardware necessary to expand our
capacity;

- we may not be able to expand our customer service, billing and other
related support systems; and

- we may not be able to obtain sufficient additional capacity from wireless
carriers.

The expansion of our systems and operations could also be affected by a
lack of available funding either through cash from operations or through
financings. Due to the limited deployment of our services to date, we cannot be
sure that our systems and operations will maintain an acceptable level of
performance if we are required to connect and manage a substantially larger
number of customers. Any failure on our part to develop and maintain our
wireless data services as we experience rapid growth could significantly reduce
demand for our services.

WE MAY NOT HAVE ADEQUATELY PROTECTED OUR INTELLECTUAL PROPERTY RIGHTS, WHICH
COULD ALLOW COMPETITORS TO DEVELOP SIMILAR PRODUCTS USING SIMILAR TECHNOLOGY.

Our success depends significantly on our technology and other proprietary
rights relating to our services. We will be relying on a combination of patent,
copyright, trademark, service mark and trade secret laws, confidentiality
procedures and contractual provisions to establish and protect such proprietary
rights.

We have received a patent for our enterprise messaging system software and
are pursuing registration of our trademarks and/or service marks. Despite the
measures we have taken and expect to take to protect our intellectual property,
these steps may prove to be inadequate. For example, patents may be allowed or
issued to others based on our pending or future patent applications, patents may
be successfully challenged or circumvented, or rights granted under any patent
that may be issued or licensed to us may not provide us with a competitive
advantage. Our trademarks and service marks may not have the distinctiveness
necessary to offer our business competitive advantages, and our registrations
may not be enforceable. We may not be able to obtain future registrations. We
are pursuing federal registrations for various trademarks and/or service marks
for which we already have common-law trademark rights based on our use of such
marks in interstate commerce. We may not be able to use these names effectively
or at all if we fail to obtain such registrations due to conflicting marks or
otherwise.

10
<PAGE> 14

In addition, third parties may breach the confidentiality obligations that
they have to us under our contracts with them, or misappropriate or infringe our
intellectual property rights, or that adequate remedies will be available to us
if a breach, misappropriation or infringement occurs. In addition, our
competitors or other third parties may independently develop competing
technologies, reverse-engineer our software or other technologies or even design
around our intellectual property rights. If our competitors are able to develop
similar products or services using similar technology, any competitive advantage
we have will be compromised and our revenues could decrease.

OUR CONTRACTUAL RIGHTS TO THIRD PARTY INTELLECTUAL PROPERTY MAY BE INSUFFICIENT
TO SECURE RIGHTS NECESSARY FOR THE USE OF OUR TECHNOLOGIES OR MAY BE
SUCCESSFULLY CHALLENGED.

A significant element of our business strategy is to develop wireless data
applications for specific markets that have wider applicability, either to
additional participants in those markets or, with modification, to other,
broader, markets. Because some aspects of our technologies are developed with
the assistance of third party consultants or in connection with customized
development for our customers, we depend on contractual provisions to ensure
that we obtain the intellectual property rights necessary for the use of the
developed technologies. We cannot assure you that such provisions will be
sufficient to secure the necessary rights to the developed technologies, or that
we will not be subject to claims by our consultants or customers that they have
rights to part or all of the developed technology.

In the past, we have developed applications for third parties without
retaining the right to use all associated intellectual property. We are
currently working to obtain exclusive license rights to certain technology that
we use in key aspects of our business. If we fail to obtain this license or are
unable to do so on commercially reasonable terms, we will experience significant
delays and incur significant additional expenses to pursue and implement our
business strategy.

OUR LOSS OF OR INABILITY TO MAINTAIN OR OBTAIN ANY REQUIRED INTELLECTUAL
PROPERTY COULD LEAD TO A RELIANCE ON MORE EXPENSIVE OR LOWER QUALITY OR
PERFORMANCE TECHNOLOGY, OR FORCE US TO CEASE OFFERING OUR PRODUCT OR SERVICE.

We also rely on certain technologies that we license from third parties
including certain third-party software that may not be available to us in the
future on commercially reasonable terms or at all. Our loss of or inability to
maintain or obtain, any required intellectual property could require us to use
substitute technology, which could be more expensive or of lower quality or
performance, or force us to cease offering our product or service. Either of
these results would have a material adverse effect on our business, financial
condition or results of operations. Moreover, some of our license agreements are
non-exclusive, and our competitors, therefore, may have access to the same
technology that we license.

WE MAY BE SUED BY THIRD PARTIES FOR INFRINGEMENT OF THEIR INTELLECTUAL PROPERTY
RIGHTS AND INCUR COSTS OF DEFENSE AND POSSIBLY ROYALTIES OR LOSE THE RIGHT TO
USE TECHNOLOGY IMPORTANT TO PROVIDING OUR PRODUCTS OR SERVICES.

Third parties could claim infringement by us with respect to current or
future products or services. As the number of entrants into our market
increases, the possibility of an infringement claim against us grows. We may be
inadvertently infringing a patent of which we are unaware. In addition, because
patent applications can take many years to issue, there may be a patent
application now pending of which we are unaware, which will cause us to be
infringing when it issues in the future. Any infringement claim, whether
meritorious or not, could be time-consuming, result in costly litigation, cause
service installation delays or require us to enter into royalty or licensing
agreements. Royalty or licensing agreements might not be available on terms
acceptable to us or at all. As a result, any claim could have a material adverse
effect upon our business, financial condition or results of operations.

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<PAGE> 15

DISRUPTION OF OUR SERVICES DUE TO ACCIDENTAL OR INTENTIONAL SECURITY BREACHES
MAY HARM OUR REPUTATION, CAUSING A LOSS OF SALES AND WOULD INCREASE OUR
EXPENSES.

A significant barrier to the growth of wireless data services has been the
need for secure transmission of confidential information. Our systems could be
disrupted by unauthorized access, computer viruses and other accidental or
intentional actions. In addition, many of our customers are law enforcement
agencies and, as such, are especially sensitive to breaches of security. We may
incur significant costs to protect against the threat of security breaches or to
alleviate problems caused by such breaches. If a third-party were able to
misappropriate our users' personal or proprietary information or credit card
information, we could be subject to claims, litigation or other potential
liabilities that could materially adversely impact our revenue and may result in
the loss of customers.

ANY TYPE OF SYSTEMS FAILURE COULD REDUCE SALES, OR INCREASE COSTS, OR RESULT IN
CLAIMS OF LIABILITY.

Any disruption from landline connections could result in delays in our
customers' abilities to exchange information. There can be no assurance that our
systems will operate appropriately if we experience a hardware or software
failure or if there is an earthquake, fire or other natural disaster, a power or
telecommunications failure, an act of God or an act of war. A failure in our own
or our carriers' systems could cause delays in transmitting data, and as a
result we may lose customers or face litigation that could involve material
costs and distract management from operating our business.

COMPETITORS COULD IMPAIR OUR ABILITY TO SELL NEW AND EXISTING SERVICES AT A
PROFIT.

Intense competition is developing in the market for services we offer. We
developed our software using standard industry development tools. Our agreements
with wireless carriers, equipment suppliers, and other vendors and partners are
often non-exclusive. Our competitors may use the same products and services in
competition with us. With time and capital, it would be possible for competitors
to replicate our services. Many of our competitors have significantly greater
resources than we do. In particular, wireless network carriers have a built-in
cost advantage due to their ownership of wireless networks and have significant
application engineering expertise and personnel. Competition could reduce our
market share or force us to lower prices to unprofitable levels. See
"Business -- Competition."

AN INTERRUPTION IN THE SUPPLY OF PRODUCTS THAT WE OBTAIN FROM THIRD PARTIES
COULD CAUSE A DECLINE IN SALES OF OUR SERVICES OR SIGNIFICANTLY INCREASE OUR
COSTS.

In designing, developing and supporting our wireless data services, we rely
on computer manufacturers, wireless handheld device manufacturers and software
providers. These suppliers may experience difficulty in supplying us or our
customers with products sufficient to meet our needs or they may terminate or
fail to renew contracts for supplying us or our customers with these products on
terms that enable us to resell them as part of our services at acceptable
margins or to support a given application. Any significant interruption in the
supply, or increase in the cost, of any of these products could cause a decline
in sales of our services unless and until we are able to replace the
functionality provided by these products. We also depend on third parties to
deliver and support reliable products, enhance their current products, develop
new products on a timely and cost-effective basis and respond to emerging
industry standards and other technological changes.

OUR SALES CYCLE IS LONG, AND OUR STOCK PRICE COULD DECLINE IF SALES ARE DELAYED
OR CANCELLED.

Quarterly fluctuations in our operating performance are exacerbated by the
length of time between our first contact with a business customer and the first
revenue from sales of services to that customer or end user. Because our
services represent a significant investment for our Paradigm4 Wireless DataNet
customers, we spend a substantial amount of time educating them regarding the
use and benefits of our services and they, in turn, spend a substantial amount
of time performing internal reviews and obtaining capital expenditure approvals
before purchasing our services. Most of our customers are government entities
that must comply with stringent procurement rules and regulations that lengthen
our sales cycle.

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<PAGE> 16

As much as a year or more may elapse between the time we approach a customer and
the time we begin to deliver services to a customer or end user. Any delay in
sales of our services could cause our quarterly operating results to vary
significantly from projected results, which could cause our stock price to
decline. In addition, we may spend a significant amount of time and money on a
potential customer that ultimately does not purchase our services.

WE MAY NEED ADDITIONAL CAPITAL AND WE MAY NOT BE ABLE TO OBTAIN IT, WHICH COULD
PREVENT US FROM CARRYING OUT OUR BUSINESS STRATEGY.

We currently expect that our available cash resources combined with the net
proceeds from this offering will be sufficient to fund our operating needs for
at least the next 12 months, including the expansion of our sales and marketing
program and any acquisitions we may pursue in the next 12 months. We may need to
raise additional funds to meet our working capital requirements, to facilitate
more rapid expansion, to adopt new technologies or otherwise respond to
competitive pressures or other events. We may need to raise funds through public
or private debt or equity financings. If funds are raised through the issuance
of equity securities, the percentage ownership of our then-current stockholders
may be reduced and the holders of new equity securities may have rights,
preferences or privileges senior to those of the holders of our common stock. If
additional funds are raised through a bank credit facility or the issuance of
debt securities, the holders of that indebtedness would have rights senior to
the rights of the holders of our common stock and the terms of that indebtedness
would likely impose significant restrictions on our operations. If we need to
raise additional funds, we may not be able to do so on terms favorable to us, or
at all. If we cannot raise adequate funds on acceptable terms, we may not be
able to continue to fund our operations.

NEW LAWS AND REGULATIONS AFFECTING OUR INDUSTRY COULD INCREASE OUR COSTS OR
REDUCE OUR OPPORTUNITIES TO EARN REVENUE.

We are not currently subject to direct regulation by the Federal
Communications Commission, or FCC, or any other governmental agency, other than
regulations applicable to businesses in general. However, in the future, we may
become subject to regulation by the FCC or another regulatory agency. In
addition, the wireless carriers who supply us airtime are subject to regulation
by the FCC and regulations that affect them could increase our costs or reduce
our ability to continue selling and supporting our services.

OUR STOCK PRICE, LIKE THAT OF MANY TECHNOLOGY COMPANIES, WILL LIKELY BE
VOLATILE.

We expect that the market price of our common stock will be volatile. We
are involved in a highly visible, rapidly changing industry and stock prices in
our industry have risen and fallen rapidly in response to a variety of factors,
including:

- announcements of new wireless communications technologies and new
providers of wireless communications;

- acquisitions of or strategic alliances among providers of wireless
communications;

- changes in recommendations by securities analysts regarding the results
or prospects of providers of wireless communications; and

- changes in investor perceptions of the acceptance or profitability of
wireless communications.

WE HAVE ANTI-TAKEOVER DEFENSES THAT COULD DELAY OR PREVENT AN ACQUISITION AND
COULD ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK.

Our certificate of incorporation and bylaws to be in effect upon completion
of this offering, and provisions of Delaware law, could delay, defer or prevent
an acquisition or change of control of Paradigm4 or otherwise adversely affect
the price of our common stock. For example, our bylaws will limit the ability of
stockholders to call a special meeting. In addition to possibly delaying or
preventing an acquisition, the
13
<PAGE> 17

issuance of a substantial number of shares of preferred stock could adversely
affect the price of our common stock.

RISK FACTORS RELATED TO THIS OFFERING

UPON COMPLETION OF THIS OFFERING, YOU WILL EXPERIENCE DILUTION.

Our tangible assets are readily identified assets like property, equipment,
cash, securities and accounts receivable. The value of these assets on our pro
forma balance sheet as of December 31, 1999 minus the value of our liabilities
as of such date equaled $0.61 per share, after giving effect to the completion
of this offering. We also have outstanding a large number of stock options and
warrants to purchase common stock with exercise prices significantly below the
price of shares in this offering. You will experience further dilution to the
extent these options or warrants are exercised.

FUTURE SALES OF OUR COMMON STOCK MAY NEGATIVELY AFFECT OUR STOCK PRICE.

Following this offering, a large number of other outstanding shares of our
common stock will be available for resale beginning at various times in the
future. The market price of our common stock could decline as a result of sales
of a large number of shares of our common stock in the market following this
offering, or the perception that such sales could occur. These sales also might
make it more difficult for us to sell equity securities in the future at a time
and at a price that we deem appropriate. The section of this prospectus entitled
"Shares Eligible for Future Sale" describes in detail the number of shares that
may be sold and regulatory matters affecting the timing and volume of such
sales.

NO PRIOR PUBLIC MARKET EXISTS FOR OUR COMMON STOCK, AND OUR STOCK PRICE MAY
DECLINE AFTER THE OFFERING.

Before this offering, there has been no public market for our common stock,
and an active public market for our common stock may not develop or be sustained
after this offering. If an active public market for our common stock does not
develop, the liquidity of your investment may be limited, and our share price
may decline below its initial public offering price. The initial public offering
price will be determined by negotiations between us and the representatives of
the underwriters and may bear no relationship to the price that will prevail in
the public market.

IF OUR STOCK PRICE IS VOLATILE, WE MAY BECOME SUBJECT TO SECURITIES LITIGATION,
WHICH IS EXPENSIVE AND COULD RESULT IN A DIVERSION OF OUR RESOURCES.

In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been brought
against that company. Telecommunications and technology companies have been
subject to this type of litigation in the past. We may also become involved in
this type of litigation. Any such litigation may be expensive and divert
management's attention and resources away from our business.

WE WILL HAVE BROAD DISCRETION IN HOW WE USE THE PROCEEDS FROM THIS OFFERING, AND
OUR USE OF THOSE PROCEEDS MAY NOT YIELD A FAVORABLE RETURN OR MAY BE CONDUCTED
IN WAYS WITH WHICH YOU DO NOT AGREE.

We intend to use the net proceeds from this offering to develop and expand
our service offerings, expand our sales and engineering staff, expand our
network operations center, increase our sales and marketing activities and for
working capital and other general corporate purposes. We have not yet determined
the amount of net proceeds to be used specifically for each of the foregoing
purposes. Accordingly, we will have broad discretion in using these proceeds.
You will not have the opportunity to evaluate the economic, financial or other
information that we may use to determine how we use these proceeds. You may
disagree with the way management decides to spend these proceeds. If we do not
apply the funds effectively, our accumulated deficit will increase and we may
lose significant business opportunities.

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<PAGE> 18

FORWARD LOOKING STATEMENTS

Certain statements made in this prospectus under the captions "Prospectus
Summary," "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" and elsewhere in this
prospectus are forward-looking statements. Because such forward-looking
statements are not historical facts, they involve risks and uncertainties and
there are important factors that could cause actual results to differ materially
from those expressed or implied by such forward-looking statements, including
those discussed under "Risk Factors."

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<PAGE> 19

USE OF PROCEEDS

We estimate that we will receive net proceeds from the sale of the shares
of our common stock in this offering of $ million, assuming an initial
public offering price of $ per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by us. If the underwriters exercise their over-allotment option in full, we
estimate that our net proceeds will be $ million.

We intend to use the net proceeds of this offering to develop and expand
our service offerings, expand our sales and engineering staff, expand our
network operations center, increase our sales and marketing activities and for
working capital and other general corporate purposes. We may also use a portion
of the net proceeds for acquisitions, strategic alliances or joint ventures.
Although we review potential strategic alliances and acquisitions from time to
time, we have not had more than preliminary discussions with respect to any such
alliances or acquisitions. We have not yet determined the amount of net proceeds
to be used specifically for each of the foregoing purposes. Accordingly, our
management will have significant flexibility in applying the net proceeds of
this offering. Pending any such uses, as described above, we intend to invest
the net proceeds of this offering in interest-bearing instruments.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock and
our existing credit facility restricts our ability to pay any such cash
dividends. We currently anticipate that we will retain any future earnings for
the development and operation of our business. Accordingly, we do not anticipate
declaring or paying any cash dividends in the foreseeable future.

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<PAGE> 20

CAPITALIZATION

The following table sets forth, as of December 31, 1999, our
capitalization:

- on an actual basis;

- on a pro forma basis to reflect (a) the issuance of shares of convertible
preferred stock during the first quarter of 2000 in consideration for net
cash proceeds of approximately $29.8 million and the conversion of $2.7
million in outstanding notes payable, including accrued interest of
$200,000, and (b) the automatic conversion of all outstanding shares of
convertible preferred stock into 28,416,485 shares of common stock upon
the closing of this offering; and

- on a pro forma as adjusted basis to give further effect to the sale of
the shares offered hereby at an assumed initial public offering price of
$ per share, after deducting estimated underwriting discounts and the
estimated offering expenses payable by us.

You should read this table in conjunction with our Management's Discussion
and Analysis of Financial Condition and Results of Operations and our
consolidated financial statements and accompanying notes included elsewhere in
this prospectus.

<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
-------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash and cash equivalents................................. $ 1,842 $ 30,542 $
======== ======== ========

Short-term debt:
Credit agreement........................................ $ 14,917 $ 14,917 $
Subordinated notes to stockholders...................... 2,500 --
-------- -------- --------
Total short-term debt................................ 17,417 14,917
-------- -------- --------

Stockholders' equity (deficit):
Convertible preferred stock, $0.001 par value;
12,504,057 shares authorized, 11,363,453 shares
issued and outstanding actual; no shares issued or
outstanding pro forma and pro forma as adjusted...... 11 --
Common stock, $0.001 par value, 55,971,133 shares
authorized, 2,797,596 shares issued and outstanding
actual; 100,000,000 shares authorized, 31,214,081
shares issued and outstanding pro forma; and
shares issued and outstanding pro forma as
adjusted............................................. 3 31
Preferred stock, $0.001 par value; no shares authorized,
issued or outstanding actual and pro forma; 5,000,000
shares authorized, no shares issued or outstanding
pro forma as adjusted................................ -- --
Additional paid-in capital................................ 37,872 69,255
Warrants.................................................. 1,899 1,899
Accumulated deficit....................................... (51,615) (51,615)
-------- -------- --------
Total stockholders' (deficit) equity...................... (11,830) 19,570
-------- -------- --------
Total capitalization............................ $ 5,587 $ 34,487 $
======== ======== ========
</TABLE>

The information above excludes:

- 5,989,415 shares of common stock issuable upon the exercise of stock
options outstanding as of December 31, 1999, with a weighted average
exercise price of $3.36 per share, and

- 2,787,145 shares of common stock issuable upon the exercise of
outstanding warrants at December 31, 1999, with a weighted average
exercise price of $2.63 per share.

17
<PAGE> 21

DILUTION

Our pro forma net tangible book value as of December 31, 1999 was $19.1
million, computed as pro forma stockholders' equity less intangible assets of
approximately $467,000, or $0.61 per share of common stock. Our pro forma net
tangible book value reflects (a) the issuance of shares of convertible preferred
stock during the first quarter of 2000 in consideration for net cash proceeds of
approximately $28.7 million and the conversion of $2.7 million in outstanding
notes payable, including $200,000 of accrued interest, and (b) the automatic
conversion of all outstanding shares of convertible preferred stock into
28,416,485 shares of common stock upon the closing of this offering. Pro forma
net tangible book value per share is determined by dividing the amount of our
pro forma total tangible assets less total liabilities by the pro forma number
of shares of common stock outstanding at that date. Dilution in net tangible
book value per share represents the difference between the assumed initial
public offering price and the pro forma net tangible book value per share of
common stock immediately after the completion of this offering.

After giving effect to the issuance and sale of the shares of common stock
offered by us at an assumed initial public offering price of $ per share and
after deducting estimated underwriting discounts and commissions and estimated
offering expenses payable by us, and the application of the estimated net
proceeds from this offering, our pro forma net tangible book value as of
December 31, 1999 would have been $ million or $ per share of common
stock. This represents an immediate increase in pro forma net tangible book
value to our existing stockholders of $ per share and an immediate dilution
to purchasers in this offering of $ per share.

The following table illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $
Pro forma net tangible book value per share at December
31, 1999............................................... $ 0.61
Increase in pro forma net tangible book value per share
attributable to this offering..........................
-------
Pro forma net tangible book value per share after this
offering..................................................
-------
Dilution per share to new investors......................... $
=======
</TABLE>

The following table summarizes, on a pro forma basis, as of December 31,
1999, the differences between the number of shares of common stock purchased
from us, the aggregate cash consideration paid to us and the average price per
share paid by existing stockholders and new investors purchasing shares of
common stock in this offering. The calculation below is based on an assumed
initial public offering price of $ per share, before deducting estimated
underwriting discounts and commissions and estimated offering expenses payable
by us:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------ -------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
-------- ------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......................... % $ % $
New investors..................................
-------- --- -------- ---- -------
Total................................ 100% $ 100% $
======== === ======== ==== =======
</TABLE>

The foregoing tables assume no exercise of any stock options or warrants
outstanding as of December 31, 1999. As of December 31, 1999, there were:

- 5,989,415 shares of common stock issuable upon the exercise of stock
options outstanding under our option plans with a weighted average
exercise price of $3.36; and

- 2,787,145 shares of common stock issuable upon the exercise of warrants
with a weighted average exercise price of $2.63 per share.

18
<PAGE> 22

SELECTED CONSOLIDATED FINANCIAL DATA

(IN THOUSANDS, EXCEPT SHARE DATA)

The selected consolidated financial data as of December 31, 1998 and 1999
and for the years ended December 31, 1997, 1998 and 1999 are derived from our
audited consolidated financial statements included elsewhere in this prospectus.
The selected consolidated financial data as of December 31, 1996 and 1997 and
for the year ended December 31, 1996 are derived from our audited financial
statements that are not included in this prospectus.

In 1999, we decided to hold for sale a software development contract with
the City of New York. Accordingly, we have reported the net income or loss on
this contract as discontinued operations of contract held for sale. You should
read this information together with our consolidated financial statements and
the notes to those statements appearing elsewhere in this prospectus and the
information under "Management's Discussion and Analysis of Financial Condition
and Results of Operations." We have not allocated any research and development,
selling and marketing, depreciation and amortization or interest expense to
calculate discontinued operations of contract held for sale. See note 1 to our
consolidated financial statements.

Pro forma net loss per common share has been computed assuming the
conversion as of January 1, 1999 of all outstanding convertible preferred stock,
including the series G convertible preferred stock issued in February 2000, into
an aggregate of 28,416,485 shares of common stock.

19
<PAGE> 23

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1996 1997 1998 1999
-------- --------- --------- -----------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:

Revenues(1):
Services revenues......................... $ 1,260 $ 6,693 $ 948 $ 6,296
Hardware and third party software sales... 1,646 4,935 2,711 3,735
-------- --------- --------- -----------
Total revenues......................... 2,906 11,628 3,659 10,031
-------- --------- --------- -----------
Cost of revenues:
Cost of services revenues................. 367 1,595 8,517 12,280
Cost of hardware and third party software
sales.................................. 1,494 4,525 2,675 2,866
-------- --------- --------- -----------
Total cost of revenues................. 1,861 6,120 11,193 15,146
Gross profit (loss)......................... 1,045 5,508 (7,534) (5,115)
Research and development expenses........... 264 1,972 3,330 5,518
Selling and marketing expenses.............. 622 2,656 3,725 3,570
General and administrative expenses......... 3,783 4,634 4,733 3,775
Depreciation and amortization expense....... 247 725 1,678 1,859
-------- --------- --------- -----------
Loss from operations........................ 3,871 4,479 21,001 19,837
Interest expense............................ 10 347 1,590 1,984
Interest income............................. 32 51 54 116
Other income (expense), net................. -- -- 477 (252)
-------- --------- --------- -----------
Loss from continued operations before
provision for income taxes................ (3,849) (4,775) (22,060) (21,956)
Provision for income taxes.................. 45 94 7 1
-------- --------- --------- -----------
Loss from continuing operations............. (3,894) (4,869) (22,067) (21,957)
Discontinued operations of contract held for
sale...................................... 630 (23) 1,041 (475)
-------- --------- --------- -----------
Net loss.................................... $ (3,264) $ (4,892) $ (21,026) $ (22,432)
======== ========= ========= ===========
Basic and diluted (loss) earnings per common
share:
Continuing operations..................... $ (1.55) $ (1.89) $ (8.42) $ (8.03)
Discontinued operations................... 0.25 (0.01) 0.40 (0.17)
-------- --------- --------- -----------
Net loss.................................. $ (1.30) $ (1.90) $ (8.02) $ (8.20)
======== ========= ========= ===========
Weighted average shares outstanding......... 2,505,701 2,568,826 2,619,424 2,733,995
======== ========= ========= ===========
Pro forma net loss per share................ $ (0.72)
===========
Shares used in computing pro forma net loss
per share................................. 31,150,480
===========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------------------------
1996 1997 1998 1999
------ ------- -------- --------
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 199 $ 98 $ 349 $ 1,842
Working capital.................................... 670 242 (16,650) (16,305)
Total assets....................................... 7,370 17,210 15,318 18,802
Total stockholders' equity (deficit)............... 3,375 3,298 (13,416) (11,830)
</TABLE>

- ---------------
(1) Our 1998 and 1999 revenues were significantly affected by changes in our
estimates of costs required to complete certain contracts subsequent to
recognizing revenues based on the percentage-of-completion accounting
method. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Overview."

20
<PAGE> 24

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of
operations should be read in conjunction with the financial statements and the
notes to those statements included elsewhere in this prospectus. This discussion
contains forward-looking statements that involve risks and uncertainties. Please
see "Forward Looking Statements."

OVERVIEW

Since our inception in 1996, we have expended significant resources on
research and development to design applications and systems that better address
our customers' wireless needs, including the development of our Paradigm4
Wireless DataNet, which includes our patented enterprise messaging system
middleware, our message switching software, and our network operations center.
We have also devoted significant resources to building our 24x7 help desk and
customer support services. To date, we primarily have focused on the development
and implementation of wireless applications in the public safety market, one of
the first markets to adopt wireless solutions, to access and exchange critical
data more effectively. We recently have begun to expand the breadth of our
services to provide our customers with complete, outsourced wireless data
solutions. We expect that recurring revenues derived from providing hosted
outsourced wireless solutions will comprise a greater percentage of our revenues
in future periods, as we continue to expand within the public safety market and
into new markets.

As a result of the investments we have made in our business, we have
incurred significant operating losses since our inception. We intend to continue
to invest in business development, research and development, marketing and
advertising. As a result, we expect to continue to incur operating losses for
the foreseeable future. Moreover, the rates at which these losses will be
incurred may increase from current levels.

Revenues

We derive services revenues from engineering and implementation services,
maintenance fees and subscriber fees. We also derive revenues from the resale of
hardware and third party software. We expect that revenues from the sale of
hardware and third party software will become a significantly lesser portion of
our revenues in the future. In addition, we intend to derive revenues from
network and carrier services fees as we expand our services.

Engineering and Implementation Services. Our engineering and
implementation services revenues historically have been based on fixed price
contracts. Under these long term fixed-price contracts, we recognize revenue
using the percentage-of-completion method. As a result, we recognize expenses as
incurred on the contract and recognize revenues based on a comparison of actual
costs incurred to our then-estimated total costs. Accordingly, the revenues we
recognize in any given period depend to a significant extent on our estimate of
the total remaining costs to complete individual projects. We expect to continue
to provide significant wireless engineering and implementation services for
commercial as well as public safety customers. Revenues in the public safety
market will continue to be derived from fixed-price contracts, however, we
intend to enter primarily into time-and-materials contracts with our commercial
customers.

Maintenance Revenues. Our engineering and implementation contracts
typically include ongoing maintenance revenue after the contract is completed.
Upon completion of a contract, we are normally paid an annual maintenance fee.
Some of our customers, however, request that we operate their data
communications capabilities on an outsourced basis, which generates
substantially higher recurring revenues. We receive revenues from maintaining
and servicing our installations in the field, as well as

21
<PAGE> 25

servicing our other new wireless data applications. We expect maintenance and
service revenues to increase as we complete more engineering and implementation
contracts.

Carrier Services Fees. We expect to generate recurring revenues from
contracts with wireless carriers to outsource their switching functions and to
interconnect them to other carriers in order to enable nationwide
interoperability. We expect to enter into long-term contracts under which we
will receive recurring monthly services fees. We also expect to generate
recurring revenues from other entities, such as application service providers
and content providers, to connect them to carriers and end-users through our
network. To date, revenues from carrier service fees have not comprised a
material portion of our total revenues.

Network Services. We receive periodic, recurring revenues from our network
services customers. We provide, support and host wireless data applications and
services through the Paradigm4 Wireless DataNet. This service provides an
outsourced solution for customers that do not have the equipment, expertise,
support internal resources or security infrastructure necessary for the
operation of wireless data applications or systems. We currently derive network
services revenues from Lockheed Martin IMS and Sentrol and from several law
enforcement agencies for which we have created customized applications. In
addition, we will offer pre-packaged applications such as our SmartPartner
service and Wireless Knowledge's Workstyle Server product as they become
commercially available. We expect that gross margins for our network services
will be higher than those for our engineering and implementation services.
Therefore, we intend to pursue network services opportunities aggressively. To
date, revenues from network services have not comprised a material portion of
our total revenues.

Hardware/Software Revenues. In connection with our engineering and
implementation services, we have derived revenues from the sale of third-party
hardware and software products. We anticipate that revenues from the sale of
hardware and software products will become a significantly lesser portion of our
revenues in the future.

Operating Costs and Expenses

Our cost of services revenues consists primarily of salaries and expenses
for our engineering, implementation and network operations staff; costs
associated with our 24x7 customer support and help desk; training costs; costs
associated with consultants; and production facilities costs. Our cost of
hardware and third party software sales consists of acquisition costs of
hardware and third party software.

Research and development expenses consist primarily of salaries and
benefits for research and development personnel; costs associated with
consultants and licensing fees. A significant amount of depreciation on research
equipment and amortization of related software is included in depreciation and
amortization expense. Our selling and marketing expenses consist primarily of
compensation and benefits for our sales and marketing personnel, advertising
expenses, and costs associated with tradeshows and marketing materials. We
anticipate selling and marketing expenses to grow significantly as we target new
markets. Our general and administrative expenses consist primarily of
compensation and benefits related to our corporate staff, professional fees, and
travel and facilities costs.

Significant Contracts

In 1997, we recognized approximately 75% of the revenues associated with
our Florida Department of Law Enforcement contract using the
percentage-of-completion method, based on our then estimate that 75% of the
costs of completing that contract had already been incurred. In 1998, based on
subsequent experience under this contract, including the promulgation of new
federal specifications applicable to the contract, we significantly increased
our estimate of the costs of completing the contract. As a result,

22
<PAGE> 26

because we had not incurred more than 75% of the costs to complete the contract
by December 31, 1998, we were unable to recognize any additional revenue under
the contract in 1998, although we devoted, and continue to devote, substantial
resources under the contract. As of December 31, 1999, we recorded a provision
for losses on uncompleted contracts of $5.1 million, approximately $4.0 million
of which relates to this contract.

Discontinued Operations

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

Revenues. Revenues increased to $10.0 million for the year ended December
31, 1999 from $3.7 million for the year ended December 31, 1998. Service
revenues increased to $6.3 million for the year ended December 31, 1999 from
$948,000 for the year ended December 31, 1998. This increase was attributable to
the commencement of significant new engineering and implementation services.
Revenues from hardware and third party software sales increased to $3.7 million
for the year ended December 31, 1999 from $2.7 million for the year ended
December 31, 1998, an increase of 37%. This increase was a result of increased
sales of hardware and third party software to our engineering and implementation
services customers.

Cost of Revenues. Cost of services revenues increased to $12.3 million for
the year ended December 31, 1999 from $8.5 million for the year ended December
31, 1998, an increase of 45%. This increase was primarily attributable to an
increase in payroll expenses associated with the expansion of our engineering,
implementation and network operations staff and consultants, and costs
associated with implementing our 24x7 customer support and help desk. Cost of
services revenues for 1999 and 1998 included charges of $2.4 million and $2.6
million, respectively, to increase the provision for losses on uncompleted
contracts. Cost of hardware and third party software sales increased to $2.9
million for the year ended December 31, 1999 from $2.7 million for the year
ended December 31, 1998, an increase of 7%, as a result of increased demand for
hardware and third party software products under our engineering and
implementation contracts.

Research and Development Expenses. Research and development expenses
increased to $5.5 million for the year ended December 31, 1999 from $3.3 million
for the year ended December 31, 1998, an increase of 67%. This increase resulted
primarily from increases in salaries and benefits as we expanded our research
and development staff, as well as increased use of consultants.

Selling and Marketing Expenses. Selling and marketing expenses decreased
to $3.6 million for the year ended December 31, 1999 from $3.7 million for the
year ended December 31, 1998, a decrease of 3%, resulting primarily from
decreased advertising expenses.

23
<PAGE> 27

General and Administrative Expenses. General and administrative expenses
decreased to $3.8 million for the year ended December 31, 1999 from $4.7 million
for the year ended December 31, 1998, a decrease of 19%. This decrease was
primarily as a result of a decrease in professional fees.

Depreciation and Amortization Expense. Depreciation and amortization
expense increased to $1.9 million for the year ended December 31, 1999 from $1.7
million for the year ended December 31, 1998, an increase of 12%. This increase
was attributable primarily to depreciation on new equipment.

Interest Expense. Interest expense increased to $2.0 million for the year
ended December 31, 1999 from $1.6 million for the year ended December 31, 1998,
an increase of 25%, resulting primarily from an increase of borrowings under our
credit facility.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Revenues. Revenues decreased to $3.7 million for the year ended December
31, 1998 from $11.6 million for the year ended December 31, 1997, a decrease of
68%. Services revenues decreased to $948,000 for the year ended December 31,
1998 from $6.7 million for the year ended December 31, 1997. This decrease was
due to our inability to recognize revenues for services performed under certain
contracts during the year ended December 31, 1998 as a result of changes in
estimated costs to complete projects commenced in prior years under the
percentage of completion method. Revenues from hardware and third party software
sales decreased to $2.7 million for the year ended December 31, 1998 from $4.9
million for the year ended December 31, 1997, a decrease of 45%. This decrease
was due to lower hardware and third party software sales in connection with
implementation and engineering services performed during the year ended December
31, 1998.

Cost of Revenues. Cost of services revenues increased to $8.5 million for
the year ended December 31, 1998 from $1.6 million for the year ended December
31, 1997. This increase was primarily attributable to an increase in payroll
expenses associated with the expansion of our engineering and implementation
staff. In addition, cost of services revenues for 1998 included a $2.6 million
charge to increase the provision for losses on uncompleted contracts. Cost of
hardware and third party software sales decreased to $2.7 million for the year
ended December 31, 1998 from $4.5 million for the year ended December 31, 1997,
a decrease of 40%. This decrease resulted from reduced demand for hardware and
third party software products under our implementation and engineering services
contracts in 1998.

Research and Development Expenses. Research and development expenses
increased to $3.3 million for the year ended December 31, 1998 from $2.0 million
for the year ended December 31, 1997, an increase of 65%. This increase resulted
from increases in salaries and benefits as we expanded our research and
development staff and consultants in connection with the development of our
wireless hosting capabilities and our enterprise messaging system middleware.

Selling and Marketing Expenses. Selling and marketing expenses increased
to $3.7 million for the year ended December 31, 1998 from $2.7 million for the
year ended December 31, 1997, an increase of 37%. This increase resulted from
increases in compensation and benefits as we increased our sales and marketing
staff and an increase in marketing and advertising costs.

General and Administrative Expenses. General and administrative expenses
increased to $4.7 million for the year ended December 31, 1998 from $4.6 million
for the year ended December 31, 1997, an increase of 2%. This increase resulted
from an increase in professional fees.

Depreciation and Amortization Expense. Depreciation and amortization
expenses increased to $1.7 million for the year ended December 31, 1998 from
$725,000 for the year ended December 31, 1997, an increase of 135%. This
increase was attributable primarily to the depreciation on new equipment and
amortization of software purchased during 1997.

Interest Expense. Interest expense increased to $1.6 million for the year
ended December 31, 1998 from $347,000 for the year ended December 31, 1997,
resulting from more borrowings under the credit facility we entered into in June
1998.

24
<PAGE> 28

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have financed our operations through the issuance of
debt and equity securities and borrowings under our credit facility. At December
31, 1999, we had cash and cash equivalents of approximately $1.8 million. As of
December 31, 1999, we had negative working capital of approximately $16.3
million. Subsequent to December 31, 1999, we issued 11,524,809 shares of our
series G convertible preferred stock at $2.82 per share. Net cash proceeds were
approximately $28.7 million, net of issuance costs and the conversion of $2.7
million of subordinated debt and accrued interest.

Net cash used in operating activities was $8.2 million in 1997, $16.8
million in 1998, and $18.7 million in 1999. Net cash used in operating
activities was primarily a result of our net losses during these periods, and
was partially offset by depreciation and amortization costs and provisions for
losses on uncompleted contracts.

Cash used in investing activities was $852,000 in 1997, $2.1 million in
1998 and $1.4 million in 1999, and was primarily a result of investments in
property, equipment and increases in restricted cash. Also, in 1998, we loaned
$612,000 to an acquisition target that was repaid to us in 1999 after
negotiations related to this acquisition were terminated.

Net cash provided by financing activities was $8.9 million in 1997, $19.1
million in 1998 and $19.6 million in 1999. Net cash provided by financing
activities during these periods primarily consisted of proceeds from the
issuance of subordinated notes and our preferred stock. During 1997 and 1999, we
raised net cash proceeds of approximately $4.7 million and $12.3 million,
respectively, through the issuance of preferred stock that will convert into an
aggregate of 7,860,640 shares of our common stock upon completion of this
offering. For the years ended December 31, 1997 through 1999, we raised net cash
proceeds of approximately $16.2 million through the issuance of subordinated
bridge notes. All of these bridge notes have since been converted into shares of
our preferred stock. In February 2000, we raised approximately $31.4 million,
net of commissions and offering expenses, in connection with the issuance of
preferred stock that converts into 11,524,809 shares of our common stock on
completion of the offering. All of our outstanding convertible preferred stock
will convert into an aggregate of 28,416,485 shares of our common stock upon
completion of this offering.

We have entered into a credit agreement with Greyrock Business Credit,
which consists of two $5.0 million term loans and an $8.0 million revolving
facility. Accrued interest under the agreement is payable monthly at a rate
equal to the lender's prime rate plus 2%, which was 10.5% at December 31, 1999.
The loans are secured by substantially all of our assets. Availability under the
revolving facility is based on a borrowing base formula comprised of 80% of
eligible accounts receivable and 50% of eligible cost and estimated earnings in
excess of billings. One of the $5.0 million term loans matures on May 30, 2000,
while the second term loan and the revolving facility mature on October 31,
2000. At December 31, 1999, borrowings under the term loans and revolving
facility were $10.0 million and $4.9 million, respectively. We are currently in
discussions with our lender concerning the extension of these loans. Subsequent
to December 31, 1999, we repaid $429,000 of capital lease obligations.

We expect to invest between $5.0 million and $7.0 million during the year
ending December 31, 2000, primarily related to our equipment and software for
our network operations center. In addition, in February 2000, we entered into an
agreement with Wireless Knowledge Inc., a joint venture between Microsoft
Corporation and Qualcomm, Inc. to purchase a minimum of 40,000 licenses over an
18 month period for approximately $2.0 million. We paid $1.0 million on signing
the agreement and have committed to pay approximately $480,000 on April 30, 2000
and the balance on June 30, 2000. In addition, we have committed to acquire an
additional 110,000 licenses during the remaining two year term of the agreement
for $5.4 million. Our total purchase commitment to Wireless Knowledge over the
life of the agreement is approximately $11.0 million. We have also agreed to
spend a minimum of $1.0 million advertising our wireless data services using the
Workstyle Server brand.

We believe that our current cash and cash equivalents will be sufficient to
meet our anticipated cash needs for working capital and capital expenditures for
at least the next 12 months. If cash generated from

25
<PAGE> 29

operations is insufficient to satisfy our liquidity requirements, we may seek to
sell additional equity or debt securities or establish an additional credit
facility. The sale of additional equity or convertible debt securities could
result in additional dilution to our stockholders. The incurrence of additional
indebtedness would result in increased fixed obligations and would likely result
in operating covenants that would restrict our operations. We cannot assure you
that financing will be available in amounts or on terms acceptable to us, if at
all.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments
and Hedging Activities, which establishes the accounting and reporting standards
for derivative instruments and for hedging activities. The effective date of the
Statement (which was deferred through the issuance Statement of Financial
Accounting Standards No. 137) is our calendar year commencing January 1, 2001.
As of December 31, 1999, we have not entered into any transactions that would
have had a material effect on our financial statements if this standard was in
effect as of that date.

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 provides the SEC's views on the issue of revenue
recognition. SAB No. 101 is intended to clarify the concept that revenue should
not be recognized until it is realized or realizable and earned. SAB No. 101
provides guidance on applying the broad concept as well as examples of
acceptable and unacceptable revenue recognition situations. SAB No. 101 states
that revenue is recognizable if all of the following four criteria are met:

1. Persuasive evidence of an arrangement exists;

2. Delivery has occurred or services have been rendered;

3. The seller's price to the buyer is fixed and determinable; and

4. Collectibility is reasonably expected.

SAB No. 101 states that if a company's efforts, subsequent to delivering a
product or service to a customer, to obtain customer acceptance of such product
and service are more than perfunctory, a sale has not occurred and therefore,
the associated revenue cannot be recognized. SAB No. 101 must be adopted for all
years presented in the accompanying consolidated financial statements. We
determined that SAB No. 101 did not have a material effect as of, and for years
from our inception through December 31, 1999, as the majority of our revenues
are recognized using the percentage-of-completion method.

INCOME TAXES

As of December 31, 1999, we had net operating loss carryforwards of
approximately $47.0 million for income tax purposes, which expire commencing in
2016 for Federal tax purposes and commencing in 2001 for state tax purposes.
However, under the Tax Reform Act of 1986, our ability to realize a future tax
benefit from our net operating loss carryforwards may be limited due to changes
in our proportionate ownership. Deferred tax assets reflect the net tax effects
of temporary differences between carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for Federal and state income
tax purposes. At December 31, 1998 and 1999, we had deferred tax assets of
approximately $9.0 million and $16.0 million, respectively, which consist
primarily of temporary differences relating to Federal and state net operating
loss carryforwards. The deferred tax asset has been fully offset by a valuation
allowance due to the uncertainty of realization of this asset.

YEAR 2000

Throughout 1999, we engaged in a comprehensive year 2000 compliance plan
pursuant to which we conducted a review of internal systems, services and
vendors on which we rely. As part of our year 2000 compliance plan, we
identified areas believed to pose a year 2000 related risk, and tried to
implement all

26
<PAGE> 30

necessary corrective actions that we identified. As of March 31, 2000, we had
identified only minor year 2000 related issues, all of which had been remedied.
As of March 31, 2000, we incurred expenses of approximately $300,000 associated
with our 2000 compliance efforts, the majority of which consisted of internal
time and costs. We do not expect our future costs related to year 2000 to be
material. We will continue to monitor our mission critical computer
applications, and those of our vendors and subcontractors to ensure that any
latent year 2000 issues that may arise are promptly addressed.

QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Interest rate risk is the primary source of market risk to our operations.
We do not enter into contracts for trading purposes. As of December 31, 1999, we
had aggregate variable rate debt under our credit agreement and subordinated
notes of approximately $17.4 million, all of which are classified as current
liabilities. A 10% change in interest rates would change the annual interest
expense on this debt as of December 31, 1999 by approximately $190,000.

27
<PAGE> 31

BUSINESS

OVERVIEW

INDUSTRY OVERVIEW

Electronic Data Communications and the Internet. The widespread
introduction of personal computers in the 1980s began the shift toward business
communications and processes that are dependent on electronic information, or
data-centric. This shift has been accelerated by the more recent emergence of
the Internet as a global communications medium to deliver and share information
and to conduct business electronically. International Data Corporation, or IDC,
a market research firm, estimates that the number of worldwide Internet users
will grow from approximately 142 million users in 1998 to 502 million users by
the end of 2003. Businesses and government agencies are increasingly employing
the Internet, intranets and extranets to communicate and conduct transactions
more efficiently, and to enable their increasingly mobile work force to access
and exchange information more easily.

Growth of Data-Centric Enterprise Management. As computing power and
communications networks have become more pervasive, businesses and government
agencies have begun to benefit from real-time access to data and the resulting
efficiency gains. As a result, enterprises are increasingly investing in
additional data access and communications resources that promise further
efficiency gains by enhancing the availability of data. The recent emergence of
electronic commerce, or e-commerce, to transact business has increased the need
for real-time access to critical data, such as pricing, inventory and logistics
information. Furthermore, due to the increasing complexity of designing,
implementing and managing data access and communications resources, many
enterprises are choosing to outsource these needs to third-party service
providers.

Growth of Wireless Communications. The wireless communications industry
has experienced rapid growth of wireless subscribers driven in part by an
increasingly mobile workforce and the desire for convenience and enhanced
productivity. Dataquest, a market research firm, estimates that there were
approximately 217 million wireless voice and data subscribers worldwide at the
end of 1998 and projects that this number of subscribers will grow to
approximately 828 million by the end of 2003. IDC forecasts that the remote and
mobile workforce in the United States will grow from 35.7 million individuals at
the end of 1999 to 47.1 million at the end of 2003. To remain productive, many
of these workers need access to information that is typically available on their
personal computers.

The use of wireless communications has grown rapidly due to a number of
other important factors, including:

- decreased cost of customer service;

- expansion of network coverage;

- availability of extended service features, such as voice and text
messaging; and

- proliferation of wireless devices, such as smartphones, digital
assistants and two-way pagers.

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Convergence of Wireless Communications and the Internet. The convergence
of wireless communications and the Internet has created new opportunities for
the delivery of wireless data services. This convergence is likely to enable the
delivery of wireless multimedia applications, including voice, data, image and
video. We believe that three recent developments are facilitating the expansion
of wireless data usage. First, international wireless technology groups, such as
the Wireless Application Protocol Forum and the Symbian Alliance, have created
global standards for the development of wireless applications, which are
intended to encourage mass penetration of the market for wireless devices and
services. Second, advanced wireless networks have been developed and are being
implemented with the capacity to transmit data applications that require greater
transmission capacity, or bandwidth. Third, new wireless devices capable of
efficient two-way digital data transmission are becoming available to the broad
market. Dataquest estimates that the number of wireless data subscribers
worldwide will grow from approximately 14 million at the end of 1998 to
approximately 103 million at the end of 2003.

The Market Opportunity. We believe that a significant opportunity exists
for a wireless service provider to capitalize on the growing demand for wireless
data communications. To succeed, however, a wireless service provider must
address effectively the factors that have thus far hindered widespread adoption
of wireless data services and wireless Internet access. These factors include:

- limited geographic coverage of and interoperability among wireless data
carriers;

- incompatible standards for mobile devices and wireless data networks;

- lack of applications designed to function over wireless networks;

- inability to access and transmit data over wireless networks at adequate
speeds;

- data reliability and security concerns;

- lack of personnel with the expertise to develop and operate wireless data
systems; and

- substantial ongoing support and maintenance requirements.

PARADIGM4 SOLUTION

We provide a broad range of solutions that enable our customers to access
and exchange information on a wireless basis. Our services link our customers'
mobile workforce and remote locations to our customers' and third-party data
bases. Our solutions utilize the sophisticated capabilities of our proprietary
platform, the Paradigm4 Wireless DataNet, as well as our extensive industry
experience, to facilitate exchange of data on a timely, reliable, secure and
cost-effective basis.

We offer a range of solutions designed to optimize the value of our
services and address our customers' varied wireless data needs. We design,
develop and implement customized wireless data applications, as well as enable
an enterprise's existing applications for use on a wireless basis. We also offer
our customers pre-packaged wireless data applications such as Paradigm4's
SmartPartner service, which is a mobile wireless solution that enables law
enforcement officers to access state and federal law enforcement databases using
wireless devices in the field, and Wireless Knowledge's Workstyle Server
product, which provides data capabilities such as wireless e-mail and calendar
access applicable to a broad range of industries.

Moreover, through the Paradigm4 Wireless DataNet, we provide a complete,
outsourced wireless data solution by:

- creating our customers' wireless data applications and hosting them in
our data center;

- providing connections to wireless data carriers that are monitored by our
network operations center; and

- furnishing a full range of value-added network management services,
including extensive customer support.

Key elements of our solution include:

Extensive Wireless Data Network Coverage and Advanced Interoperability
Functions. Through the Paradigm4 Wireless DataNet, we provide end users with
reliable access to applications and enterprise data.

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We offer wireless carriers advanced interoperability, enabling an extensive
network that allows wireless data users to move smoothly between the coverage
areas of different wireless carriers. We have developed relationships with many
leading wireless network carriers, including BellSouth Wireless Data, AT&T
Wireless Services, Bell Atlantic Mobile, Telus Mobility, Aeris, and American
Mobile Satellite's ARDIS subsidiary. We are continuing to form relationships
with additional carriers.

Device Independent and Carrier Neutral. Our wireless data services are
device independent and carrier neutral. We currently provide our services
through a wide variety of wireless access devices, including
Research-In-Motion's interactive pagers, Windows-based laptop computers, Windows
CE-based computers and smartphones using either HDML or wireless application
protocol, or WAP, browsers. As a result, we can select the particular device
whose features and economics best suit each customer or application. Our
Paradigm4 Wireless DataNet platform integrates the most widely used wireless
data network systems. Its flexible architecture, based on industry standard
equipment and protocols, interacts with the major operating systems on which
most corporate applications run, including Windows NT, UNIX, Linux and most
mainframe operating systems. Our platform is designed to facilitate connections
to new wireless technologies as they emerge.

Efficient and Secure Data Transmission. Our switching software and
patented enterprise messaging system middleware improve data transmission by
employing compression techniques and managing the flow of data to a wireless
user. As a result, users can access and exchange information more quickly and
efficiently. Over the next several years, wireless carriers and equipment
vendors are planning to build second and third generation networks, which
promise to transmit data at much higher speeds. We have designed our Paradigm4
Wireless DataNet platform to grow with the capabilities of these wireless
networks. For example, our services are positioned to operate over networks
using General Packet Radio Services, known as GPRS, a new, third-generation
high-speed wireless network standard being deployed in U.S. markets and abroad.
The Paradigm4 Wireless DataNet is designed to provide guaranteed data delivery
through measures that confirm data have arrived properly and re-send data if no
acknowledgement has been received. We provide security for our customers' data
using authentication and encryption. In addition, the Paradigm4 Wireless DataNet
has redundant elements and serves as a highly secure link between customer data
and carrier networks.

Focus on Customer Service and Support. We are focused on providing our
customers with continuous high quality service and support. We help our
customers choose the appropriate combination of applications, wireless devices,
carrier services and pricing. We offer extensive service and support through our
24x7 help desk, which handles questions related to devices, applications,
network status and operation, to maintain the reliability and effectiveness of
the wireless data communications for the end user. We also provide 24x7 support
through our network operations center, which monitors applications hosting and
network infrastructure and addresses complicated questions.

OUR STRATEGY

We intend to become the leading provider of wireless data services to
commercial and other enterprises. We intend to achieve our objectives through
the following strategies:

Continue to Broaden the Scope of our Services. We continue to design and
implement customized wireless data applications for our customers. We believe
that our ability to address our customers' wireless needs by designing and
implementing wireless data applications will bring new users to our network and
provide us with recurring service revenue opportunities. Moreover, we intend to
continue to identify opportunities to develop and offer products to address the
needs of enterprises within a particular industry segment without extensive
customization. We have also established relationships with key application
developers that allow us to offer our customers access to corporate data bases
and personal information management tools such as email, contacts and calendar,
as well as e-commerce applications. For example, we are a reseller of Wireless
Knowledge's Workstyle Server product, which offers wireless access to Microsoft
Exchange, and we are currently the exclusive reseller of this product to
government markets in North America. We continuously seek additional
relationships that will enable us to provide wireless applications suitable for
a variety of industries.

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Maintain Market Leadership in Public Safety Sector. We intend to maintain
our position as a leading provider of wireless data communications systems and
services in the public safety market. We will continue to provide wireless data
systems and applications, as well as related message-switching products, that
are designed to address the specific needs of wireless users in this market. We
continue to roll-out our new SmartPartner service, which provides public safety
officers with fast, reliable and cost-effective wireless access to critical
information from state and federal data bases. We intend to capitalize on our
extensive experience in wireless data communications and our expertise in
connecting to state and federal message switches, as well as our established
reputation in the public safety market, to distribute our SmartPartner service
broadly throughout the public safety market.

Expand to New Markets. We intend to expand our services into new markets.
We have recently launched sales of the new Workstyle Server product. This
product, created by Wireless Knowledge, a joint venture of Microsoft Corporation
and Qualcomm, Inc., facilitates real-time access to the e-mail, calendar, and
contact-information features of Microsoft Exchange. We also plan to offer
Oracle's new Portal-to-Go, a wireless enablement tool for access to Web sites,
data bases and other corporate information. We believe that these products
create attractive opportunities for us to create enterprise-specific
applications for customers. We will also target specific industries that we
believe would benefit from access to wireless data. For example, we have
recently begun marketing Workstyle Server products and services to the
insurance, healthcare, financial services, legal and public utility industries.

Seek Additional Connections to Carriers. We intend to seek additional
connections with wireless carriers to enhance the appeal of our data services.
Connections offer wireless carriers access to our advanced interoperability
technology to improve their product offerings. Connections to numerous carriers
also allow application and content providers to distribute their products widely
through the Paradigm4 Wireless DataNet. These connections will also provide our
customers with broad access to multiple carriers, content providers and
third-party applications, as well as our own applications, through a single
connection to the Paradigm4 Wireless DataNet.

Increase our Market Penetration and Brand Recognition Through Enhanced
Sales and Marketing Efforts. We intend to increase our market penetration and
brand recognition through increased sales and marketing efforts. We plan to
increase our sales force and promote our brand aggressively through advertising
in key business and trade periodicals, participation in industry events,
conferences and trade shows, and targeted promotions and public relations
campaigns. We believe that establishing a strong brand identity within the
wireless data services industry is important to our future success.

Expand Technologies and Capabilities Through Strategic Acquisitions and
Alliances. We believe that opportunities exist for us to expand our
technological capabilities, product offerings and services through acquisitions.
In evaluating potential acquisitions, we will focus on transactions that enable
us to: acquire important enabling technology; acquire attractive applications;
realize marketing, sales, customer and technological synergies; or add key
personnel. We acquired the stock of EGL Networks, Inc. and some assets of
Vendata, Inc. in 1999. We believe that these acquisitions have significantly
enhanced our ability to provide wireless application services to our customers.
We continuously review acquisition opportunities that we believe may further our
business strategy. In addition, we intend to continue to seek alliances with
third parties that will complement our network and provide us with additional
revenue opportunities.

THE PARADIGM4 WIRELESS DATANET PLATFORM

We operate the Paradigm4 Wireless DataNet platform to deliver our wireless
data services. The elements of our service platform are the following:

Paradigm4 Network. The Paradigm4 network links enterprise customers,
carriers and application providers through direct frame-relay links, and routers
provided by Paradigm4 that are located on their premises. These connections are
configured with varying levels of redundancy, based on each entity's
requirements, to minimize the likelihood that network failures will cause
service interruptions. We provide alternate routing paths for data flowing
between each carrier, application provider and enterprise customer.

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As a result, the network provides an integrated system for wireless data
exchange among enterprise customers, wireless carriers and application
providers.

Data Center. Our data center, located in Bothell, Washington, houses the
hardware and software that maintains the operation of the Paradigm4 Wireless
DataNet. The data center houses our message switching software and patented
enterprise messaging system, or EMS, middleware. Our EMS middleware enables us
to operate the same application with devices using different technologies. Our
switching software and EMS middleware provide encryption, compression, message
logging and guaranteed delivery. The Paradigm4 Wireless DataNet currently has
active connections with several wireless data carriers through the network
infrastructure. The data center also houses our hosted mobility switch.

Network Operations Center. From our network operations center, we monitor
and manage the Paradigm4 Wireless DataNet infrastructure and the wireless data
communications systems of our customers on a 24x7 basis to ensure rapid response
to customer service issues. In addition, our advanced diagnostic tools enable us
to isolate the source of service interruptions throughout the network and
respond to them in a timely fashion. Customers also have access to web-based
reporting for network performance or faults.

Help Desk and Customer Support. We have operated a 24x7 help desk since
1997. Our help desk staff fields questions from customers and their mobile users
regarding all aspects of the operation of the wireless data communications
systems that we operate for them. Following scripted help-desk inquiry routines
and using custom software to capture and catalogue information, our help desk
personnel handle most routine customer assistance inquiries. The help desk staff
also support our field staff during complex integration and implementation
projects. Issues that cannot be resolved at the help desk level are referred to
the network operations center staff or to our engineering staff.

OUR PRODUCTS AND SERVICES

We offer products and services in the following three categories:

- applications development and implementation;

- network services; and

- engineering and implementation services.

Applications Development and Implementation

We focus our applications development activities on specific markets in
which we believe we can provide a uniform solution with minimal customization.
We also create customized applications to address the specific needs of our
customers. In addition, we are developing or implementing new broad-based
wireless data applications, such as e-mail, calendar and contacts and
advertiser-driven mass-marketing, that we believe can be extended beyond
specific markets across a variety of industries.

SmartPartner Services. Our SmartPartner services provide public safety
personnel with a mobile wireless solution that enables real-time communications
with state and federal data bases containing information about criminals, wanted
persons and motor vehicles. We offer SmartPartner as a fully outsourced solution
that includes the Paradigm4 Wireless DataNet, airtime, software, services and
maintenance. SmartPartner provides guaranteed message delivery, message routing,
and message logging in a secure environment. We currently provide SmartPartner
services through Research in Motion 950 two-way pagers. We also plan to make
SmartPartner services available on portable digital assistants. The States of
South Carolina and Michigan are currently piloting the SmartPartner service.
Florida and the City of Boston are currently connected to the Paradigm4 Wireless
DataNet and are scheduled to begin pilot programs during the second quarter of
2000. We have conducted internal simulations to test interfaces with eight
additional states. The Secret Service and Federal Bureau of Investigation are
both participating in the South Carolina pilot program.

Workstyle Server Product and Managed Service. Wireless Knowledge's
Workstyle Server provides real-time wireless access to integrated e-mail,
calendaring and contacts for Microsoft Exchange. We intend to resell the
Workstyle Server both as a stand-alone software product, and to offer a managed
service that combines the Workstyle Server software with support, monitoring and
management services. Customers
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can connect with Workstyle Server using either the Internet or the Paradigm4
Wireless DataNet through browser-enabled devices, such as smartphones or
personal digital assistants. We believe that the Workstyle Server product and
related services will have significant appeal to enterprises using Microsoft
Exchange that would benefit from wireless access of their e-mail, calendar and
contact information.

Oracle Portal-to-Go. Oracle's Portal-to-Go is a new server product that
enables existing data bases and Internet applications to be made accessible from
mobile devices connected to the Internet, including personal digital assistants,
handheld computers and smartphones. We will offer Portal-to-Go either as a
stand-alone software product or as a hosted application with our network
services on an enterprise and an outsourced basis. We believe Portal-to-Go will
have broad appeal within the traditional public sector and commercial market
segments of wireless computing.

Telemetry Services. We offer integrated wireless data services that
provide fully automated wireless communications between networks and fixed
monitoring devices. These services, known as telemetry services, are generally
utilized for monitoring remote processes or assets. We have implemented and
currently manage telemetry services for SLC Technologies, Inc., a leading
provider of security and fire alarm systems, to provide back-up wireless
monitoring for alarm systems.

Network Services

The Paradigm4 Wireless DataNet provides enterprise customers and wireless
data carriers with reliable and secure applications hosting, interoperability,
connectivity, mobility switching and related services.

Applications Hosting Services. We offer our enterprise customers fully
hosted, outsourced applications for wireless access to important data. We also
provide carriers access to hosted applications and related content through the
Paradigm4 Wireless DataNet. Since the third quarter of 1998, we have provided
applications hosting for Lockheed Martin IMS to enable access to their scofflaw
and vehicle location data base.

Carrier Interconnect Services. We offer carriers a common, managed network
that interconnects a carrier with other carriers, each through a single
connection into the Paradigm4 Wireless DataNet. This interconnection allows a
carrier to provide reliable data roaming to its customers traveling within the
coverage area of other interconnected carriers. Without this service, a wireless
data carrier wishing to interconnect with other wireless data carriers must
obtain a dedicated circuit to each carrier. Our network's use of redundancy and
routing protocols provides consistent, reliable service to customers. We
currently provide interconnect services to AT&T Wireless and Houston Cellular.

Hosted Mobility Switching Services. We enable wireless carriers to offer
data services to their customers using the Paradigm4 Wireless DataNet. For
carriers that do not have significant internal wireless data resources or
expertise, we operate and manage a wireless mobility switch in the Paradigm4
Wireless DataNet through a connection to each of the carrier's base stations.
This service provides outsourced mobility functions for the carriers. Our
network operations center maintains configuration data and monitors network
components. We have provided mobility switching through the Paradigm4 Wireless
DataNet for Houston Cellular since the third quarter of 1999.

Customer Connectivity Services. We provide wireless data customers with
managed connections to multiple wireless data carriers and services, usually in
combination with our applications hosting services. The Paradigm4 Wireless
DataNet combines multiple wireless service offerings into an integrated network
service. Since 1997, we have provided the Pittsburgh Police Department with
connectivity through the Paradigm4 Wireless DataNet to both AT&T Wireless and
Bell Atlantic by linking their mobile data terminals with the Pennsylvania
Criminal Justice Information Systems state and federal data bases.

Engineering and Implementation Services

Our staff of 90 highly skilled software and network engineers, project
managers and other technologists has significant experience in consulting with
customers to design, develop, integrate and implement wireless data
communications systems and applications. Our engineers design and implement
wireless data systems and applications tailored specifically to a customer's
needs, or enable existing

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customer applications for wireless communications. We then integrate an
application or package of applications for operability among the customer's
in-house data resources, available wireless network carriers and the end-users'
devices. Our applications development process is based on standard industry
protocols to facilitate use with different classes of devices and operating
systems, and to ensure scalability. We currently plan to expand significantly
our engineering and implementation services to new industries.

We recently engineered and implemented the first of the new, federally
mandated, high-capacity National Crime Information Center, or NCIC, 2000 message
switches for the Florida Department of Law Enforcement. The switch we installed
in Florida currently handles in excess of one million transactions per day and
connects thousands of devices and users to important law enforcement data. We
have also implemented NCIC2000 switches for the states of Delaware, Kansas and
New Mexico and are implementing an NCIC2000 switch for the state of Tennessee.
We believe that the NCIC2000 initiative, mandating increased state access to
federal criminal data bases, is likely to stimulate further demand for wireless
access to the same data for mobile law enforcement personnel. We also believe
that our NCIC2000 development activities will facilitate the marketing of our
engineering and other network services to state government agencies.

CUSTOMERS

We provide services to government and commercial enterprises and to
wireless data carriers. The following table sets forth selected existing
customers for each of our current product and service offerings, indicating for
each the products or services we provide them.

<S> <C> <C> <C> <C> <C> <C>
APPLICATION OR HOSTED
ENGINEERING APPLICATIONS APPLICATIONS CUSTOMER MOBILITY CARRIER
SERVICES DEVELOPMENT HOSTING CONNECTIVITY SWITCHING INTERCONNECT
<CAPTION>

<S> <C> <C> <C> <C> <C> <C>
Lockheed Martin -- -- --
Florida Dept. of Law
Enforcement -- --
AT&T -- --
Houston Cellular -- --
City of Pittsburgh -- -- -- --
Puerto Rico --
SLC Technologies,
Inc. -- -- -- --
</TABLE>

To date, a small number of customers have accounted for a significant
majority of our revenues and will continue to do so for the foreseeable future.
For the year ended December 31, 1999, we provided engineering services to the
state of Delaware and the Florida Department of Law Enforcement, which accounted
for approximately 16% and 15% of our revenues, respectively. Our top five
customers, in the aggregate, accounted for approximately 52% of our revenues
during that period. For the year ended December 31, 1998, our four largest
customers accounted for approximately 98% of our revenues. If we lose one or
more of our significant customers and do not attract additional customers, we
may not generate sufficient revenues to offset this loss of revenues and our net
loss will increase. In addition, if a significant customer fails to pay amounts
it owes us, or does not pay those amounts on time, our revenues, operating
results and financial position could suffer. Our backlog from signed contracts
was approximately $16.1 million as of December 31, 1999, of which we expect to
recognize $8.9 million during the year ending December 31, 2000.

STRATEGIC RELATIONSHIPS

Wireless Knowledge Inc. We are collaborating with Wireless Knowledge, a
joint venture of Microsoft Corporation and Qualcomm, Inc., to develop and market
Workstyle Server products and services. We are the exclusive reseller of the
Workstyle Server product to the government sector in North America and a
non-exclusive reseller in all other North American sectors. We will provide, on
an exclusive basis in North

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America, a value-added managed service that includes support, monitoring and
managing many aspects of an enterprise's provision of Workstyle Server to its
end users. Under our arrangement with Wireless Knowledge, we will act as an
exclusive third-party distributor, installer and integrator of managed services
for the Workstyle Server for the first six months following the commercial
introduction of the managed service. Wireless Knowledge also has agreed to
provide us with sales leads for managed services generated by their national
advertising campaign. We believe that this product will create attractive
opportunities for us to create enterprise-specific enhanced applications.

Our initial joint activities include product design, development of
specifications for Workstyle Server managed services and scheduling of the
proposed deployment of new end-user devices. Our arrangement with Wireless
Knowledge will involve substantial joint marketing of the Workstyle Server. We
have agreed to advertise our wireless data services using the Workstyle Server
brand.

Under certain circumstances, others may have the ability to resell the
Workstyle Server product to the government sector in North America and to
provide a similar, or the same, managed service to North American sector. In
addition, Microsoft Corporation and Qualcomm, Inc., as part of the joint venture
that formed Wireless Knowledge, retain rights to Wireless Knowledge technology
and could offer competing products or services themselves. If Microsoft,
Qualcomm or others devoted substantial resources to marketing Workstyle Server,
the value of our strategic relationship with Wireless Knowledge would be
diminished and our business would suffer. As part of the agreement, we have
committed to purchase for resale Workstyle Server licenses over a 42-month
period.

Wireless Data Carriers. We actively seek to connect wireless data carriers
to the Paradigm4 Wireless DataNet to increase the reach of our network. For
wireless carriers, we offer managed connectivity and routing that enables
wireless data roaming and mobility switching, as well as access to applications
hosted on the Paradigm4 Wireless DataNet. As more carriers utilize our carrier
interconnect services, we expect that application providers will have an
additional incentive to utilize our applications hosting and connectivity
services to reach more end users. The Paradigm4 Wireless DataNet currently has
active connections with AT&T Wireless Services, Bell Atlantic Mobile, Bell South
Wireless Data, Telus Mobility and Aeris and we are in discussions with several
others wireless carriers about establishing connections to the Paradigm4
Wireless DataNet. The Paradigm4 Wireless DataNet is configured to interconnect
with a wide variety of wireless data carriers and to accommodate other
technologies as they emerge.

Public Technology, Inc. We recently entered into a joint marketing
agreement with Public Technology, Inc., or PTI, to expand our marketing reach
within the public sector. PTI is a non-profit organization dedicated to
furthering the use of technology in both cities and counties for elected
officials and professional managers. We expect to work with PTI in marketing the
SmartPartner service and the Workstyle Server product and managed service to
state and local governments. More importantly, we expect to develop and market
jointly with PTI additional applications for the public sector market, such as
building- and health-inspection support.

TECHNOLOGY

Our service platform is designed for the creation, delivery and support of
complex wireless data applications through the use of industry standard
development tools, our message switching technology, patented middleware and
network infrastructure.

Message Switching. Our message switching software integrates multiple
sources of data and delivers the combined content to a variety of wireless and
wireline devices. The system, which is operated on high-availability platforms,
provides services for authentication, encryption, message logging and guaranteed
message delivery. A software developers kit enables application programs to take
advantage of these features. The system interfaces to industry-standard data
bases as well as legacy systems using a wide variety of communications
protocols. The message switch incorporates our EMS middleware to optimize
communications with wireless devices.

Software Development Tools. We make use of industry-standard tools to
develop products for the variety of wireless devices and services available. Our
software development has been based primarily on programming languages C, C++,
HTML and relational data base products such as Oracle and Microsoft

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SQL Server. In our current development efforts, we are adding browser-based
technologies based on Java and XML. These technologies are easily adapted to
support HDML and WAP devices -- the two most common device browser interfaces.
All network communications are based on Internet protocols to ensure application
portability. Current applications are designed to be compatible with emerging
technologies, such as GPRS and 1xRTT.

Application Development Platforms. Our engineers use various application
development platforms to develop new, enhanced applications rapidly. For
example, we use Oracle's Portal-to-Go, a development platform created
specifically for wireless data that combines web, database and enterprise
content, using Java-based application code, through a user-configurable
interface to multiple wireless data devices. New devices can be added without
modifying the application code by installing a new interface adapter to the
Portal-to-Go server.

Enterprise Messaging System Middleware. Our patented EMS middleware is
embedded in applications we create to optimize transmission of data to and from
various types of wireless devices. Our middleware reduces the amount of data
transferred by compressing the data and removing unnecessary protocol
information while maintaining reliable delivery of all messages. In addition,
the EMS software provides multiple levels of message priority. These features
result in an enhanced user experience and a reduction of airtime cost. The EMS
software also provides important capabilities, such as store and forward,
retransmit and the ability dynamically to select a wireless network service.
Application protocol interface calls and EMS system functional operation are
identical across all operating platforms. The system is currently available on
the following operating platforms: DOS, Windows 3.1, CE, Windows NT/9X and most
versions of UNIX. It is also available on the Norand Mobile Display Terminal.
EMS currently supports the following wireless networks: CDPD, Mobitex,
DataRadio, ARDIS and Bell South Wireless Data.

Interoperability and Connectivity. The Paradigm4 Wireless DataNet
architecture addresses and resolves interoperability problems inherent in the
current interconnections among wireless data carriers. The network employs
advanced routing technology to improve reliability and reduce the number of
links required to support interoperability. It is designed for interconnections
with carriers based on IP and OSI protocols and to accommodate new wireless data
technologies as they emerge, including GPRS for GSM and TDMA carriers, 1xRTT for
CDMA carriers, third-generation networks and private networks. It also provides
connections for application providers to carriers and connections for users to
carriers and application providers. Enterprise customers, carriers and
application providers connect to the network through direct frame-relay links
and routers provided by Paradigm4 and located on their premises. These
connections are configured with varying levels of redundancy, which may include
multiple on-premise routers and communications links, to minimize the likelihood
that network failures will cause service interruptions. The Paradigm4 network
provides active redundancy based on multiple connections to each connected
entity by mapping multiple permanent virtual circuits from each entity to
diverse locations in the network infrastructure.

RESEARCH AND DEVELOPMENT

As of March 31, 2000, our research and development team consisted of 18
professionals engaged in research and development and engineering. We intend to
continue to add significantly to the size of our research and development staff.

SALES AND MARKETING

Our sales and marketing activities are carried out by a direct sales staff
augmented by indirect sales channels through certain of our strategic
relationships. As of March 31, 2000, our sales and marketing staff consisted of
36 professionals. Our direct sales organization has been focused primarily on
sales of engineering and implementation services to the public safety and
carrier services markets. As we continue to increase our emphasis on sales of a
broader range of network services and increasingly to commercial customers, we
intend to expand significantly our sales and marketing force. We compensate our
sales force

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through a combination of salary and commission. We believe that our compensation
structure incentivizes our sales force to focus on recurring revenue
opportunities.

In the public safety sector, we supplement our direct sales through, among
other things, our relationship with PTI. In the commercial sector, we expect to
augment our direct sales force in part through our relationship with Wireless
Knowledge, which has agreed to forward to us Workstyle Server managed services
sales leads generated by their brand awareness advertising in national and
regional print media. We also expect to engage in collaborative sales with other
targeted, broad-based applications providers.

COMPETITION

The market for our services is becoming increasingly competitive. The
potential adoption of an industry standard protocol, such as WAP, may make it
easier for new market entrants to offer some or all of the services we offer and
may make it easier for existing competitors to introduce some or all of the
services they do not now provide, or improve the quality of their services. We
expect that we will compete primarily on the basis of the functionality, price,
breadth and quality of our products and services. Our current or potential
competitors include:

- Wireless application service providers that target specific industries in
which Paradigm4 is active or may be active, and provide wireless access
to mission critical data and applications. These include Aether Systems,
Inc., Cerulean Technology, Inc., Data Critical Corporation, Datamaxx,
Mobile Data Solutions Inc., SAIC and 724 Solutions Inc.

- Developers of wireless data middleware and systems integrators that
provide mobile data solutions and deploy mobile data applications. These
include companies focused exclusively on wireless data, such as Global
Data Inc., Mobile Ware Corporation and Nettech Systems, as well as
traditional systems integrators such as the consulting operations of the
big five public accounting firms, Cap Gemini America, Inc., Inacom Corp.,
Keane, Inc. and others, who may move aggressively into wireless data
systems integration.

- Wireless data Internet service providers such as GoAmerica, Inc.,
InfoSpace.com, Inc. and Infowave Software, Inc. that may offer competing
enterprise applications such as e-mail and calendar access, as well as
wireline Internet service providers such as America Online, that have
announced their intentions to become wireless data providers.

- Wireless network operators, such as AT&T Wireless, Bell Atlantic Mobile,
Metricom, Inc., Nextel Communications Inc., Omnipoint Corp. and Sprint
PCS, any of which may decide to develop in-house resources to provide
services that compete with those of Paradigm4.

- Existing and potential customers that develop their own in-house
solutions with internal expertise and outsourced service providers and
products.

Many of our existing and potential competitors have substantially greater
financial, technical, marketing and distribution resources than we do.
Additionally, many of these companies have greater name recognition and more
established relationships with our target customers. Furthermore, these
competitors may be able to adopt more aggressive pricing policies and offer
customers more attractive terms than we can. Nevertheless, we believe that the
breadth of our solution, encompassing engineering services, applications
development, hosting and continuous customer support with significant
interoperability functions will provide customers with a more desirable
outsourcing alternative to competitors offering only integration, network access
or applications development on a stand-alone basis.

GOVERNMENT REGULATION

We are not currently subject to direct federal, state or local government
regulation, other than regulations that apply to businesses generally. The
wireless network operators with which we contract to provide airtime are subject
to regulation by the Federal Communications Commission. Therefore, indirectly,
changes in Federal Communications Commission regulations could affect the
availability of wireless coverage these carriers are willing or able to sell to
us. We could also be adversely affected by developments in regulations that
govern or may in the future govern the Internet, the allocation of radio

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<PAGE> 41

frequencies or the placement of our carriers' cellular towers. Due to the
increasing popularity and use of the Internet, there is an increasing number of
laws and regulations pertaining to the Internet. In addition, a number of
legislative and regulatory proposals are under consideration by various agencies
and commissions in the United States and elsewhere. Laws or regulations may be
adopted, and in some countries have already been adopted, with respect to the
Internet relating to liability for information retrieved from or transmitted
over the Internet, online content regulation, user privacy, taxation and quality
of products and services. Moreover, the applicability to the Internet of
existing laws governing issues such as intellectual property ownership and
infringement, copyright, trademark, trade secret, obscenity, libel, employment
and personal privacy is uncertain and developing. Uncertainty and new
regulations could increase our costs and prevent us from delivering some or all
of our services.

INTELLECTUAL PROPERTY RIGHTS

Our success depends on our technology and other proprietary rights relating
to our services. We rely on a combination of patent, copyright, trademark,
service mark and trade secret laws, confidentiality procedures and contractual
provisions to establish and protect such proprietary rights.

We have applied for patent protection of certain technologies and to have
several of our trademarks and service marks registered. To date, we have been
issued a U.S. patent relating to our Electronic Messaging System middleware
technology. In addition, a second patent has been allowed based on the same
technology which, if issued, will give us even broader protection. We have also
applied for foreign patents for the same technology, a patent for which has
recently been allowed in the European Community. We have been granted U.S.
trademark registrations for our "P4" trademark, and have filed trademark or
service mark registrations in the U.S. for Paradigm4, Paradigm4 Wireless
DataNet, our logo with the tag line "imagination gone wireless" and
SmartPartner, and intend to file abroad. Our software programs are protected
under the U.S. copyright laws. In the case of some of our software programs, we
intend to register the copyrights with the U.S. Copyright Office in order to
provide us with additional protection.

EMPLOYEES

As of March 31, 2000, we had 178 employees. Management considers its
relations with our employees to be good. None of our employees is represented by
a union.

PROPERTIES

Our principal executive office is located in a leased facility Hartford,
Connecticut. Our network operations center and data center are housed in a
leased facility in Bothell, Washington. We occupy leased office spaces in an
additional eleven locations throughout the United States, primarily for purposes
of providing sales and engineering and implementation services. We believe that
our current facilities are adequate to meet our business needs and that
additional space will be available as we need it.

LEGAL PROCEEDINGS

We are involved in various legal proceedings arising from time to time in
the course of our business. We are not currently a party to any material legal
proceedings.

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<PAGE> 42

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The executive officers and directors of Paradigm4, and their ages and
positions as of April 18, 2000, are:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
J. Bruce Boisture.................... 50 Chairman, Chief Executive Officer and President
Brian Herrman........................ 45 Vice President, Chief Financial Officer
Martin J. Pattwell................... 47 Vice President, Chief Operating Officer and Director
Richard M. Borden.................... 34 Vice President, General Counsel and Secretary
Michael Lowry........................ 39 Vice President, Sales
Mark Chiarelli....................... 47 Vice President, Chief Technology Officer
Chris Yonlick........................ 41 Vice President, Network Engineering and Operations
Mark English......................... 40 Vice President, Information Technology and Architecture
John Bay............................. 47 Special Director of Strategic Alliances and Director
Andrew Zehner........................ 38 Associate General Counsel and Assistant Secretary
Thomas Cirrito....................... 52 Director
Donald Duffy......................... 32 Director
Alexander D. Lynch................... 38 Director
Eric Meyer........................... 39 Director
Terence Quinn........................ 44 Director
Peter Kleinknecht.................... 54 Director
</TABLE>

J. Bruce Boisture has served as our Chairman of the board of directors
since April 2000, and our Chief Executive Officer and President since May 1999.
From May 1999 to April 2000, Mr. Boisture served as Co-Chairman of the board of
directors. Prior to joining Paradigm4, from 1995 to May 1999, Mr. Boisture was
president of his own investment firm, Trinity Capital Alliance, Inc. In that
capacity, he organized and participated in various corporate investment
transactions, participating as required in the management of various companies
in which the firm invested. From January 1991 to 1995, Mr. Boisture was a
private investor. Before founding Trinity Capital, Mr. Boisture served from 1986
through 1990 as the Chief Operating Officer of Acadia Partners, L.P., a $1.7
billion investment fund. He was an associate and then partner at the law firm of
Day, Berry & Howard in Hartford, Connecticut, from 1979 through 1986, after
serving as a law clerk in the Second Circuit Court of Appeals and the U.S.
Supreme Court from 1977 to 1979. Mr. Boisture is a graduate of Princeton
University, Oxford University, and Yale Law School.

Brian Herrman has served as our Vice President and Chief Financial Officer
since May 1999. From May 1998 to April 1999, Mr. Herrman was a private investor.
From January 1991 to April 1998, Mr. Herrman was the co-owner and Vice President
of Silikal Resin Systems, Inc. where he also served as Chief Financial Officer,
then Chief Operating Officer. From June 1977 to December 1990, Mr. Herrman was
employed by Ernst and Young, where he was a partner in the firm's
Entrepreneurial Services Group and was responsible for business consulting,
accounting, and tax matters for numerous small and medium-sized companies. Mr.
Herrman is a CPA and a graduate of George Washington University.

Martin J. Pattwell has served as our Vice President and Chief Operating
Officer and a director since March 1998. Mr. Pattwell served as our Vice
President, Sales from February 1999 to September 1999. Mr. Pattwell served as
Director of Sales from February 1997 to February 1999. Prior to joining
Paradigm4, from September 1992 to February 1997, he was the District Manager and
Regional Director of Stratus Computer. Mr. Pattwell is a graduate of Villanova
University.

Richard M. Borden has served as our Vice President, General Counsel and
Secretary since August 1997. Prior to joining Paradigm4 in 1997, Mr. Borden was
an associate at the law firm of Shipman &

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<PAGE> 43

Goodwin from April 1994 to July 1997. From February 1993 to March 1994, Mr.
Borden was an associate at the law firm of Pepe & Hazard, and, from October 1990
to December 1992, he was an associate at the law firm of Cravath, Swaine &
Moore. Mr. Borden serves on the board of directors of the MIT Enterprise Forum
of Connecticut. Mr. Borden is a graduate of Amherst College and New York
University School of Law.

Michael Lowry has served as our Vice President, Sales since January 2000.
Prior to joining Paradigm4, Mr. Lowry served as Director of Sales at Connecticut
Telephone/USN from September 1999 to January 2000. Mr. Lowry served as Regional
Director of CTC Communications Corp. from February 1998 to September 1999. From
June 1997 to February 1998, he was Director of National and Key Accounts for
Midcom Communications/Winstar. From October 1996 to June 1997, he was Vice
President, Sales of Ziplink LLC. From January 1995 to October 1996, Mr. Lowry
was the Northeast District Sales Manager for Skytel Corp. Mr. Lowry is a
graduate of Middlebury College.

Mark Chiarelli has served as our Vice President and Chief Technology
Officer since November 1999. From June 1998 to November 1999, Mr. Chiarelli
served as President of EGL Networks, Inc., a network engineering company
co-founded by Mr. Chiarelli in 1998 and acquired by Paradigm4 in December 1999.
Mr. Chiarelli served in various positions for AT&T Wireless Services Wireless
Data Division from July 1994 to June 1998. Mr. Chiarelli is a graduate of
Western Washington University.

Chris Yonlick has served as our Vice President, Network Engineering and
Operations since November 1999. From June 1998 to November 1999, he served as
the Vice President, Engineering and Operations of EGL Networks, Inc., which he
co-founded in 1998. From June 1997 to June 1998, Mr. Yonlick worked at AT&T
Wireless Services as Senior Technical Architect for AWS Enterprise Network
Support Group. Mr. Yonlick served as Director, Network Engineering and
Operations in the Messaging Division of AT&T Wireless Services from May 1995 to
June 1997 and as Manager, Network Engineering, of the Wireless Data Division
from September 1993 to May 1995. Mr. Yonlick is a graduate of Washington State
University.

Mark English has served as our Vice President, Information Technology and
Architecture since November 1999. From May 1998 to November 1999, he served as
Director, Systems Engineering at EGL Networks. As Principal Member of Technical
Staff, AT&T Wireless Services, Mr. English held the position of Wireless Data
Architect within the Wireless Data Division from February 1996 to May 1998. From
February 1994 to February 1996, he was a Senior Member of Technical Staff
developing telecommunications and application software and managed a networking
group for US West Communications. Mr. English attended Western Washington State
University.

John Bay has served as Special Director of Strategic Alliances and a
director since April 2000. Mr. Bay served as Co-Chairman of the board of
directors from May 1999 to April 2000. Mr. Bay served as our Acting Vice
President, Marketing from September 1999 to April 2000 and as our President from
December 1995 to May 1999. Mr. Bay was a co-founder of Paradigm4 and has served
on the board of directors since January 1996. Before founding Paradigm4, from
June 1995 to December 1995, he was Managing Director of the Wireless
Communications Group of SHL Systemhouse, Inc. From March 1994 to June 1995, Mr.
Bay was Managing Director of the International Public Safety Group of SHL
Systemhouse, Inc., and from March 1993 to March 1994, he was President of SHL
Systemhouse, Inc.'s SI3 subsidiary. Mr. Bay attended Muhlenberg College.

Andrew Zehner has served as our Associate General Counsel since January
2000 and our Assistant Secretary since March 2000. Prior to joining Paradigm4,
from April 1994 to January 2000, Mr. Zehner was Associate Counsel at People's
Choice TV Corp., a wireless communications company. People's Choice TV was
acquired by Sprint Corporation in September 1999. Mr. Zehner is a graduate of
Middlebury College and the University of Maryland School of Law.

Thomas Cirrito has served as one of our directors since November 1998. From
June 1996 to the present, Mr. Cirrito has served as the general partner of
Atocha, L.P., a financial management firm specializing in high growth
telecommunications opportunities. From April 1996 to May 1998, Mr. Cirrito

40
<PAGE> 44

served as President of Consumer Division of Communications Telco Group, Inc.
From June 1993 to April 1995, Mr. Cirrito served as Chairman, President and
Chief Executive Officer of Long Distant Wholesale Club. Mr. Cirrito is also a
member of the boards of directors of WorldxChange Communications and Digital
Commerce Corporation.

Donald Duffy has served as one of our directors since January 1996. Mr.
Duffy is a founding partner of Meyer, Duffy & Associates, and Meyer Duffy
Ventures, each founded in 1994, both partnerships that invest in early stage
networking infrastructure and Internet technology companies. Mr. Duffy currently
serves on the board of Predictive Systems, Inc.

Eric Meyer has served as one of our directors since January 1996. Mr. Meyer
is a founding partner of Meyer, Duffy & Associates and Meyer Duffy Ventures,
each founded in 1994, both partnerships that invest in early stage networking
infrastructure and internet technology companies. He currently serves on the
board of Predictive Systems, Inc.

Peter Kleinknecht has served as one of our directors since May 1999. Mr.
Kleinknecht has been the Chairman of Knight Electrical Services since January
1999. From January 1975 to December 1998, Mr. Kleinknecht was President of
Kleinknecht Electric Inc. Mr. Kleinknecht was President and Vice Chairman of IPC
Information Systems Inc., a turret manufacturing company, from January 1991 to
April 1998.

Alexander D. Lynch has served as one of our directors since April 2000. Mr.
Lynch has been Vice President, Strategic Development at TradeOut.com, Inc. since
February 2000. From January 1995 to February 2000, Mr. Lynch was a partner at
the law firm of Brobeck, Phleger & Harrison LLP, New York, New York. Mr. Lynch
is a graduate of Tulane University and Columbia Law School.

Terence Quinn has served as one of our directors since October 1996. Mr.
Quinn has been Managing Director and Senior Technology Equity Research Analyst
for ING Furman Selz Asset Management LLC since 1993. Mr. Quinn specializes in
the computer software and computer services industries with particular focus on
companies involved in client server and Internet related solutions. Mr. Quinn
previously was Managing Director at Kidder Peabody & Company, and Senior Vice
President at Drexel Burnham Lambert & Company.

There are no family relationships among any of our directors, officers or
key employees.

In January 1997, Mr. Chiarelli entered an Alford plea to a charge of
vehicular homicide, pursuant to which he was convicted without admitting or
denying guilt. In connection with this matter, Mr. Chiarelli was sentenced to
serve 60 days of work-release confinement, two years of probation and 240 hours
of community service. Mr. Chiarelli has since satisfied all obligations with
regard to this proceeding.

COMMITTEES OF THE BOARD OF DIRECTORS

We established a compensation committee in May 1997. The compensation
committee consists of Thomas Cirrito and Donald Duffy. The compensation
committee recommends, reviews and oversees the compensation paid to our
executive officers and administers our employee stock option plans.

We established an audit committee in November 1998. Prior to the closing of
this offering, the board of directors will adopt a charter for the audit
committee which sets forth the responsibilities and guidelines of the audit
committee. The audit committee currently consists of Peter Kleinknecht and
Donald Duffy. We will appoint independent directors to each of our audit
committee and compensation committee after the completion of this offering in
compliance with the rules promulgated by the Securities and Exchange Commission
and The Nasdaq Stock Market, Inc. The audit committee assists the board of
directors in fulfilling its responsibilities with respect to various accounting
and financial reporting activities.

We established a finance committee in May 1997. The finance committee
consists of Eric Meyer and Terrence Quinn. The finance committee assists our
board of directors by reviewing and granting approval for financial activities,
including the issuance of equity securities, the incurrence and issuance of
debt, and entering into or amending the terms of significant contracts and
transactions.

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<PAGE> 45

EXECUTIVE COMPENSATION

The following table sets forth the compensation earned for all services
rendered to us in all capacities during 1999 by our Chief Executive Officer and
our four other most highly compensated executive officers. We refer to these
five officers as the "named executive officers."

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
FISCAL
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS
- --------------------------- ------ -------- -------
<S> <C> <C> <C>
J. Bruce Boisture........................................... 1999 $131,250 $12,250
Chairman and Chief Executive Officer
Martin J. Pattwell.......................................... 1999 $191,250 $25,323
Vice President, Chief Operating Officer
Richard M. Borden........................................... 1999 $152,333 --
Vice President, General Counsel, Secretary
Mark Chiarelli.............................................. 1999 $144,750 --
Vice President, Chief Technology Officer
John Bay.................................................... 1999 $203,333 $36,000
Special Director of Strategic Alliances
</TABLE>

Mr. Boisture joined us in May 1999. His current annual base salary is $225,000.

Mr. Pattwell's bonus included $15,323 in commissions.

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth information concerning individual grants of
stock options made during the fiscal year ended December 31, 1999 to the named
executive officers. We did not grant any stock appreciation rights to these
individuals during the year.

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------
% OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
NUMBER OPTIONS ANNUAL RATES OF STOCK
OF SHARES GRANTED TO EXERCISE PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES PRICE OPTION TERM
OPTIONS IN FISCAL PER EXPIRATION ------------------------
NAME GRANTED(#) YEAR SHARE DATE 5%($) 10%($)
- ---- ---------- ---------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
J. Bruce Boisture...... 1,650,000 35.66% $2.10 05/26/09 $2,179,120 $5,522,318
Martin J. Pattwell..... 350,000 7.57% $2.10 06/01/09 $ 462,238 $1,171,401
19,000 0.41% $2.82 11/09/09 $ 33,696 $ 85,393
Richard M. Borden...... 200,000 4.32% $2.82 11/09/09 $ 354,696 $ 898,871
Mark Chiarelli......... 172,800 3.74% $2.10 11/09/09 $ 228,213 $ 578,337
John Bay............... 410,000 8.86% $2.10 06/01/09 $ 541,478 $1,372,212
60,000 1.30% $2.82 11/09/09 $ 106,409 $ 269,661
</TABLE>

Potential realizable value is based on an assumption that the stock price
of the common stock appreciates at the annual rate shown (compounded annually)
from the date of grant until the end of the ten-year term of the option.
Potential realizable values are net of exercise price, but before taxes
associated with exercise. These numbers are calculated based on the requirements
promulgated by the Securities and Exchange Commission and do not reflect our
estimate of future stock price growth.

The vesting rate for the named executive officers' stock options described
in the table above is as follows:

- Mr. Boisture's options vest on the first, second and fourth anniversaries
of the date of grant. The vesting of all of Mr. Boisture's options will
be automatically accelerated upon the closing of this offering in the
event the initial public offering price exceeds $6.00 per share. Mr.
Boisture has transferred 385,066 of these options to his wife, an adult
child and three trusts for his minor children.

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<PAGE> 46

- With respect to the 350,000 options, Mr. Pattwell's options vest on the
grant date and on the first, second and third anniversary of the date of
grant. The vesting of all of these options will be automatically
accelerated upon the closing of this offering. With respect to the 19,000
options, Mr. Pattwell's options vest on the first, second and third
anniversary of the date of grant.

- Mr. Borden's options vest on the first, second and third anniversary of
the date of grant.

- Mr. Chiarelli's options vest on the grant date, on the occurrence of
certain milestones and at a rate of 3,000 per month commencing on the
grant date.

- With respect to the 410,000 options, Mr. Bay's options vest on December
31, 1999, December 31, 2000 and on the seventh anniversary of the date of
grant. The vesting of all of these options will be automatically
accelerated upon the closing of this offering in the event the initial
public offering price exceeds $6.00 per share. With respect to the 60,000
options, Mr. Bay's options vest on the first, second and third
anniversary of the date of grant.

AGGREGATE OPTION EXERCISES AND HOLDINGS

The following table sets forth information concerning the number and value
of unexercised options held by each of our named executive officers at December
31, 1999. None of these executive officers exercised options during the fiscal
year ended December 31, 1999.

<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS
1999(#) AT DECEMBER 31, 1999($)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
J. Bruce Boisture.................. 440,000 1,210,000 $316,800 $871,200
Martin J. Pattwell................. 115,625 290,875 $ 63,000 $189,000
Richard M. Borden.................. 37,500 212,500 $ -- $ --
Mark Chiarelli..................... 72,750 133,800 $ 28,080 $ 96,336
John Bay........................... 246,250 343,750 $164,750 $230,400
</TABLE>

Value of unexercised options is (i) the fair market value of the common
stock at fiscal 1999 year end, which was determined by the board of directors to
be $2.82, less the option exercise price per share, times (ii) the number of
shares subject to the option. If the offering price were used as the fair market
value, the value of Mr. Boisture's options would increase by $ and
$ respectively, Mr. Pattwell's would increase by and
respectively, Mr. Borden's would increase by and
respectively, Mr. Chiarelli's would increase by and
respectively and Mr. Bay's would increase by and
respectively.

DIRECTOR COMPENSATION

Other than reimbursing directors for customary and reasonable expenses of
attending board of directors or committee meetings, we do not currently
compensate our directors. From time to time, directors may be granted options to
purchase shares of our common stock.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of our compensation committee is an officer or employee
of Paradigm4. None of our executive officers serves as a member of the board of
directors or compensation committee of any entity that has one or more executive
officers serving on our board of directors or compensation committee.

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<PAGE> 47

EMPLOYMENT AGREEMENTS

We have entered into employment agreements with each of the named executive
officers. Pursuant to these agreements,

- Mr. Boisture currently receives an annual base salary of $225,000, a
yearly guaranteed bonus of $25,000 and, at the discretion of our board of
directors, an annual performance bonus equal to up to 20% of his base
salary and guaranteed bonus;

- Mr. Pattwell currently receives an annual base salary of $200,000 and a
possible annual bonus of up to $40,000 based on the achievement of
certain milestones;

- Mr. Borden currently receives an annual base salary of $160,000;

- Mr. Chiarelli currently receives an annual base salary of $180,000 and is
eligible to receive a bonus of up to $92,000 based on the achievement of
certain milestones; and

- Mr. Bay currently receives an annual base salary of $200,000 and a
possible annual bonus, as determined by the compensation committee.

Each of these employment agreements, except for Mr. Chiarelli's agreement,
automatically renews for a three-year period beginning on January 1 of each
year, unless either we or the named executive officer who is a party to the
agreement gives the other notice of the intention not to renew. Mr. Chiarelli's
agreement has a term of one year, and unless terminated by us or Mr. Chiarelli,
will automatically renew until either we or Mr. Chiarelli give notice of
termination. Each of the agreements contains customary confidentiality and
non-competition provisions and contemplates that each named executive officer
will devote his full time to our business.

Pursuant to each agreement, if we terminate the employment of any named
executive officer without cause, he is entitled to a payment from us as
determined by the terms of his employment agreement. If Mr. Boisture's
employment is terminated without cause, he is entitled to an amount equal to two
times his annual base salary plus a guaranteed bonus and certain health-related
benefits for two years from the date of termination. Messrs. Pattwell, Borden
and Bay would each be entitled to an amount equal to his annual base salary and
certain health-related benefits for one year from the date of termination. Mr.
Chiarelli would be entitled to an amount equal to six months of his annual base
salary.

Each of Messrs. Boisture, Bay, Pattwell and Borden is entitled to a payment
if we terminate his employment within 12 months of certain changes of control.
If terminated within 12 months of a change of control, Mr. Boisture would be
entitled to receive a lump sum payment in an amount equal to two times his base
salary plus guaranteed bonus. He would also receive at least 40% of his base
salary and his bonus, pro rated for the then-current year, and health related
benefits for a period of 24 months. Each of Messrs. Pattwell, Borden and Bay
would be entitled to receive two times his annual compensation, and
health-related benefits for a period of 24 months. Each of Messrs. Borden and
Bay would also receive 20% of their respective annual compensation pro rated for
the then current year, while Mr. Pattwell would receive at least 10% of his
annual compensation pro rated for the then current year.

EMPLOYEE BENEFIT PLANS

We adopted our 1999 Stock Plan in May 1999 and our 1996 Stock Plan in
January 1996, which was amended in October 1996. A total of 6,500,000 shares of
common stock have been authorized for issuance under the 1999 Stock Plan. A
total of 1,900,000 shares of common stock have been authorized for issuance
under the 1996 Stock Plan. Under the terms of each plan, shares subject to stock
awards that have expired or otherwise terminated without having been exercised
again become available for grant. Exercised shares repurchased by us through a
right of repurchase will not again become available for grant.

As of March 31, 2000, we had options to purchase 1,106,110 shares of common
stock issued and outstanding under the 1996 Stock Plan, and options to purchase
5,100,843 shares of common stock issued

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<PAGE> 48

and outstanding under the 1999 Stock Plan. The per share exercise prices of
these options ranged from $0.50 to $11. We have not made any grants under the
1996 Stock Plan since May 19, 1999. All future option grants will be made under
the 1999 Stock Plan.

Upon a change in control of our ownership, the board of directors may take
the following actions with respect to the outstanding stock options under both
stock plans:

- substitute the stock of the reorganized company for the options on an
equitable basis in order to protect these outstanding options;

- provide that all options must be exercised within a specified number of
days; or

- grant the reorganized company the right to purchase any unexercised
shares at their fair market value.

1999 Stock Plan

The 1999 Stock Plan permits the grant of options to our directors,
employees and consultants. Options may be either incentive stock options within
the meaning of Section 422 of the Internal Revenue Code or nonstatutory stock
options. In addition, the 1999 Stock Plan permits the grant of stock
appreciation rights, stock awards and rights to purchase restricted stock. The
maximum number of shares with respect to which options or stock appreciation
rights may be granted to any employee, including any cancellations or repricings
which may occur, will be limited to 5,000,000 shares in any calendar year.

The board of directors has delegated the authority to administer the 1999
Stock Plan to our compensation committee. Subject to the limitations set forth
in the 1999 Stock Plan, the compensation committee has the authority to:

- determine eligibility for plan participants;

- designate the number of shares to be covered by each award;

- determine whether an option is to be an incentive stock option or a
nonstatutory stock option;

- establish vesting schedules;

- determine the exercise price of options and specify the type of
consideration to be paid upon exercise; and

- specify other terms of award, subject to restrictions.

The maximum term of options granted under the 1999 Stock Plan is ten years.
Incentive stock options granted under the 1999 Stock Plan generally are
non-transferable. Nonstatutory stock options generally are non-transferable,
although the applicable option agreement may permit transfers. Options generally
expire after the termination of an optionholder's service. An optionholder may
exercise any options that are exercisable as of the date of termination during
the three-month period after termination. If an optionholder is permanently
disabled or dies during his or her service, his or her options generally may be
exercised up to 12 months following disability or death.

The exercise price of an incentive stock option cannot be less than 100% of
the fair market value of the common stock on the date of the grant and of a
nonstatutory stock option cannot be less than 50% of the fair market value of
the common stock on the date of grant, and in each case, may be paid in cash or
shares of our common stock or a combination thereof. Additionally, after the
closing of this offering, optionholders may exercise options through a cashless
exercise whereby all or a portion of the option shares are simultaneously sold
through a designated brokerage firm. The exercise price of an option granted to
a person who holds more than 10% of the voting power of Paradigm4 cannot be less
than 110% of the fair market value of our common stock on the date of the grant.

The terms of any stock appreciation rights, stock awards or restricted
stock purchase rights granted under the 1999 Stock Plan will be determined by
the compensation committee. The price applicable to any stock appreciation
right, stock award or restricted stock purchase right may be equal to the fair
market value of our common stock or any other price as determined by the
compensation committee. Stock appreciation rights, stock awards and restricted
stock purchase rights awarded under the 1999 Stock Plan are generally
nontransferable, although the applicable award agreement may permit transfers.

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<PAGE> 49

The board of directors may amend or terminate the 1999 Stock Plan at any
time. Amendments will generally be submitted for stockholder approval only to
the extent required by applicable law.

1996 Stock Plan

The 1996 Stock Plan permits the grant of options to our directors,
officers, employees, vendors, advisors and consultants. Options may be either
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code or nonstatutory stock options.

Most of the provisions of the 1996 Stock Plan are parallel in all material
respects to those of the 1999 Stock Plan. Some distinguishing characteristics
include the following:

- The 1996 Stock Plan is administered by the board of directors or an
administrator appointed by the board of directors; and

- If an optionholder dies during his or her service, his or her options
generally may be exercised up to six months following death provided that
the options were exercisable on the employee's last day of work.

401(k) PLAN

We sponsor the Paradigm4 401(k) Plan, a defined benefit contribution plan
intended to qualify under Section 401 of the Internal Revenue Code of 1086, as
amended. All employees are eligible to participate and may enter the 401(k) Plan
after 30 days of service. Participants may make pre-tax contributions to the
401(k) Plan of up to 15% of their eligible earnings, subject to statutorily
prescribed annual limit. At this time, we do not make matching contributions on
behalf of participants. Each participant's contributions, and the corresponding
investment earnings, are generally not taxable to the participants until
withdrawn. Participant contributions are held in trust as required by law.
Individual participants may direct the trustee to invest their accounts in
authorized investment alternatives.

INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION ON LIABILITY

Our certificate of incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that a director
of a corporation will not be personally liable for monetary damages for breach
of an individual's fiduciary duties as a director except for liability:

- for any breach of a director's duty of loyalty to Paradigm4 or to our
stockholders;

- for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law;

- for unlawful payments of dividends or unlawful stock repurchases or
redemptions as provided in Section 174 of the Delaware General
Corporation Law; or

- for any transaction from which a director derives an improper personal
benefit.

Our bylaws provide that we will indemnify our directors, officers,
employees and other agents to the full extent permitted by law. We believe that
indemnification under our bylaws will cover at least negligence and gross
negligence on the part of an indemnified party. Our bylaws also will permit us
to advance expenses incurred by an indemnified party in connection with the
defense of any action or proceeding arising out of a party's status or service
as a director, officer, employee or other agent of Paradigm4 upon an undertaking
by the party to repay the advances if it is ultimately determined that he or she
is not entitled to indemnification.

We believe that our certificate of incorporation and bylaw provisions are
necessary to attract and retain qualified persons as directors and officers. We
also will maintain directors' and officers' liability insurance.

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<PAGE> 50

CERTAIN TRANSACTIONS

COMMON STOCK TRANSACTIONS

Since our inception, we have issued shares of our common stock through
subscription agreements under which we made customary representations,
warranties and covenants, through the exercise of warrants, and through the
exercise of option grants issued pursuant to our stock option plans. The
following table lists the number of shares of common stock held by our
directors, executive officers, promoters and holders of 5% or more of our common
stock:

<TABLE>
<CAPTION>
NAME OF STOCKHOLDER SHARES OF COMMON STOCK HELD
- ------------------- ---------------------------
<S> <C>
Meyer, Duffy & Associates, Inc. (and associated individuals
and entities)............................................. 648,410
John Bay.................................................... 564,960
Joseph Dion................................................. 473,870
Keith Evans................................................. 447,370
Thomas Welch................................................ 400,330
Martin Pattwell............................................. 9,429
</TABLE>

PREFERRED STOCK FINANCINGS

On January 31, 1996, we sold a total of 275,000 shares of series A
preferred stock at a purchase price of $10.00 per share to various investors for
approximately $2.75 million. On June 13, 1996, we sold a total of 25,000 shares
of series B preferred stock at a purchase price of $20.00 per share to one
investor for $500,000. On October 18, 1996, we sold a total of 50,000 shares of
series C preferred stock at a purchase price of $25.00 per share to various
investors for $1,250,000. On December 1, 1996, we sold a total of 40,000 shares
of series D preferred stock at a purchase price of $50.00 per share to various
investors for $2.0 million. On May 9, 1997 and on June 12, 1998, we sold a total
of 179,105 shares of series E preferred stock at a purchase price of $50.00 per
share to various investors for approximately $9.0 million. From April 1999
through November 1999, we sold a total of 10,794,348 shares of series F
preferred stock at a purchase price of $2.10 per share to various investors for
approximately $22.0 million. On February 14, 2000, we sold a total of 11,524,809
shares of series G preferred stock at a purchase price of $2.82 per share to
various investors for approximately $32.5 million.

We sold these shares of preferred stock pursuant to preferred stock
purchase agreements or subscription agreements, under which we made customary
representations, warranties and covenants, and in connection with which we
provided the purchasers with registration rights and information rights, among
other provisions customary in venture capital financings. Each share of our
preferred stock will be automatically converted into common stock upon the
completion of this offering.

47
<PAGE> 51

The following table lists the number of shares of each class of preferred
stock purchased by our directors, executive officers, promoters and holders of
5% or more of each class of our stock:

<TABLE>
<CAPTION>
SHARES OF PREFERRED STOCK PURCHASED (#)
(APPROXIMATE AGGREGATE CONSIDERATION PAID (IN THOUSANDS))
-------------------------------------------------------------------------------
NAME OF INVESTOR SERIES A SERIES B SERIES C SERIES D SERIES E SERIES F SERIES G
- ---------------- -------- -------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Meyer Duffy & Associates, Inc. (and 73,000) 25,000) 11,000) 15,000) 102,367) 1,318,715) 4,539,005)
associated individuals and entities) ($730 ($500 ($275 ($750 ($5,100 ($2,770 ($12,800
Atocha, L.P. 4,187,483) 957,446)
($8,800 ($2,700
Deutsche Bank Capital Partners, L.P. 3,546,099)
($10,000
ATTI (and associated individuals and 49,047) 389,000)
entities) ($2,500 ($816.9
ING Furman Selz (and associated 7,500) 16,000) 20,000) 27,691) 531,913)
entities) ($175 ($400 ($1,000 ($1,380 ($1,500
Archery Capital LLC (and associated 709,216)
entities) ($2,000
Wretton Limited 8,750) 2,000) 5,000)
($87.5 ($50 ($125
Clark Family Investment Trust 1,000,000)
($2,100
The Fox Hound Fund 833,333)
($1,750
Elm Manor, LLC (and associated 30,000) 50,000)
individuals and entities) ($300 ($105
Knight Investments (and associated 15,000) 716,448)
individuals and entities) ($150 ($1,500

Paul Minor, Jr. & Howard S. Tuthill, 15,000)
Trustees for the Estate of William R. ($150
McElroy
John Bay 1,000) 25,525)
($50 ($53.6
Joseph Dion 2,605)
($65.1
Michael Garin 6,500) 3,880)
($65 ($194
Ian Reddin 10,000) 2,800)
($100 ($140
</TABLE>

In certain cases, we issued subordinated notes, which were surrendered as
consideration for preferred stock. None of these notes is currently outstanding.
Upon the closing of this offering, each outstanding share of series A, series B
and series C preferred stock will be converted into 5 shares of common stock,
each share of series D and series E preferred stock will be converted into
19.8413 shares of common stock, and each outstanding share of series F and
series G preferred stock will be converted into 1 share of common stock.

REGISTRATION RIGHTS AGREEMENT

In connection with the various sales of our preferred stock, we entered
into a registration rights agreement with most of the purchasers of the
preferred stock. For a description of the registration rights agreement, please
see "Description of Capital Stock -- Registration Rights." The purchasers of
preferred stock who did not enter into the registration rights agreement
obtained similar rights through their subscription agreements for preferred
stock.

48
<PAGE> 52

WARRANT ISSUANCES

Since January 1996, we have issued warrants to purchase shares of our
capital stock to certain holders of five percent or more of various classes of
our stock in connection with financing transactions. A description of these
transactions is set forth below:

In January 1996, we issued to two entities affiliated with Meyer, Duffy &
Associates, Inc. warrants to purchase an aggregate of up to 38,425 shares of
common stock, at an exercise price of $2 per share as an inducement for
subordinated bridge loans.

In December, 1996, we issued to an entity affiliated with Meyer, Duffy &
Associates, Inc. a warrant to purchase an aggregate of up to 10,000 shares of
series E preferred stock at an exercise price of $50 per share as an inducement
for a subordinated bridge loan. This warrant was not exercised and consequently
expired.

In April 1997, we issued warrants to purchase shares of common stock at an
exercise price of $2.99 per share as an inducement for subordinated bridge
loans. Two entities affiliated with Meyer, Duffy & Associates, Inc. were issued
warrants to purchase an aggregate of up to 108,680 shares of common stock;
individuals and entities affiliated with ATTI were issued warrants to purchase
an aggregate of up to 41,800 shares of common stock; John Bay was issued a
warrant to purchase an aggregate of up to 11,704 shares of common stock; and
Joseph Dion was issued a warrant to purchase an aggregate of up to 3,344 shares
of common stock.

In July 1997, we issued to ATTI a warrant to purchase an aggregate of up to
100,320 shares of our common stock at an exercise price of $2.99 per share as an
inducement for a subordinated bridge loan.

In August 1997, we issued warrants to purchase shares of common stock at an
exercise price of $3.00 per share. Three entities affiliated with Meyer, Duffy &
Associates, Inc. were issued warrants to purchase an aggregate of up to 97,311
shares, and an entity affiliated with ATTI was issued a warrant to purchase an
aggregate of up to 75,751 share as an inducement for subordinated bridge loans.

In October 1997, we issued to an entity affiliated with Meyer, Duffy &
Associates, Inc. a warrant to purchase an aggregate of up to 118,248 shares of
common stock at an exercise price of $3.00 per share as an inducement for a
subordinated bridge loan.

In November 1997, we issued to an entity affiliated with ING Furman Selz a
warrant to purchase an aggregate of up to 58,250 shares of common stock at an
exercise price of $3.00 per share as an inducement for a subordinated bridge
loan.

In December 1997, we issued warrants to purchase shares of common stock at
an exercise price of $3.00 per share. An entity affiliated with Meyer, Duffy &
Associates, Inc. was issued a warrant to purchase an aggregate of up to 69,900
shares, and an entity affiliated with ING Furman Selz was issued a warrant to
purchase an aggregate of up to 11,662 shares as an inducement for a subordinated
bridge loan.

In September 1999, we issued to ATTI a warrant to purchase an aggregate of
up to 56,635 shares of common stock at an exercise price of $2.10 per share in
connection with an equipment leasing transaction.

In November 1998, we issued to Atocha, L.P. a warrant to purchase an
aggregate of up to 205,479 shares of common stock at an exercise price of $7.30
per share as an inducement for a subordinated bridge loan. This warrant has been
cancelled.

In October and November 1999, we issued to entities affiliated with Meyer,
Duffy & Associates warrants to purchase an aggregate of up to 358,750 shares of
common stock at an exercise price of $2.10 per share as part of the
restructuring of the series D and series E preferred stock.

In December 1999, we issued to Atocha, L.P. a warrant to purchase an
aggregate of up to 40,179 shares of common stock at an exercise price of $2.10
per share as an inducement for extending the maturity of a subordinated loan.

49
<PAGE> 53

OPTION GRANTS

In 1999, we established our 1999 Stock Plan. For a description of the 1999
Stock Plan and options granted thereunder to our named executive officers,
please see "Management -- Executive Compensation" and "-- Employee Benefit
Plans." The following additional directors, executive officers and promoters
have been granted options under this plan:

<TABLE>
<CAPTION>
NAME OPTIONS PURCHASE PRICE
- ---- --------- --------------
<S> <C> <C>
Mark English................................................ 136,800 $ 2.10
Brian Herrman............................................... 300,000 2.10
Michael Lowry............................................... 100,000 2.82
Chris Yonlick............................................... 172,800 2.10
</TABLE>

In 1996, we established our 1996 Stock Plan. For a description of the 1996
Stock Plan and options granted thereunder to our named executive officers,
please see "Management -- Executive Compensation" and "-- Employee Benefit
Plans." The following additional directors, executive officers and promoters
have been granted options under this plan:

<TABLE>
<CAPTION>
NAME OPTIONS PURCHASE PRICE
- ---- --------- --------------
<S> <C> <C>
Mark Chiarelli.............................................. 33,750 $11.00
Joseph Dion................................................. 95,000 11.00
Joseph Dion................................................. 25,000 0.55
Mark English................................................ 14,250 11.00
Keith Evans................................................. 95,000 11.00
Keith Evans................................................. 25,000 0.55
Thomas Welch................................................ 95,000 11.00
Chris Yonlick............................................... 33,750 11.00
</TABLE>

AGREEMENT WITH FURMAN SELZ LLC

In May 1997, we paid $200,000 to Furman Selz LLC, an entity associated with
ING Furman Selz, in connection with the provision of investment banking services
related to the financing of series E preferred stock.

CONSULTING AGREEMENT WITH MEYER, DUFFY & ASSOCIATES, INC.

We entered into a financial advisory agreement with Meyer, Duffy &
Associates, Inc. Under the agreement, Meyer Duffy provided us with investment
banking advisory services. To date, we paid Meyer Duffy $367,500 in 1996,
$140,000 in 1997, $83,800 in 1998, and $58,800 in 1999 under the agreement. This
agreement expired in 1999.

RESTRUCTURING OF SERIES D AND SERIES E PREFERRED STOCK

On May 21, 1999, to resolve potential claims based on financial information
provided to the series D and series E preferred stockholders, our board of
directors approved an increase in the conversion rate for the series D preferred
stock and the series E preferred stock so that the common stock equivalent price
was reduced from $5.83 per share to $2.52 per share. In addition, anti-dilution
provisions were added to the terms of the series D preferred stock to adjust for
the increase. In October and November 1999, we issued warrants to purchase an
aggregate of up to 708,750 shares of common stock at an exercise price of $2.10
per share in connection with this restructuring.

AGREEMENT WITH MR. BOISTURE

We have entered into a put agreement with Bruce Boisture, our Chairman,
Chief Executive Officer and President. Under the agreement, Mr. Boisture has a
right to require that we purchase a percentage of his equity holdings in
Paradigm4 in the event that in one or more related transactions, 50% or more of
the

50
<PAGE> 54

aggregate equity securities held collectively by all of the preferred
stockholders are sold. This agreement will terminate upon the closing of this
offering.

RELATIONSHIP WITH DIRECTOR

Alexander D. Lynch, a member of our board of directors, was a partner in
the law firm of Brobeck, Phleger & Harrison LLP from January 1995 to February
2000. Brobeck, Phleger & Harrison LLP represented us in connection with a
variety of matters, including our series G preferred stock financing completed
in February 2000, and is representing us in connection with this offering.

51
<PAGE> 55

PRINCIPAL STOCKHOLDERS

The following table sets forth information with respect to the beneficial
ownership of our outstanding common stock as of April 1, 2000, and as adjusted
to reflect the sale of the shares of common stock offered hereby by:

- each person or group of affiliated persons whom we know to beneficially
own 5% or more of the common stock;

- each of our directors;

- each of our named executive officers; and

- our directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. Unless otherwise indicated, the address of each
beneficial owner listed below is c/o Paradigm4, Inc., 100 Wells Street,
Hartford, Connecticut 06103. Except as indicated by footnote, the persons named
in the table have sole voting and investment power with respect to all shares of
common stock shown as beneficially owned by them. The number of shares of common
stock outstanding used in calculating the percentage for each listed person
includes the shares of common stock underlying warrants or options held by that
person that are exercisable within 60 days of April 1, 2000 or upon the closing
of this offering, but excludes shares of common stock underlying warrants or
options held by any other person. For the purposes of calculating percentage
ownership as of April 1, 2000, 31,528,510 shares of common stock were issued and
outstanding, assuming the conversion of all outstanding shares of our
convertible preferred stock into an aggregate of 28,416,485 shares of our common
stock.

<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED
NUMBER OF SHARES ----------------------------------------
NAME OF BENEFICIAL OWNER BENEFICIALLY OWNED BEFORE THE OFFERING AFTER THE OFFERING
- ------------------------ --------------------- ------------------- ------------------
<S> <C> <C> <C>
NAMED EXECUTIVE OFFICERS AND DIRECTORS:
J. Bruce Boisture(1)....................... 1,650,000 5.0%
Martin Pattwell(2)......................... 396,929 1.2
Richard Borden(3).......................... 50,000 *
Mark Chiarelli(4).......................... 90,500 *
John Bay(5)................................ 1,137,189 3.5
Thomas Cirrito(6).......................... 5,185,108 16.4
Donald Duffy(7)............................ 9,565,983 29.5
Eric Meyer(8).............................. 9,884,621 30.5
Terrence Quinn(9).......................... 1,200,452 3.8
Peter Kleinknecht(10)...................... 791,448 2.5
Alexander D. Lynch......................... -- *
OTHER 5% STOCKHOLDERS:
Entities affiliated with Meyer, Duffy &
Associates, Inc.(11)..................... 9,410,983 31.1%
Atocha, L.P.(12)........................... 5,185,108 16.4
DB Capital Partners, L.P.(13).............. 3,546,099 11.2
Directors and executive officers as a group
(15 persons)(14)......................... 20,997,997 58.8
</TABLE>

- ---------------
* Less than 1%.

(1) Consists of 1,264,934 shares of common stock issuable upon exercise of
options granted to Mr. Boisture and exercisable within 60 days of April 1,
2000 or upon the closing of this offering and 385,066 shares of common
stock issuable upon exercise of options granted to Mr. Boisture's wife,
adult child and three trusts for the benefit of Mr. Boisture's minor
children. Mr. Boisture disclaims beneficial ownership of these shares
granted to his family members.

(2) Includes 387,500 shares of common stock issuable upon exercise of options
exercisable within 60 days of April 1, 2000 or upon the closing of this
offering.

52
<PAGE> 56

(3) Consists of 50,000 shares of common stock issuable upon exercise of options
exercisable within 60 days of April 1, 2000 or upon the closing of this
offering.

(4) Consists of 90,500 shares of common stock issuable upon exercise of options
exercisable within 60 days of April 1, 2000.

(5) Includes 530,000 shares of common stock issuable upon exercise of options
exercisable within 60 days of April 1, 2000 or upon the closing of this
offering; and 11,704 shares issuable pursuant to warrants.

(6) Consists of 5,144,929 shares of common stock beneficially owned by Atocha,
L.P. and 40,179 shares issuable pursuant to warrants. Mr. Cirrito is the
general partner of Atocha, L.P. The address of Mr. Cirrito is c/o Atocha,
L.P., 6429 Georgetown Pike, McLean, Virginia 22101.

(7) Includes 30,000 shares issuable upon exercise of options exercisable within
60 days of April 1, 2000 and an aggregate of 9,410,983 shares beneficially
owned by entities affiliated with Meyer, Duffy & Associates, Inc. Mr. Duffy
disclaims beneficial ownership of the securities held by these entities,
except to the extent of his economic interest in each of such entities. The
address of Mr. Duffy is c/o Meyer, Duffy & Associates, Inc., 780 Third
Avenue, New York, New York 10017.

(8) Includes 30,000 shares issuable upon exercise of options exercisable within
60 days of April 1, 2000; 11,496 shares issuable pursuant to warrants and
an aggregate of 9,410,983 shares beneficially owned by entities affiliated
with Meyer, Duffy & Associates, Inc. Mr. Meyer disclaims beneficial
ownership of the securities held by these entities, except to the extent of
his economic interest, in each of such entities. The address of Mr. Meyer
is c/o Meyer, Duffy & Associates, Inc., 780 Third Avenue, New York, New
York 10017.

(9) Includes 35,000 shares issuable upon exercise of options exercisable within
60 days of April 1, 2000; 595,241 shares held by Bridgewood Capital
Partners, L.P.; 256,491 shares held by Crestwood Capital International
Ltd.; 281,806 shares held by Crestwood Capital Partners L.P.; 31,914 shares
held by Crestwood Capital Partners II, L.P. Mr. Quinn disclaims beneficial
ownership of the securities held by these entities, except to the extent of
his economic interest in each of such entities. The address of Mr. Quinn is
c/o ING Furman Selz, 230 Park Avenue, New York, New York 10169.

(10) Includes 716,448 shares held by Knight Investments, L.P. Mr. Kleinknecht,
the president of the general partner of Knight Investments, L.P. and, as
such may be deemed to beneficially own such shares. The address for Mr.
Kleinknecht is 960 Reef Road, Vero Beach, Florida 32963.

(11) Consists of 1,013,006 shares held by and 53,461 shares issuable pursuant to
warrants held by MD Strategic, L.P.; 365,080 shares held by Meyer Duffy
Ventures IV "Series B", L.P.; 869,965 shares held by and 149,300 shares
issuable pursuant to warrants held by Meyer Duffy Ventures III, L.P.;
320,576 shares held by and 69,900 shares issuable pursuant to warrants held
by Meyer Duffy Ventures IV "Series A", L.P.; 71,429 shares held by Meyer
Duffy Ventures IV "Series C", L.P.; 305,000 shares held and 95,000 shares
issuable pursuant to options exercisable by Meyer Duffy & Associates, Inc.;
415,897 shares held by and 150,075 shares issuable pursuant to warrants
held by PV II, L.P.; 1,773,049 shares held by Meyer Duffy Ventures Fund,
L.P.; 1,879,432 shares held by MD Ventures II, L.P.; 886,524 shares held by
Meyer Duffy Ventures International, LLC; 601,290 shares held by and 336,998
shares issuable pursuant to warrants held by PV IV, L.P.; and 25,000 shares
held by Predictive Ventures Limited Partnership. The address of Meyer,
Duffy & Associates, Inc. is 780 Third Avenue, New York, New York 10017.

(12) Includes 40,179 shares issuable pursuant to warrants. The address of
Atocha, L.P. is 6429 Georgetown Pike, McLean, Virginia 22101.

(13) Consists of 3,546,099 shares of common stock owned by DB Capital Partners
SBIC, L.P. DB Capital Partners, L.P. is the general partner of DB Capital
Partners SBIC, L.P. The address of DB Capital Partners, L.P. is 130 Liberty
Street, New York, New York 10006.

(14) Includes 3,355,750 shares issuable upon exercise of options exercisable
within 60 days of April 1, 2000 or upon the closing of this offering and
823,113 shares issuable pursuant to warrants.

53
<PAGE> 57

DESCRIPTION OF CAPITAL STOCK

GENERAL

The following description of our common stock and preferred stock and the
relevant provisions of our certificate of incorporation and bylaws as will be in
effect upon the closing of this offering are summaries thereof and are qualified
by reference to our certificate of incorporation and our bylaws, copies of which
have been filed with the Securities and Exchange Commission as exhibits to our
registration statement, of which this prospectus forms a part.

Upon closing of this offering, our authorized capital stock will consist of
100,000,000 shares of common stock, par value $0.001 per share, and 5,000,000
shares of preferred stock, par value $0.001 per share.

COMMON STOCK

Upon the closing of this offering, and giving effect to the issuance of
shares of common stock in this offering, there will be
shares of common stock outstanding. Holders of common stock are entitled to one
vote for each share held on all matters submitted to a vote of stockholders and
do not have cumulative voting rights. Accordingly, holders of a majority of the
shares of common stock entitled to vote in any election of directors may elect
all of the directors standing for election. Holders of common stock are entitled
to receive ratably those dividends, if any, as may be declared by the board of
directors out of funds legally available therefor, subject to any preferential
dividend rights of any outstanding preferred stock. Upon our liquidation,
dissolution or winding up, the holders of common stock are entitled to receive
ratably our net assets available after the payment of all debts and other
liabilities and subject to the prior rights of any outstanding preferred stock.
Holders of the common stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of common stock are, and the shares
offered by us in this offering will be, when issued in consideration for payment
thereof, fully paid and non-assessable. The rights, preferences and privileges
of holders of common stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of preferred stock which we may
designate and issue in the future.

PREFERRED STOCK

Upon the closing of this offering, there will be no shares of preferred
stock outstanding. Upon the closing of the offering, the board of directors will
be authorized, without further stockholder approval, to issue from time to time
up to an aggregate of 5,000,000 shares of preferred stock in one or more series
and to fix or alter the designations, preferences, rights and any
qualifications, limitations or restrictions of the shares of each series
thereof, including the dividend rights, dividend rates, conversion rights,
voting rights, terms of redemption, including sinking fund provisions,
redemption price or prices, liquidation preferences and the number of shares
constituting any series or designation of series. We have no current plans to
issue any shares of preferred stock.

The board may authorize the issuance of preferred stock with voting or
conversion rights that could adversely affect the voting power or other rights
of the holders of the common stock. The issuance of preferred stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could, among other things:

- have the effect of delaying, deferring or preventing an acquisition of
Paradigm4;

- cause the market price of our common stock to decline; or

- impair the voting and other rights of the holders of our common stock.

54
<PAGE> 58

OPTIONS

Options to purchase a total of 8,400,000 shares of common stock may be
granted under the 1996 Stock Plan and the 1999 Stock Plan. As of March 31, 2000,
there were outstanding options to purchase a total of 6,206,953 shares of common
stock, of which options to purchase approximately will be exercisable upon
the closing of this offering. Since we intend to file a registration statement
on Form S-8 as soon as practicable following the closing of this offering, any
shares issued upon exercise of these options will be immediately available for
sale in the public market, subject to the terms of any lock-up agreements
entered into with the underwriters.

WARRANTS

As of March 31, 2000, we have issued warrants to purchase an aggregate of
2,908,912 shares of common stock at exercise prices ranging from $0.01 per share
to $4.21 per share, with a weighted average per share price of $2.52. The
exercise price and number and kind of shares are subject to adjustment upon a
stock split, stock dividend or other recapitalization of our common stock. The
warrants do not have any voting rights until exercised for shares of common
stock.

REGISTRATION RIGHTS

Pursuant to the terms of our registration rights agreement, the holders of
an aggregate of approximately 38,483,000 shares of common stock outstanding or
issuable upon conversion of convertible securities will be entitled to certain
registration rights with respect to our common stock. Certain of these holders
have the right to demand that we register all or any portion of their common
stock received upon conversion for resale under the Securities Act any time
after May 9, 2000.

This type of registration right is known as a "demand" registration right.
If we become eligible to file a registration statement on Form S-3, the holders
demanding registration may require us to designate the registration a Form S-3
registration under the Securities Act. These demand registration rights are
subject to certain conditions and limitations, including:

- we are not required to effect more than two non-Form S-3 registrations in
the aggregate, provided that certain holders make the demand;

- we are not required to effect more than one non-Form S-3 registration in
any 12-month period;

- we are not required to effect a registration unless the holder making the
demand has a bona fide intent to sell the registered securities;

- once in any 12-month period, we may postpone filing a registration for no
more than 180 days if we furnish to the holders a certificate signed by
our President and prepared in good faith stating that, in the judgment of
the board of directors, such registration would be seriously detrimental
to us and our stockholders; and

- each demand registration must include equity securities with a proposed
aggregate offering price of at least $500,000.00.

In addition, under the terms of our registration rights agreement and
various subscription agreements, if we propose to register or are required to
register any shares of common stock under the Securities Act, either for our own
account or for the account of other security holders, the holders of shares with
registration rights are entitled to receive notice of the registration and are
entitled to include their shares in the registration, subject to limitations.
This type of registration is known as a "piggyback" registration right.

We are generally required to bear all of the expenses of these
registrations, except underwriting discounts, selling commissions and transfer
taxes. Registration of any of the shares of common stock held by security
holders with registration rights would result in those shares becoming freely
tradable without restriction under the Securities Act.

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<PAGE> 59

ANTI-TAKEOVER EFFECTS OF PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE OF
INCORPORATION AND BYLAWS

We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, or DGCL. Subject to various exceptions, Section 203 prohibits a
publicly held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the
interested stockholder attained that status with the approval of the board of
directors or unless the business combination is approved in a prescribed manner.
A "business combination" includes mergers, asset sales and other transactions
resulting in a financial benefit to the interested stockholder. Subject to
various exceptions, an "interested stockholder" is a person who, together with
affiliates and associates, owns, or within three years did own, 15.0% or more of
the corporation's voting stock. This statute could prohibit or delay the
accomplishment of mergers or other takeover or change in control attempts with
respect to us and, accordingly, may discourage attempts to acquire us.

The authorized but unissued shares of our common stock and preferred stock
are available for future issuance without stockholder approval, subject to
various limitations imposed by The Nasdaq National Market. These additional
shares may be used for a variety of corporate purposes, including future public
offerings to raise additional capital, corporate acquisitions and employee
benefit plans. The existence of authorized but unissued shares of common stock
and preferred stock could make more difficult or discourage an attempt to obtain
control of us by means of a proxy contest, tender offer, merger or otherwise.

In addition, various provisions of our certificate of incorporation and our
bylaws, which provisions will be in effect upon the closing of the offering, may
be deemed to have an anti-takeover effect and may delay, defer or prevent a
tender offer or takeover attempt that a stockholder might consider in its best
interest, including those attempts that might result in a premium over the
market price for the shares held by stockholders.

These provisions will include:

- the elimination of the ability of stockholders to call special meetings
of stockholders;

- a requirement that stockholder actions may only occur at a duly called
stockholder meeting and not by a consent in writing; and

- the implementation of procedures for stockholders to propose new
business.

These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the board of directors and in the policies
formulated by the board of directors and to discourage transactions that may
involve an actual or threatened change of control of Paradigm4. These provisions
are designed to reduce our vulnerability to an unsolicited acquisition proposal.
The provisions also are intended to discourage others from making tender offers
for our shares and, as a consequence, they also may inhibit fluctuations in the
market price of our shares that could result from actual or rumored takeover
attempts. These provisions also may have the effect of preventing changes in our
management.

INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS AND LIMITATION OF LIABILITY

Our certificate of incorporation provides for indemnification of our
directors and officers against, and absolution of, liability to us and our
stockholders. In addition, we intend to obtain liability insurance for our
directors and officers.

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<PAGE> 60

SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of our common stock in the public market, or
the perception that such sales could occur, could adversely affect prevailing
market prices of our common stock. Upon the closing of this offering, we will
have outstanding an aggregate of shares of our common stock, assuming no
exercise of the underwriters' over-allotment option and no exercise of
outstanding options. Of these shares, all shares sold in this offering will be
freely tradable without restriction or further registration under the Securities
Act of 1933, as amended, unless such shares are purchased by "affiliates" as
that term is defined in Rule 144 under the Securities Act. The remaining
31,528,510 shares of our common stock held by existing shareholders are
"restricted securities" as that term is defined in Rule 144 under the Securities
Act. Restricted securities may be sold in the public market only if registered
or if they qualify for an exemption from registration under Rule 144 or 701
under the Securities Act, which rules are summarized below. Subject to lock-up
agreements described below and the provisions of Rules 144 and 701, these
31,528,510 shares will be available for sale in the public market as follows:

<TABLE>
<CAPTION>
NUMBER OF SHARES DATE
---------------- ----
<S> <C>
After the date of this prospectus, freely
tradable shares sold in this offering and
shares saleable under Rule 144(k) that
are not subject to the 180-day lock up

After 90 days from the date of this
prospectus, shares saleable under Rule
144 or Rule 701 that are not subject to
the 180-day lock up

After 180 days from the date of this
prospectus, the 180-day lock-up is
released and these shares are saleable
under Rule 144 (subject, in some cases,
to volume limitations), Rule 144(k) or
Rule 701

After 180 days from the date of this
prospectus, restricted securities that
are held for less than one year are not
yet saleable under Rule 144
</TABLE>

LOCK-UP AGREEMENTS

All of our officers and directors and certain of our stockholders and
option holders owning an aggregate of % of our common stock will enter into
lock-up agreements under which they agree not to transfer or dispose of,
directly or indirectly, any shares of our common stock or any securities
convertible into or exercisable or exchangeable for shares of our common stock
for 180 days after the date of this prospectus.

RULE 144

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of our
common stock for at least one year would be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:

- 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after the offering; or

- the average weekly trading volume of the common stock on The Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 in connection with such sale.

Sales under Rule 144 are also subject to manner-of-sale provisions, notice
requirements and the availability of current public information about us.

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<PAGE> 61

RULE 144(k)

Under Rule 144(k), a person who is not one of our affiliates at any time
during the three months preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years, including the holding period
of any prior owner other than an affiliate, is entitled to sell such shares
without complying with the manner of sale, public information, volume limitation
or notice provisions of Rule 144. Therefore, unless otherwise contractually
restricted, "144(k)" shares may be sold immediately upon completion of this
offering.

RULE 701

In general, under Rule 701 of the Securities Act as currently in effect,
each of our employees, consultants or advisors who purchases shares from us in
connection with a compensatory stock plan or other written agreement is eligible
to resell such shares 90 days after the effective date of this offering in
reliance on Rule 144, but without compliance with restrictions, including the
holding period, contained in Rule 144.

REGISTRATION RIGHTS

After this offering, the holders of approximately 38,483,000 shares of
common stock and shares of common stock issuable upon the exercise of
outstanding warrants and options will be entitled to rights in connection with
the registration of those shares under the Securities Act. For more information,
see "Description of Capital Stock -- Registration Rights." After such
registration, these shares of our common stock become freely tradable without
restriction under the Securities Act. These sales could have a material adverse
effect on the trading price of our common stock.

STOCK PLANS

We intend to file a registration statement under the Securities Act
covering 8,400,000 shares of common stock reserved for issuance under our 1996
Stock Plan and our 1999 Stock Plan. We expect this registration statement to be
filed and to become effective as soon as practicable after the effective date of
this offering.

As of March 31, 2000, options to purchase 6,206,953 shares of common stock
were issued and outstanding. All of these shares will be eligible for sale in
the public market from time to time, subject to vesting provisions, Rule 144
volume limitations applicable to our affiliates and, in the case of some
options, the expiration of lock-up agreements.

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<PAGE> 62

UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS

The following is a general discussion of the material United States federal
income and estate tax consequences of the ownership and disposition of the
common stock applicable to Non-United States Holders of this common stock as of
the date hereof. For the purpose of this discussion, a Non-United States Holder
is any holder that for United States federal income tax purposes is not a United
States person (as defined below). The following discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended, and regulations,
administrative and judicial interpretations thereof, all as in effect on the
date hereof, and all of which are subject to change, possibly with retroactive
effect. We have not and will not seek a ruling from the Internal Revenue Service
with respect to the United States federal income and estate tax consequences
described below and, as a result, there can be no assurance that the Internal
Revenue Service will not disagree with or challenge any of the conclusions set
forth in this discussion. For purposes of this discussion, the term United
States person means:

- a citizen or resident of the United States;

- a corporation or other entity taxable as a corporation created or
organized in the United States or under the laws of the United States or
any political subdivision thereof;

- an estate the income of which is included in gross income for United
States federal income tax purposes regardless of its source; or

- a trust that is subject to the primary supervision of a United States
court and which has one or more United States persons who have the
authority to control all substantial decisions of the trust or that has a
valid election in effect under applicable United States Treasury
regulations to be treated as a United States person.

This discussion does not consider:

- United States state and local or non-United States tax consequences;

- specific facts and circumstances that may be relevant to a particular
Non-United States Holder's tax position, including, if the Non-United
States Holder is a partnership, that the United States tax consequences
of holding and disposing of our common stock may be affected by
determinations made at the partner level;

- the tax consequences for the shareholders or beneficiaries of a
Non-United States Holder;

- special tax rules that may apply to certain Non-United States Holders,
including, without limitation, banks, insurance companies, dealers in
securities and traders in securities who elect to apply a mark-to-market
method of accounting; or

- special tax rules that may apply to a Non-United States Holder that holds
our common stock as part of a "straddle," "hedge," or "conversion
transaction."

DIVIDENDS

If we pay a dividend, any dividend paid to a Non-United States Holder of
common stock generally will be subject to United States withholding tax either
at a rate of 30% of the gross amount of the dividend or such lower rate as may
be specified by an applicable tax treaty. Dividends received by a Non-United
States Holder that are effectively connected with a United States trade or
business conducted by the Non-United States Holder or, if an income tax treaty
applies, are attributable to a permanent establishment, or in the case of an
individual, a "fixed base" in the United States, as provided in that treaty
("U.S. trade or business income"), are generally not subject to such withholding
tax if the Non-United States Holder files the appropriate U.S. Internal Revenue
Service Form with the payor. However, such U.S. trade or business income, net of
deductions and credits, is taxed at the same graduated rates applicable to
United States persons. Any U.S. trade or business income received by a
Non-United States Holder that is a corporation may also, under certain
circumstances, be subject to an additional "branch profits tax" at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty.

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<PAGE> 63

Dividends paid on or prior to December 31, 2000 to an address in a foreign
country are presumed, absent actual knowledge to the contrary, to be paid to a
resident of such country for purposes of the withholding discussed above and for
the purposes of determining the applicability of a tax treaty rate. For
dividends paid after December 31, 2000:

- a Non-United States Holder of common stock who claims the benefit of an
applicable income tax treaty rate generally will be required to satisfy
applicable certification and other requirements;

- in the case of common stock held by a foreign partnership, the
certification requirement will generally be applied to the partners of
the partnership and the partnership will be required to provide
information, including a United States taxpayer identification number;
and

- look-through rules will apply for tiered partnerships.

A Non-United States Holder of common stock that is eligible for a reduced
rate of withholding tax pursuant to a tax treaty may obtain a refund of any
excess amounts currently withheld by filing an appropriate claim for refund with
the IRS.

GAIN ON DISPOSITION OF COMMON STOCK

A Non-United States Holder generally will not be subject to United States
federal income tax on any gain realized upon the sale or other disposition of
his common stock unless:

- the gain is U.S. trade or business income;

- the Non-United States Holder is an individual who holds his or her common
stock as a capital asset (generally, an asset held for investment
purposes) and who is present in the United States for a period or periods
aggregating 183 days or more during the calendar year in which the sale
or disposition occurs and certain other conditions are met;

- the Non-United States Holder is subject to tax pursuant to the provisions
of the United States tax law applicable to certain United States
expatriates; or

- Paradigm4 is or has been a "United States real property holding
corporation" for United States federal income tax purposes at any time
within the shorter of the five-year period preceding the disposition or
the holder's holding period for its common stock.

Generally, a corporation is a "United States real property holding
corporation" if the fair market value of its "United States real property
interests" equals or exceeds 50% of the sum of the fair market value of its
worldwide real property interests plus its other assets used or held for use in
a trade or business. We believe that Paradigm4 has not been and is not
currently, and we do not anticipate it becoming, a "United States real property
holding corporation" for United States federal income tax purposes. The tax
relating to stock in a "United States real property holding corporation" will
not apply to a Non-United States Holder whose holdings, direct and indirect, at
all times during the applicable period, constituted 5% or less of the common
stock, provided that the common stock was regularly traded on an established
securities market.

Special rules may apply to certain Non-United States Holders, such as
"controlled foreign corporations," "passive foreign investment companies,"
"foreign personal holding companies" and corporations that accumulate earnings
to avoid United States federal income tax, that are subject to special treatment
under the Code. Such entities should consult their own tax advisors to determine
the United States federal, state, local and other tax consequences that may be
relevant to them.

BACKUP WITHHOLDING AND INFORMATION REPORTING

Generally, we must report annually to the Internal Revenue Service and to
each Non-United States Holder the amount of dividends paid, the name and address
of the recipient, and the amount, if any, of tax withheld. Pursuant to tax
treaties or other agreements, the Internal Revenue Service may make its reports
available to tax authorities in the recipient's country of residence.

Dividends paid to a Non-United States Holder at an address within the
United States may be subject to backup withholding at a rate of 31% if the
Non-United States Holder fails to establish that it is entitled

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<PAGE> 64

to an exemption or to provide a correct taxpayer identification number and other
information to the payer. Backup withholding will generally not apply to
dividends paid to Non-United States Holders at an address outside the United
States on or prior to December 31, 2000 unless the payer has knowledge that the
payee is a United States person. Under recently finalized Treasury Regulations
regarding withholding and information reporting, payment of dividends to
Non-United States Holders at an address outside the United States after December
31, 2000 may be subject to backup withholding at a rate of 31% unless such
Non-United States Holder satisfies various certification requirements.

Under current Treasury Regulations, the payment of the proceeds of the
disposition of common stock by or through a United States office of a broker or
through a non-United States branch of a United States broker is subject to
information reporting and backup withholding at a rate of 31% unless the
beneficial owner certifies its non-United States status under penalties of
perjury or otherwise establishes an exemption. Generally, the payment of the
proceeds of the disposition by a Non-United States Holder of common stock
outside the United States by or through a non-United States office of a
non-United States broker will not be subject to backup withholding but will be
subject to information reporting requirements if the broker is:

- a United States person;

- a "controlled foreign corporation" for United States federal income tax
purposes; or

- a foreign person 50% or more of whose gross income for certain periods is
from the conduct of a United States trade or business, or,

- for taxable years beginning after December 31, 2000, a foreign
partnership, in which one or more United States persons, in the
aggregate, own more than 50% of the income or capital interests in the
partnership or if the partnership is engaged in a trade or business in
the United States,

unless the broker has documentary evidence in its files of the beneficial
owner's Non-United States status and other conditions are met, or the beneficial
owner otherwise establishes an exemption. Neither backup withholding nor
information reporting generally will apply to a payment of the proceeds of a
disposition of common stock by or through a foreign office of a foreign broker
not subject to the preceding sentence.

In general, the recently promulgated final Treasury Regulations, described
above, do not significantly alter the substantive withholding and information
reporting requirements but would alter the procedures for claiming benefits of
an income tax treaty and change the certification procedures relating to the
receipt by intermediaries of payments on behalf of the beneficial owner of
shares of common stock. Non-United States Holders should consult their tax
advisors regarding the effect, if any, of those final Treasury Regulations on an
investment in the common stock. Those final Treasury Regulations are generally
effective for payments made after December 31, 2000.

Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained, provided that the required information is furnished to the Internal
Revenue Service.

ESTATE TAX

The estate of an individual Non-United States Holder who owns common stock
at the time of death or had made a particular lifetime transfer of an interest
in common stock will be required to include the value of that common stock in
such holder's gross estate for United States federal estate tax purposes, unless
an applicable estate tax treaty provides otherwise.

THE FOREGOING DISCUSSION IS A SUMMARY OF THE PRINCIPAL FEDERAL INCOME AND
ESTATE TAX CONSEQUENCES OF THE OWNERSHIP, SALE OR OTHER DISPOSITION OF COMMON
STOCK BY NON-UNITED STATES HOLDERS. ACCORDINGLY, INVESTORS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO THE INCOME TAX CONSEQUENCES OF THE
OWNERSHIP AND DISPOSITION OF COMMON STOCK, INCLUDING THE APPLICATION AND EFFECT
OF THE LAWS OF ANY STATE, LOCAL, FOREIGN OR OTHER TAXING JURISDICTION.

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<PAGE> 65

UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters
named below, for whom Credit Suisse First Boston Corporation, Donaldson, Lufkin
& Jenrette Securities Corporation and Chase Securities Inc. are acting as
representatives, the following respective numbers of shares of common stock:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Credit Suisse First Boston Corporation......................
Donaldson, Lufkin & Jenrette Securities Corporation.........
Chase Securities Inc........................................
--------
Total.............................................
========
</TABLE>

The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that, if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.

We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering
price less the underwriting discounts and commissions. The option may be
exercised only to cover any over-allotments of common stock.

The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and selling group members may allow a discount of $ per share
on sales to other broker/dealers. After the initial public offering, the public
offering price and concession and discount to broker/dealers may be changed by
the representatives.

The following table summarizes the compensation and estimated expenses we
will pay.

<TABLE>
<CAPTION>
PER SHARE TOTAL
-------------------------------- --------------------------------
WITHOUT WITH WITHOUT WITH
OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT OVER-ALLOTMENT
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting discounts and
commissions paid by us............ $ $ $ $
Expenses payable by us.............. $ $ $ $
</TABLE>

The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.

We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any additional shares of our common stock or securities convertible into or
exchangeable or exercisable for any of our common stock, or publicly disclose
the intention to make any such offer, sale, pledge, disposition or filing,
without the prior written consent of Credit Suisse First Boston Corporation for
a period of 180 days after the date of this prospectus, except in the case of
issuances by Paradigm4 upon the exercise of employee stock options outstanding
on the date hereof.

Our officers and directors and our stockholders and option holders owning
an aggregate of % of our common stock have agreed that they will not offer,
sell, contract to sell, pledge or otherwise dispose of, directly or indirectly,
any shares of our common stock or securities convertible into or exchangeable or
exercisable for any shares of our common stock enter into a transaction which
would have the same effect, or enter into any swap, hedge or other arrangement
that transfers, in whole or in part, any of the economic

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<PAGE> 66

consequences of ownership of our common stock whether any such aforementioned
transaction is to be settled by delivery of our common stock or such other
securities, in cash or otherwise, or publicly disclose the intention to make any
such offer, sale, pledge or disposition, or to enter into any such transaction,
swap, hedge or other arrangement, without, in each case, the prior written
consent of Credit Suisse First Boston Corporation for a period of 180 days after
the date of this prospectus.

The underwriters have reserved for sale, at the initial public offering
price, up to shares of the common stock for some of our employees,
friends and other people and entities with whom we maintain business
relationships who have expressed an interest in purchasing common stock in the
offering. The number of shares available for sale to the general public in the
offering will be reduced to the extent these persons purchase the reserved
shares. Any reserved shares not purchased will be offered by the underwriters to
the general public on the same terms as the other shares.

We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments which the underwriters may be required
to make in that respect.

We intend to apply to list the shares of our common stock on The Nasdaq
Stock Market's National Market under the symbol "PFOR."

Before this offering, there has been no public market for our common stock.
The initial public offering price will be determined by negotiation between the
representatives and us. The principal factors to be considered in determining
the public offering price include:

- the information in this prospectus or available to the underwriters;

- the history and the prospects for the industry in which we will compete;

- the ability of our management;

- the prospects for our future earnings;

- the present state of our development and our current financial condition;

- the general condition of the securities markets at the time of this
offering; and

- the recent market prices, and the demand for publicly traded common
stock, of generally comparable companies.

The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation M
under the Securities Exchange Act of 1934.

- Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.

- Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.

- Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed to cover
syndicate short positions.

- Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.

These stabilizing transactions, syndicate covering transactions and penalty bids
may cause the price of the common stock to be higher than it would be in the
absence of these transactions. These transactions may be effected on The Nasdaq
National Market or otherwise and, if commenced, may be discontinued at any time.

A prospectus in electronic format will be made available on the web sites
maintained by one or more of the underwriters of this offering. The
representatives may agree to allocate a number of shares to underwriters for
sale to their online brokerage account holders. Internet distributions will be
allocated by the underwriters that will make internet distributions on the same
basis as other allocations.

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<PAGE> 67

On October 22, 1999, we entered into an agreement with Credit Suisse First
Boston Corporation to act as our exclusive placement agent and financial advisor
in connection with our private placement of approximately $30,000,000 of equity
or equity-linked securities. In February 2000, Credit Suisse First Boston
Corporation received customary compensation, including warrants to purchase
100,437 shares of our common stock at $0.01 per share, in connection with this
placement. The agreement was independent of, and not contingent upon, the
completion of this offering.

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<PAGE> 68

NOTICE TO CANADIAN RESIDENTS

RESALE RESTRICTIONS

The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common stock
in Canada must be made in accordance with applicable securities laws, which will
vary depending on the relevant jurisdiction, and which may require resales to be
made in accordance with available statutory exemptions or pursuant to a
discretionary exemption granted by the applicable Canadian securities regulatory
authority. Purchasers are advised to seek legal advice prior to any resale of
the common stock.

REPRESENTATIONS OF PURCHASERS

Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."

RIGHTS OF ACTION (ONTARIO PURCHASERS)

The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.

ENFORCEMENT OF LEGAL RIGHTS

All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be possible
for Canadian purchasers to effect service of process within Canada upon the
issuer or such persons. All or a substantial portion of the assets of the issuer
and such persons may be located outside of Canada and, as a result, it may not
be possible to satisfy a judgment against the issuer or such persons in Canada
or to enforce a judgment obtained in Canadian courts against such issuer or
persons outside of Canada.

NOTICE TO BRITISH COLUMBIA RESIDENTS

A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one report must
be filed in respect of common stock acquired on the same date and under the same
prospectus exemption.

TAXATION AND ELIGIBILITY FOR INVESTMENT

Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchasers under relevant Canadian
legislation.

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<PAGE> 69

LEGAL MATTERS

The validity of the common stock offered hereby will be passed upon for us
by Brobeck, Phleger & Harrison LLP, New York, New York. Certain legal matters in
connection with the offering will be passed upon for the underwriters by Simpson
Thacher & Bartlett, New York, New York.

EXPERTS

Our consolidated balance sheets as of December 31, 1998 and 1999, and our
related consolidated statements of operations, changes in stockholders' equity
(deficit) and cash flows for each of the years in the two-year period ended
December 31, 1999 included in this prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the reports of that
firm given upon their authority as experts in accounting and auditing.

Our statements of operations, changes in stockholders' equity and cash
flows for the year ended December 31, 1997 included in this prospectus have been
audited by Ernst & Young LLP, independent auditors, as indicated in their report
with respect thereto, and are included herein in reliance upon the reports of
such firm given upon their authority as experts in accounting and auditing.

CHANGE OF AUDITORS

On May 12, 1999, our board of directors voted to retain Arthur Andersen LLP
as its independent public accountants. Previously, Ernst & Young LLP had been
our auditors. Ernst & Young's report on our financial statements for the year
ended December 31, 1997 did not contain an adverse opinion or disclaimer of
opinion and was not modified as to uncertainty, audit scope or accounting
principles. There were no disagreements with the former auditors on any matter
of accounting principles or practices, financial statement disclosure or
auditing scope of procedure at the time of the change or with respect to our
financial statements for the year ended December 31, 1997, which, if not
resolved to the former auditors' satisfaction, would have caused them to make
reference to the subject matter of the disagreement in connection with their
report. Prior to retaining Arthur Andersen LLP, we did not consult with Arthur
Andersen LLP regarding accounting principles.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We filed with the Securities and Exchange Commission a registration
statement on Form S-1, including exhibits, schedules and amendment filed with
the registration statement, under the Securities Act with respect to the common
stock to be sold in this offering. This prospectus does not contain all of the
information set forth in this registration statement. For further information
about us and the shares of common stock to be sold in the offering, please refer
to this registration statement. For additional information, please refer to the
exhibits that have been filed with our registration statement on Form S-1.

You may read and copy all or any portion of the registration statement or
any other information we file at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents upon payment of a duplicating fee, by writing
to the Securities and Exchange Commission. Please call the Securities and
Exchange Commission at 1-800-SEC-0330 for further information about the public
reference rooms. Our Securities and Exchange Commission filings, including the
registration statement, will also be available to you on the Securities and
Exchange Commission's Web site (http://www.sec.gov).

We intend to furnish our stockholders with annual reports containing
audited financial statements and to make available quarterly reports containing
unaudited financial information.

66
<PAGE> 70

PARADIGM4, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1997, 1998 AND 1999

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports of Independent Public Accountants
Arthur Andersen LLP....................................... F-2
Ernst & Young LLP......................................... F-3
Consolidated Financial Statements of Paradigm4, Inc. and
Subsidiaries
Consolidated Balance Sheets as of December 31, 1998 and
1999................................................... F-4
Consolidated Statements of Operations for the Years Ended
December 31, 1997, 1998 and 1999....................... F-5
Consolidated Statements of Changes in Stockholders' Equity
(Deficit) for the Years Ended December 31, 1997, 1998
and 1999............................................... F-6
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1998 and 1999....................... F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>

F-1
<PAGE> 71

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of
Paradigm4, Inc. and Subsidiaries:

We have audited the accompanying consolidated balance sheets of Paradigm4,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1998 and 1999,
and the related consolidated statements of operations, changes in stockholders'
equity (deficit) and cash flows for each of the two years then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Paradigm4,
Inc. and subsidiaries at December 31, 1998 and 1999, and the consolidated
results of their operations and their cash flows for each of the two years then
ended in conformity with accounting principles generally accepted in the United
States.

ARTHUR ANDERSEN LLP

Hartford, Connecticut
March 24, 2000

F-2
<PAGE> 72

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
Paradigm4, Inc.:

We have audited the accompanying statements of operations, changes in
stockholders' equity (deficit) and cash flows of Paradigm4, Inc., for the year
ended December 31, 1997. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations and cash flows of Paradigm4,
Inc. for the year ended December 31, 1997 in conformity with accounting
principles generally accepted in the United States.

ERNST & YOUNG LLP

New York, New York
February 20, 1998

F-3
<PAGE> 73

PARADIGM4, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 1998 and 1999

<TABLE>
<CAPTION>
1998 1999
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 348,739 $ 1,841,635
Accounts receivable, net (Note 2)......................... 518,487 3,252,145
Costs and estimated earnings in excess of billings under
uncompleted contracts (Note 2)......................... 7,149,449 4,666,580
Prepaid expenses and other current assets................. 95,816 654,467
Assets related to contract held for sale, net............. 3,738,947 3,820,041
------------ ------------
Total current assets........................................ 11,851,438 14,234,868
Property and equipment, at cost, net (Note 3)............... 2,304,378 1,841,494
Other assets:
Restricted cash (Note 7).................................. 700,000 2,089,457
Deferred financing costs, net............................. 304,000 259,327
Other assets.............................................. 158,000 377,027
------------ ------------
Total assets................................................ $ 15,317,816 $ 18,802,173
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.......................................... $ 3,512,441 $ 3,479,484
Accrued expenses and other current liabilities............ 1,722,852 2,730,652
Deferred revenue (Note 2)................................. 136,923 1,445,084
Reserve for losses on uncompleted contracts (Note 2)...... 2,732,481 5,131,288
Notes payable and current portion of capital lease
obligation payable (Note 4)............................ 20,396,386 17,753,695
------------ ------------
Total current liabilities................................... 28,501,083 30,540,203
Capital lease obligation payable, net of current portion
(Note 4).................................................. 233,143 92,092
------------ ------------
Total liabilities........................................... 28,734,226 30,632,295
------------ ------------
Commitments and contingencies (Note 8)
Stockholders' equity (deficit):
Convertible preferred stock $.001 par value, 2,000,000 and
12,504,057 shares authorized, 569,105 and 11,363,453
issued and outstanding, as of December 31, 1998 and
1999, respectively (Note 5)............................ 569 11,363
Common stock, $.001 par value, 18,000,000 and 30,000,000
shares authorized, 2,657,697 and 2,797,596 shares
issued and outstanding, as of December 31, 1998 and
1999, respectively..................................... 2,658 2,798
Additional paid-in capital................................ 15,521,512 37,871,830
Common stock warrants..................................... 241,857 1,898,836
Accumulated deficit....................................... (29,183,006) (51,614,949)
------------ ------------
Total stockholders' equity (deficit)........................ (13,416,410) (11,830,122)
------------ ------------
Total liabilities and stockholders' equity (deficit)........ $ 15,317,816 $ 18,802,173
============ ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 74

PARADIGM4, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Years Ended December 31, 1997, 1998 and 1999

<TABLE>
<CAPTION>
1997 1998 1999
----------- ------------ ------------
<S> <C> <C> <C>
Services revenues................................. $ 6,693,106 $ 947,550 $ 6,295,636
Hardware and third party software sales........... 4,934,535 2,711,323 3,735,350
----------- ------------ ------------
Total revenues.................................... 11,627,641 3,658,873 10,030,986
----------- ------------ ------------
Cost of services revenues......................... 1,594,891 8,517,315 12,280,118
Cost of hardware and third party software sales... 4,524,974 2,675,514 2,866,291
----------- ------------ ------------
Total cost of revenues............................ 6,119,865 11,192,829 15,146,409
----------- ------------ ------------
Gross profit (loss)............................... 5,507,776 (7,533,956) (5,115,423)
Research and development expenses................. 1,972,556 3,330,427 5,517,732
Selling and marketing expenses.................... 2,655,676 3,725,017 3,569,855
General and administrative expenses............... 4,633,864 4,733,428 3,774,858
Depreciation and amortization expense............. 724,615 1,677,737 1,858,831
----------- ------------ ------------
Loss from operations.............................. (4,478,935) (21,000,565) (19,836,699)
Interest expense.................................. 347,174 1,590,406 1,983,845
Interest income................................... 51,257 54,190 116,214
Other income (expense), net (Notes 5 and 11)...... -- 476,475 (251,951)
----------- ------------ ------------
Loss from continuing operations before provision
for income taxes................................ (4,774,852) (22,060,306) (21,956,281)
Provision for income taxes........................ 94,562 7,000 1,010
----------- ------------ ------------
Loss from continuing operations................... (4,869,414) (22,067,306) (21,957,291)
Discontinued operations of contract held for sale
(Note 1)........................................ (22,377) 1,040,835 (474,652)
----------- ------------ ------------
Net loss.......................................... $(4,891,791) $(21,026,471) $(22,431,943)
=========== ============ ============
Basic and diluted (loss) earnings per share (Note
2):
Continuing operations........................... $ (1.89) $ (8.42) $ (8.03)
Discontinued operations......................... (0.01) 0.40 (.17)
----------- ------------ ------------
Net loss.......................................... $ (1.90) $ (8.02) $ (8.20)
=========== ============ ============
Weighted average shares outstanding (Note 2)...... 2,568,826 2,619,424 2,733,995
=========== ============ ============
Pro forma net loss per share (Note 2)............. $ (0.72)
============
Shares used in computing pro forma net loss per
share (Note 2).................................. 31,150,480
============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 75

PARADIGM4, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

For the Years Ended December 31, 1997, 1998 and 1999
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
CONVERTIBLE CONVERTIBLE CONVERTIBLE
COMMON STOCK PREFERRED PREFERRED PREFERRED
------------------ ---------------- --------------- ---------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------ ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996................. 2,568,410 $2,570 275,000 $275 25,000 $25 50,000 $50
Exercise of common stock options............ 2,000 -- -- -- -- -- -- --
Issuance of series E preferred.............. -- -- -- -- -- -- -- --
Issuance of warrants in connection with
bridge loan financing..................... -- -- -- -- -- -- -- --
Issuance of warrants in connection with
credit agreement.......................... -- -- -- -- -- -- -- --
Issuance of warrants in connection with
capital lease financing................... -- -- -- -- -- -- -- --
Net loss.................................... -- -- -- -- -- -- -- --
--------- ------ ------- ---- ------ --- ------ ---
Balance at December 31, 1997................. 2,570,410 2,570 275,000 275 25,000 25 50,000 50
Exercise of common stock options............ 64,787 65 -- -- -- -- -- --
Stock grant to Birchmere Investments........ 10,000 10 -- -- -- -- -- --
Conversion of debt to series E preferred.... -- -- -- -- -- -- -- --
Issuance of warrants in connection with debt
agreements................................ -- -- -- -- -- -- -- --
Stock grants to employees................... 12,500 13 -- -- -- -- -- --
Net loss.................................... -- -- -- -- -- -- -- --
--------- ------ ------- ---- ------ --- ------ ---
Balance at December 31, 1998................. 2,657,697 2,658 275,000 275 25,000 25 50,000 50
Exercise of common stock options............ 134,899 135 -- -- -- -- -- --
Issuance of series F preferred stock and
common stock warrants..................... -- -- -- -- -- -- -- --
Conversion of debt to series F preferred.... -- -- -- -- -- -- -- --
Costs related to series F financing......... -- -- -- -- -- -- -- --
Issuance of warrants (Note 5)............... -- -- -- -- -- -- -- --
Issuance of warrants in connection with
financing agreements...................... -- -- -- -- -- -- -- --
Stock grant to employee..................... 5,000 5 -- -- -- -- -- --
Issuance of common stock options and
warrants in connection with
acquisitions.............................. -- -- -- -- -- -- -- --
Net loss.................................... -- -- -- -- -- -- -- --
--------- ------ ------- ---- ------ --- ------ ---
Balance at December 31, 1999................. 2,797,596 $2,798 275,000 $275 25,000 $25 50,000 $50
========= ====== ======= ==== ====== === ====== ===

<CAPTION>
SERIES D SERIES E SERIES F
CONVERTIBLE CONVERTIBLE CONVERTIBLE
PREFERRED PREFERRED PREFERRED ADDITIONAL COMMON
--------------- ---------------- -------------------- PAID-IN STOCK
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL WARRANTS
------ ------ ------- ------ ---------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996................. 40,000 $40 -- $ -- -- $ -- $ 6,636,627 $ --
Exercise of common stock options............ -- -- -- -- -- -- 1,000 --
Issuance of series E preferred.............. -- -- 100,000 100 -- -- 4,658,859 --
Issuance of warrants in connection with
bridge loan financing..................... -- -- -- -- -- -- -- 92,500
Issuance of warrants in connection with
credit agreement.......................... -- -- -- -- -- -- -- 47,158
Issuance of warrants in connection with
capital lease financing................... -- -- -- -- -- -- -- 15,000
Net loss.................................... -- -- -- -- -- -- -- --
------ --- ------- ---- ---------- ------- ----------- ----------
Balance at December 31, 1997................. 40,000 40 100,000 100 -- -- 11,296,486 154,658
Exercise of common stock options............ -- -- -- -- -- -- 32,378 --
Stock grant to Birchmere Investments........ -- -- -- -- -- -- 99,990 --
Conversion of debt to series E preferred.... -- -- 79,105 79 -- -- 3,955,170 --
Issuance of warrants in connection with debt
agreements................................ -- -- -- -- -- -- -- 87,199
Stock grants to employees................... -- -- -- -- -- -- 137,488 --
Net loss.................................... -- -- -- -- -- -- -- --
------ --- ------- ---- ---------- ------- ----------- ----------
Balance at December 31, 1998................. 40,000 40 179,105 179 -- -- 15,521,512 241,857
Exercise of common stock options............ -- -- -- -- -- -- 71,015 --
Issuance of series F preferred stock and
common stock warrants..................... -- -- -- -- 5,876,510 5,877 12,334,794 --
Conversion of debt to series F preferred.... -- -- -- -- 4,917,838 4,917 10,322,542 --
Costs related to series F financing......... -- -- -- -- -- -- (470,856) 215,856
Issuance of warrants (Note 5)............... -- -- -- -- -- -- -- 578,659
Issuance of warrants in connection with
financing agreements...................... -- -- -- -- -- -- -- 829,521
Stock grant to employee..................... -- -- -- -- -- -- 10,495 --
Issuance of common stock options and
warrants in connection with
acquisitions.............................. -- -- -- -- -- -- 82,328 32,943
Net loss.................................... -- -- -- -- -- -- -- --
------ --- ------- ---- ---------- ------- ----------- ----------
Balance at December 31, 1999................. 40,000 $40 179,105 $179 10,794,348 $10,794 $37,871,830 $1,898,836
====== === ======= ==== ========== ======= =========== ==========

ACCUMULATED
DEFICIT TOTAL
------------ ------------
<S> <C> <C>
Balance at December 31, 1996................. $ (3,264,744) $ 3,374,843
Exercise of common stock options............ -- 1,000
Issuance of series E preferred.............. -- 4,658,959
Issuance of warrants in connection with
bridge loan financing..................... -- 92,500
Issuance of warrants in connection with
credit agreement.......................... -- 47,158
Issuance of warrants in connection with
capital lease financing................... -- 15,000
Net loss.................................... (4,891,791) (4,891,791)
------------ ------------
Balance at December 31, 1997................. (8,156,535) 3,297,669
Exercise of common stock options............ -- 32,443
Stock grant to Birchmere Investments........ -- 100,000
Conversion of debt to series E preferred.... -- 3,955,249
Issuance of warrants in connection with debt
agreements................................ -- 87,199
Stock grants to employees................... -- 137,501
Net loss.................................... (21,026,471) (21,026,471)
------------ ------------
Balance at December 31, 1998................. (29,183,006) (13,416,410)
Exercise of common stock options............ -- 71,150
Issuance of series F preferred stock and
common stock warrants..................... -- 12,340,671
Conversion of debt to series F preferred.... -- 10,327,459
Costs related to series F financing......... -- (255,000)
Issuance of warrants (Note 5)............... -- 578,659
Issuance of warrants in connection with
financing agreements...................... -- 829,521
Stock grant to employee..................... -- 10,500
Issuance of common stock options and
warrants in connection with
acquisitions.............................. -- 115,271
Net loss.................................... (22,431,943) (22,431,943)
------------ ------------
Balance at December 31, 1999................. $(51,614,949) $(11,830,122)
============ ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-6
<PAGE> 76

PARADIGM4, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Years Ended December 31, 1997, 1998 and 1999

<TABLE>
<CAPTION>
1997 1998 1999
----------- ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss.................................................... $(4,891,791) $(21,026,471) $(22,431,943)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization.............................. 724,615 1,677,737 1,858,831
Increase in reserve for losses on uncompleted contracts.... -- 2,642,543 2,398,807
Increase (decrease) in allowance for amounts loaned to Data
On Air, Inc.............................................. -- 612,703 (612,703)
Loss on impairment of licensing rights..................... -- 250,000 --
Write-off of bid and proposal costs........................ -- 74,736 --
Write-off of organization costs............................ -- 62,292 --
Write-off of deferred financing costs...................... -- -- 304,000
Common stock warrants issued in connection with debt
agreements............................................... 139,658 87,199 974,173
Common stock grants to employees........................... -- 137,500 10,500
Common stock grants to Birchmere Investments............... -- 100,000 --
Options granted in acquisition............................. -- -- 82,328
Changes in operating assets and liabilities:
Accounts receivable........................................ (582,600) 542,929 (2,733,658)
Cost and estimated earnings in excess of billings under
uncompleted contracts.................................... (7,973,742) 2,848,581 2,482,869
Inventories................................................ 105,091 -- --
Prepaid expenses........................................... (1,708) (87,589) (558,651)
Other assets............................................... (4,351) (120,390) (719,572)
Accounts payable........................................... 2,038,308 (2,825,646) (32,957)
Assets related to contract held for sale................... (444,874) (2,353,808) (81,094)
Accrued expenses and other current liabilities............. 2,713,312 424,249 1,007,800
Deferred revenue........................................... -- 136,923 1,308,161
----------- ------------ ------------
Net cash used in operating activities....................... (8,178,082) (16,816,512) (16,743,109)
----------- ------------ ------------
INVESTING ACTIVITIES:
Purchases of property, plant and equipment.................. (600,520) (1,195,609) (113,530)
(Loans to) proceeds from Data On Air, Inc. ................. -- (612,703) 612,703
Decrease (increase) in restricted cash...................... 248,500 54,866 (1,389,457)
Deferred financing costs.................................... -- (310,000) (520,201)
Acquisition of licensing rights............................. (500,000) -- --
----------- ------------ ------------
Net cash used in investing activities....................... (852,020) (2,063,446) (1,410,485)
----------- ------------ ------------
FINANCING ACTIVITIES:
Repayment of credit line.................................... (250,000) (150,000) --
Proceeds from (repayment of) credit agreement............... 150,000 16,124,862 (1,207,977)
Proceeds from subordinated notes, net....................... 3,700,071 3,500,000 8,950,000
Repayment of stockholder/officers loans..................... (170,565) (51,589) --
Payment of capital lease obligations........................ (231,276) (330,905) (507,354)
Proceeds from common stock options exercised................ 1,000 37,943 71,150
Proceeds from sale of preferred stock and related warrants,
net of $255,000 of issuance costs in 1999.................. 4,658,959 -- 12,340,671
Proceeds from subscription receivable....................... 286,875 -- --
Proceeds from sale/leaseback of equipment................... 783,987 -- --
----------- ------------ ------------
Net cash provided by financing activities................... 8,929,051 19,130,311 19,646,490
----------- ------------ ------------
Net increase (decrease) in cash and cash equivalents........ (101,051) 250,353 1,492,896
Cash and cash equivalents, beginning of year................ 199,437 98,386 348,739
----------- ------------ ------------
Cash and cash equivalents, end of year...................... $ 98,386 $ 348,739 $ 1,841,635
=========== ============ ============
SUPPLEMENTAL CASH INFORMATION:
Interest paid............................................... $ 119,000 $ 1,399,194 $ 1,664,891
=========== ============ ============
Taxes paid.................................................. $ 87,000 $ 60,000 $ 2,444
=========== ============ ============
SUPPLEMENTAL NON-CASH INFORMATION:
Conversion of convertible notes payable, officer loans and
related accrued interest into series E and F convertible
preferred stock (Note 4)................................... $ -- $ 3,955,250 $ 10,327,459
=========== ============ ============
Issuance of common stock options and warrants in
acquisition................................................ $ -- $ -- $ 115,271
=========== ============ ============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE> 77

PARADIGM4, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 1997, 1998 and 1999

1. ORGANIZATION:

Paradigm4, Inc. (Paradigm4), a Delaware corporation, was incorporated on
December 18, 1995 and began operations in January 1996. Paradigm4 and its
subsidiaries (the Company) provides its customers with a broad range of
solutions that enable them to access and exchange information on a wireless
basis. The Company's customers at December 31, 1999 are primarily in the public
sector in the United States.

The accompanying consolidated financial statements include the accounts of
Paradigm4 and its subsidiaries, EGL Networks, Inc. (EGL) and P4 Services, Inc.
All intercompany transactions have been eliminated in consolidation. Paradigm4
acquired 80% of EGL during 1998 for $371,000 in cash. In 1999, the Company
acquired the remaining 20% of the stock of EGL for $92,000 in cash.

In September 1999, the Company acquired certain assets of Vendata, Inc.
from its stockholders in exchange for 141,843 options of the Company's common
stock exercisable at $2.10 per share and warrants to acquire an additional
28,156 shares of common stock at $2.10 per share. At the date of the
transaction, the Company determined that the fair market value of the stock
options and warrants were $115,271, and as such has recorded goodwill for that
amount.

In connection with these transactions, the Company has allocated the
purchase price to the tangible assets based on their fair market value with the
excess allocated to goodwill. The Company will amortize this goodwill over 10
years.

The Board of Directors has authorized the filing of a registration
statement with the Securities and Exchange Commission (SEC) that would permit
the Company to sell shares of the Company's common stock in connection with a
proposed initial public offering (IPO). If the offering is consummated under the
terms presently anticipated, all the then outstanding shares of the Company's
convertible preferred stock (including 11,524,809 shares of series G preferred
stock issued in February 2000) will convert into 28,416,485 shares of common
stock upon the closing of the proposed IPO with no additional consideration.

Since 1996, the Company has been providing engineering and implementation
services under a fixed-price contract with the City of New York to design and
implement a payroll system. Revenues generated from this contract were $443,697,
$2,904,738 and $5,670,148 for the years ended December 31, 1997, 1998 and 1999,
respectively. Total payments to the Company are scheduled to be $63.0 million
from January 2000 to the expected completion of the project in 2003, assuming
the Company meets specified performance milestones. In April 2000, the Company
received a non-binding letter of intent relating to the assignment of its
obligations under this contract. The letter of intent is subject to the
assignee's due diligence and other conditions. As this contract and related
activities, assets and personnel are physically, operationally and for financial
reporting purposes clearly distinguishable from other assets and represent a
separate major line of business and class of customers, this plan affects a
segment of a business as defined in Accounting Principles Board (APB) Opinion
No. 30, "Reporting the Results of Operations -- Reporting the Effects of
Disposals of a Segment of a Business and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions." This sale is expected to be completed during
2000. As such, the results of operations of this contract have been classified
as discontinued operations of contract held for sale and related assets have
been classified as assets related to contract held for sale in the accompanying
consolidated financial statements. The Company expects that the final negotiated
price for this contract will at least be equal to the net carrying value of the
assets held for sale at the closing of this transaction. The discontinued
operations of contract held for sale is presented without allocation of research
and development, selling and marketing, depreciation and amortization and
interest expenses.

F-8
<PAGE> 78
PARADIGM4, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1997, 1998 and 1999

Assets and liabilities related to contracts held for sale, net at each
December 31 is as follows:

<TABLE>
<CAPTION>
1998 1999
---- ----
<S> <C> <C>
Accounts receivable............................... $1,162,933 $3,614,067
Costs and estimated earnings in excess of billings
under uncompleted contracts..................... 3,809,861 3,425,335
Other assets...................................... 317,947 317,947
Accounts payable.................................. (604,179) (1,750,358)
Accrued expenses and other current liabilities.... (947,615) (1,786,950)
---------- ----------
$3,738,947 $3,820,041
========== ==========
</TABLE>

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Revenue and cost recognition --

Revenues from fixed-price contracts are recognized on a
percentage-of-completion basis, measured by the cost-to-cost method, in
accordance with Statement of Position (SOP) No. 81-1, "Accounting for
Performance of Construction and Certain Production -- Type Contracts."
Provisions for estimated losses on uncompleted contracts are recorded in the
consolidated statement of operations in the period in which such losses are
determined. The reserve for losses on uncompleted contracts was $2,732,481 and
$5,131,288 at December 31, 1998 and 1999, respectively, as reflected in the
accompanying consolidated balance sheets. Changes in job performance, job
conditions and estimated profitability may result in revisions to costs and
revenue and are recognized in the period in which the revisions are determined.

Deferred revenue consists primarily of maintenance service revenues. As of
December 31, 1999, deferred revenue also includes $1,032,174 related to advance
billings.

Costs of services revenues consists primarily of compensation, benefits,
subcontracted consulting costs and allocated overhead costs related to
consulting personnel and the customer support group. Costs of hardware and third
party software sales consists primarily of third party hardware and software
products, which are resold by the Company.

Cash and cash equivalents --

The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.

Accounts receivable, net --

Accounts receivable are net of allowances for doubtful accounts totaling $0
and $224,000 at December 31, 1998 and 1999, respectively. Accounts receivable at
December 31, 1998 included holdbacks on contract costs in the amount of $77,787,
payable upon final acceptance of the deliverable.

Costs and estimated earnings in excess of billings under uncompleted
contracts --

Recoverable costs and accrued profit related to long-term contracts on
which revenue has been recognized, but billings have not been presented to the
customer (unbilled receivables), are included in costs and estimated earnings in
excess of billings under uncompleted contracts.

F-9
<PAGE> 79
PARADIGM4, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1997, 1998 and 1999

Long-lived assets --

The Company accounts for long-lived assets in accordance with Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting For the Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed Of". This statement
requires a company to review long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. During 1998, the Company determined that certain licensing
rights had been impaired and wrote-off the unamortized balance of $250,000.

Deferred financing costs, net

Deferred financing costs are being amortized over the life of the debt to
which they relate. As of December 31, 1998 and 1999, accumulated amortization
was $91,000 and $238,853, respectively. In connection with the amendment of the
Company's credit agreement (Note 4), $304,000 of unamortized deferred financing
costs were written off.

Bid and proposal costs --

Prior to 1998, the Company capitalized and amortized bid and proposal costs
on contracts which had been awarded the Company over the life of the contract.
During 1998, the Company wrote-off bid and proposal costs of $74,736 previously
capitalized and began to expense bid and proposal costs as incurred.

Organization costs --

On April 9, 1998, the American Institute of Certified Public Accountants
(AICPA) issued SOP No. 98-5, "Reporting on the Costs of Start-Up Activities."
This statement requires that all non-governmental entities expense costs of
start-up activities as those costs are incurred. The term "start-up" is broadly
defined and includes pre-operating, pre-opening and organizational activities.
This statement was effective for fiscal years beginning after December 15, 1998,
however, early adoption was recommended. The Company adopted SOP No. 98-5 during
1998 and, therefore, expensed the remaining unamortized balance of organization
costs of $62,292 during 1998.

Software development costs --

The Company expenses research and development costs as incurred. The
Company has evaluated the establishment of technological feasibility of its
products in accordance with SFAS No. 86, "Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed." The Company defines
technological feasibility as the completion of a working model. The Company
sells products and services that are subject to rapid technological change, new
product development and changing customer needs. The Company has concluded that
technological feasibility is not established until the development stage of the
product is nearly complete. The time period during which costs could be
capitalized from the point of reaching technological feasibility until the time
of general product release is very short and, consequently, the amounts that
could be capitalized are not material to the Company's financial position or
results of operations. Therefore, the Company has charged all such costs to
research and development in the period incurred.

Earnings per share --

The Company computes net loss per share pursuant to SFAS No. 128, "Earnings
Per Share," and SEC Staff Accounting Bulletin (SAB) No. 98. Basic net loss per
share is computed by dividing net loss applicable to common stockholders by the
weighted average number of shares of the Company's common stock outstanding
during the period. Diluted net loss per share is determined in the same manner
as basic net loss per share except that the number of weighted average shares is
increased assuming exercise of

F-10
<PAGE> 80
PARADIGM4, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1997, 1998 and 1999

dilutive stock options and warrants using the treasury stock method and dilutive
conversion of the Company's preferred stock. Weighted average basic and dilutive
shares outstanding, comprised solely of outstanding common stock during the
years ended December 31, 1997, 1998 and 1999 were 2,568,826, 2,619,424, and
2,733,995 respectively.

For the years ended December 31, 1997, 1998 and 1999, options to purchase
1,588,085, 1,653,831, and 5,989,415 shares of common stock, respectively,
preferred stock convertible into 2,940,000, 3,626,363, and 16,891,676 shares of
common stock, respectively, and warrants to purchase 440,905, 1,416,340, and
2,787,145 shares of common stock, respectively, were excluded from the
calculation of diluted loss per share since their inclusion would be
antidilutive for all periods presented.

Pro forma net loss per share has been calculated assuming the conversion of
all outstanding shares of preferred stock including series G which was issued in
February 2000, that are mandatorily convertible upon the Company's anticipated
initial public offering into 28,416,485 shares of common stock, as if the shares
had converted as of January 1, 1999.

The consolidated financial statements give retroactive effect to the 5:1
split of the Company's common stock of October 1, 1997.

Use of estimates --

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. The principal areas of estimation are in
determining total contract costs, accruals and provision for losses on
uncompleted contracts. Actual results could differ from those estimates.

Segments --

The Company has one reportable segment. As such, all information contained
in the accompanying consolidated financial statements and related notes include
all required disclosures for this segment.

New accounting standards --

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative Instruments and Hedging Activities," which
establishes the accounting and reporting standards for derivative instruments
and for hedging activities. The effective date of SFAS No. 133 (which was
deferred through the issuance of SFAS No. 137) is the Company's calendar year
commencing January 1, 2001. This statement is not expected to have a material
effect on the Company's consolidated operating results or financial position
upon adoption.

In December 1999, the SEC issued SAB No. 101, "Revenue Recognition in
Financial Statements." SAB No. 101 provides the SEC's views on the issue of
revenue recognition. The underlying concept that SAB No. 101 is intended to
clarify is that "revenue should not be recognized until it is realized or
realizable and earned." SAB No. 1 provides guidance on applying the broad
concept as well as examples of acceptable and unacceptable revenue recognition
situations. SAB No. 101 states that revenue is recognizable if all of the
following four criteria are met:

- Persuasive evidence of an arrangement exists,

- Delivery has occurred or services have been rendered,

- The seller's price to the buyer is fixed and determinable, and

- Collectibility is reasonably expected.

F-11
<PAGE> 81
PARADIGM4, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1997, 1998 and 1999

Effectively, SAB No. 101 states that if a Company's efforts, subsequent to
delivering a product or service to a customer, to obtain customer acceptance of
such product or service are more than perfunctory, a sale has not occurred and
therefore, the associated revenue cannot be recognized.

SAB No. 101 must be adopted by the Company for all years presented in the
accompanying consolidated financial statements. The Company determined that SAB
No. 101 did not have a material effect as of and for years from inception
through December 31, 1999, as the majority of the Company's revenues are
recognized on the percentage-of-completion basis.

Fair value of financial instruments --

The carrying amounts of the Company's cash and cash equivalents, accounts
receivable, accounts payable, and debt obligations approximate their fair value.

Reclassifications --

Certain prior year amounts have been reclassified to be consistent with the
current year presentation.

3. PROPERTY AND EQUIPMENT:

Property and equipment is stated at cost. Depreciation is provided
principally by the straight-line method over the estimated useful lives of the
property and equipment, which range from 3-5 years.

Maintenance and repairs are charged to expense as incurred, except those
expenditures that increase the useful lives of the assets, which are
capitalized. When properties are replaced, retired or otherwise disposed of, the
cost of such properties and the accumulated depreciation thereon is deducted
from the respective accounts and the related gain or loss, if any, is reflected
in operations.

Property and equipment at December 31, 1998 and 1999 consists of the
following:

<TABLE>
<CAPTION>
ESTIMATED
1998 1999 USEFUL LIVES
----------- ----------- -------------
<S> <C> <C> <C>
Software................................... $ 610,750 $ 840,406 3 years
Office furniture and equipment............. 807,198 963,488 5 years
Computer equipment......................... 2,634,349 3,325,577 3 years
Leasehold improvements..................... 68,778 126,974 Life of lease
----------- -----------
4,121,075 5,256,445
Less accumulated depreciation and
amortization............................. (1,816,697) (3,414,951)
----------- -----------
$ 2,304,378 $ 1,841,494
=========== ===========
</TABLE>

Computer equipment includes assets under capitalized lease obligations with
a cost of approximately $1,543,124 and $1,697,134 as of December 31, 1998 and
1999, respectively. The accumulated depreciation attributable to assets under
capital leases is approximately $896,148 and $1,489,682 as of December 31, 1998
and 1999, respectively.

F-12
<PAGE> 82
PARADIGM4, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1997, 1998 and 1999

4. DEBT AGREEMENTS:

At December 31, 1998 and 1999, the Company's debt arrangements consisted of
the following:

<TABLE>
<CAPTION>
1998 1999
----------- -----------
<S> <C> <C>
Credit agreement(a)....................................... $16,124,862 $14,916,885
Subordinated notes from stockholders(b)................... 3,500,000 2,500,000
Capital lease obligations(c).............................. 936,256 428,902
Shareholder/officers(d)................................... 68,411 --
----------- -----------
$20,629,529 $17,845,787
=========== ===========
</TABLE>

a. Credit agreement --

In June 1998, the Company entered into an $18 million credit agreement (the
Agreement) with Greyrock Capital (Greyrock). Borrowings under the Agreement
are collateralized by a security interest in all of the Company's assets.
During 1999, this Agreement was amended to extend the maturity to October
31, 2000 and increase the term loan portion of the Agreement by $5 million.

The Agreement includes two $5 million term loans (Term Loans) and an $8
million line of credit (the Line). Accrued interest on the Term Loans and
the Line is payable monthly at a rate equal to the lender's prime rate plus
2% (9.75% and 10.5% at December 31, 1998 and 1999, respectively) until the
maturity dates, which are May 30, 2000 for one of the $5 million term loans
and October 31, 2000 for the second $5 million term loan and the Line, at
which time the applicable principal balance, as well as any unpaid
interest, is due in full.

Additional availability under the Line is based on a borrowing base formula
comprised of 80% of eligible accounts receivable and 50% of eligible costs
and estimated earnings in excess of billings, as defined. Availability of
borrowings using this formula was approximately $1,783,000 at December 31,
1999. Borrowings under the Term Loan and Line were $10,000,000 and
$4,916,885, respectively at December 31, 1999.

b. Subordinated notes --

During 1998, the Company obtained $3,550,000 (including $50,000 to a
stockholder/officer; see (d) below) of subordinated debt from certain
stockholders. In addition, during 1999 the Company obtained an additional
$6,400,000 of subordinated debt from various sources. Prior to December 31,
1999, these debt holders converted their subordinated debt ($9,950,000)
plus related accrued interest ($377,459) into 4,917,838 shares of series F
convertible preferred stock at a conversion price of $2.10 per share (Note
5). Also, during 1999, the Company obtained an additional $2,500,000 of
subordinated debt from a stockholder. The interest rate on the debt is
based on the prime rate plus 5% (13.5% at December 31, 1999). Subsequent to
December 31, 1999, this note and the related accrued interest, which
totalled $2,707,003, was converted into 957,447 shares of series G
convertible preferred stock based on a conversion rate of $2.82 per share
and $7,003 in cash (Note 12).

c. Capital lease obligations --

The Company has entered into several leases for computer equipment. The
agreements provide for monthly payments, including interest ranging from
10% to 10.75%, of approximately $66,000 through February 2000 with a
balloon payment of $120,000 in February 2000 and monthly payments of

F-13
<PAGE> 83
PARADIGM4, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1997, 1998 and 1999

approximately $9,000 thereafter through September 2001 with a balloon
payment of $42,000 at maturity. Subsequent to December 31, 1999, the
Company paid all capital lease obligation in full.

The following is a schedule of the future minimum lease payments under
capital leases, together with the present value of the net minimum lease
payments:

<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31:
- -------------------------
<S> <C>
2000...................................................... $ 336,810
2001...................................................... 92,092
---------
Present value of net minimum lease payments................. 428,902
Less -- current portion..................................... (336,810)
---------
$ 92,092
=========
</TABLE>

d. Stockholder/officers --

Borrowings under notes payable to stockholders/officers were converted to
series F preferred stock in 1999 (Note 5).

5. STOCKHOLDERS' EQUITY:

Convertible preferred stock --

Convertible preferred stock consists of the following at December 31, 1999.
Convertible preferred stock, par value $.001 authorized 12,504,057 shares:

<TABLE>
<CAPTION>
LIQUIDATION COMMON SHARES
SHARES TOTAL VALUE AS CONVERTED
---------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Series A (a) 275,000 $ 2,750,000 $ 2,750,000 1,375,000
Series B (b) 25,000 500,000 500,000 125,000
Series C (c) 50,000 1,250,000 1,250,000 250,000
Series D (d) 40,000 2,000,000 2,000,000 793,652
Series E (e) 179,105 8,955,250 8,955,250 3,553,676
Series F (f) 10,794,348 22,668,130 22,668,130 10,794,348
---------- ----------- ----------- ----------
11,363,453 $38,123,381 $38,123,381 16,891,676
========== =========== =========== ==========
</TABLE>

- ---------------
a. The series A preferred stock was issued in 1996 at $10 per share with a
liquidation preference of $10 per share. Series A preferred stockholders are
subordinate to the claims of series E and F preferred stockholders. Each
share of series A preferred stock is convertible into five shares of the
Company's common stock at the holders' option and automatically converts upon
the occurrence of certain events (see g below).

b. The series B preferred stock was issued in 1996 at $20 per share with a
liquidation preference of $20 per share. Series B preferred stockholders are
subordinate to the claims of series E and F preferred stockholders. Each
share of series B preferred stock is convertible into five shares of the
Company's common stock at the holders' option and automatically converts upon
the occurrence of certain events (see g below).

c. The series C preferred stock was issued in 1996 at $25 per share with a
liquidation preference of $25 per share. Series C preferred stockholders are
subordinate to the claims of series E and F preferred stockholders. Each
share of series C preferred stock is convertible into five shares of the
Company's

F-14
<PAGE> 84
PARADIGM4, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1997, 1998 and 1999

common stock at the holders' option and automatically converts upon the
occurrence of certain events (see g below).

d. The series D preferred stock was issued in 1996 at $50 per share with a
liquidation preference of $50 per share. Series D preferred stockholders are
subordinate to the claims of series E and F preferred stockholders. Each
share of series D preferred stock is currently convertible into 19.8413
shares of the Company's common stock at the holders' option and automatically
converts upon the occurrence of certain events (see g below).

e. During 1997 and 1998, 100,000 and 79,105 shares, respectively, of the series
E preferred stock were issued at $50 per share, with a liquidation preference
of $50 per share. The 79,105 shares issued in 1998 was the result of the
conversion of $3,955,249 of notes payable and accrued interest. Series E and
F preferred stockholders have dividend and liquidation preferences over
series A, B, C and D stockholders. Each share of series E preferred stock is
currently convertible into 19.8413 shares of the Company's common stock at
the holders' option and automatically converts upon the occurrence of certain
events (see g below). The series E preferred stock is entitled to receive
annual cumulative dividends of $4 per share. At December 31, 1999, cumulative
dividends approximated $715,000; however, this amount is not accrued since it
is only payable upon the occurrence of certain events, none of which are
probable at December 31, 1999 (liquidation of the Company or payment of
dividends to other equity holders; this dividend right expires on the
conversion of the series E convertible preferred stock to common stock).

f. During 1999, 10,794,348 shares of series F preferred stock were issued at
$2.10 per share, with a liquidation preference of $2.10 per share. Of the
10,794,348 shares issued, 4,917,838 shares were issued as the result of the
conversion of $10,327,459 of subordinated debt and accrued interest (Note 4).
Series E and F preferred stockholders have dividend and liquidation
preferences over series A, B, C and D stockholders. Each share of series F
preferred is convertible into 1 share of the Company's common stock at the
holders' option and automatically upon the occurrence of certain events (see
g below). The series F preferred stock is entitled to receive annual
cumulative dividends of $.168 per share. At December 31, 1999, cumulative
dividends approximated $900,000; however, this amount is not accrued since it
is only payable upon the occurrence of certain events, none of which are
probable at December 31, 1999 (liquidation of the Company or payment of
dividends to other equity holders; this dividend right expires on the
conversion of the series F preferred stock to common stock).

g. Events that would cause an automatic conversion as forementioned include (1)
a public offering with proceeds greater than $30,000,000 or (2) change of
control as defined in Section 2(d) of Paradigm4's Seventh Restated
Certificate of Incorporation.

The above listed preferred stock issues have the same voting rights (on an
as-converted basis) as the common stock for all matters, except for the election
of directors. See Note 12 for additional preferred stock issuances subsequent to
December 31, 1999.

Stock grants --

During 1998, the Company granted two employees an aggregate of 12,500
shares of common stock in lieu of compensation with a fair market value of $11
per share. In addition, the Company entered into a business advisory arrangement
with Birchmere Investments (Birchmere) for the purpose of obtaining future
business opportunities. The Company issued Birchmere 10,000 shares of its common
stock, with a fair market value of $10 per share, as part of the arrangement.

F-15
<PAGE> 85
PARADIGM4, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1997, 1998 and 1999

During 1999, the Company granted 5,000 shares of common stock to one
employee in lieu of compensation with a fair value of $2.10.

Stock options --

1999 Stock Plan --

The 1999 Stock Plan permits the grant of options to directors, employees
and consultants. Options may be either incentive stock options within the
meaning of Section 422 of the Internal Revenue Code or nonstatutory stock
options. In addition, the 1999 Stock Plan permits the grant of stock
appreciation rights, stock awards and rights to purchase restricted stock.

The Board of Directors administers the 1999 Stock Plan or appoints a
committee to administer the Plan. The Board of Directors has delegated the
authority to administer the 1999 Stock Plan to the compensation committee.

The maximum term of options granted under the 1999 Stock Plan is ten years.
Incentive stock options granted under the 1999 Stock Plan generally are
non-transferable. Nonstatutory stock options generally are non-transferable,
although the applicable option agreement may permit transfers. Options generally
expire after the termination of an option holder's service. An option holder may
exercise any options that are exercisable as of the date of termination during
the three-month period after termination. If an option holder is permanently
disabled or dies during his or her service, such person's options generally may
be exercised up to twelve months following disability or death.

The exercise price of an incentive stock option cannot be less than 100% of
the fair market value of the common stock on the date of the grant. The exercise
price of a nonstatutory stock option cannot be less than 50% of the fair market
value of the common stock on the date of grant.

The terms of any stock appreciation rights, stock awards or restricted
stock purchase rights granted under the 1999 Stock Plan will be determined by
the administrator. Stock appreciation rights, stock awards and restricted stock
purchase rights awarded under the 1999 Stock Plan are generally non-
transferable, although the applicable award agreement may permit transfers.

The Board of Directors may amend or terminate the 1999 Stock Plan at any
time. Amendments will generally be submitted for stockholder approval only to
the extent required by applicable law.

1996 Stock Plan --

The 1996 Stock Plan permits the grant of options to directors, officers,
employees, vendors, advisors and consultants. Options may be either incentive
stock options within the meaning of Section 422 of the Internal Revenue Code or
nonstatutory stock options.

SFAS No. 123 "Accounting for Stock-Based Compensation" requires the
measurement of the fair value of stock options to be included in the statement
of operations or disclosed in the notes to financial statements. The Company has
determined that it will continue to account for stock-based compensation for
employees under APB Opinion No. 25 and elect the disclosure-only alternative
under SFAS No. 123. The Company has computed the pro forma disclosures required
under SFAS No. 123 for options granted

F-16
<PAGE> 86
PARADIGM4, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1997, 1998 and 1999

in 1997, 1998 and 1999 using the Black-Scholes option pricing model prescribed
by SFAS No. 123. The weighted average assumptions used are as follows:

<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Expected dividend yield................................. 0% 0% 0%
Risk-free interest rate................................. 5.93% 6.53% 6.47%
Expected life of options................................ 3 years 5 years 5 years
</TABLE>

The Company uses the intrinsic-value method in accounting for its employee
stock-based compensation plans. Accordingly, no compensation cost has been
recognized for any of its stock options granted because the exercise price of
each option equaled or exceeded the fair value of the underlying common stock as
of the grant date for each stock option.

Had compensation cost of the Company's stock option plans been determined
based on the fair value at the grant dates of awards under the Plan consistent
with the methodology of SFAS No. 123, net loss would have been as follows:

<TABLE>
<CAPTION>
1997 1998 1999
----------- ------------ ------------
<S> <C> <C> <C>
Net loss:
As reported............................. $(4,891,791) $(21,026,471) $(22,431,943)
Pro forma............................... (5,286,504) (21,517,744) (23,420,301)
Pro forma net loss per common share:
As reported............................. $ (1.90) $ (8.02) $ (8.20)
Pro forma............................... (2.06) (8.21) (8.57)
</TABLE>

A summary of the status of the Company's stock option plans at December 31,
1997, 1998 and 1999 and changes during the years then ended is presented in the
table and narrative below:

<TABLE>
<CAPTION>
1997 1998 1999
-------------------- --------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- ---------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1............... 818,585 $ 1.62 1,588,085 $ 6.05 1,653,831 $ 6.74
Granted/reissued..................... 834,875 10.66 156,592 11.00 4,604,843 2.26
Exercised............................ (2,000) 0.50 (64,787) 0.52 (134,899) 0.53
Cancelled/expired.................... (63,375) 4.75 (26,059) 6.21 (134,360) 9.82
--------- ---------- ---------
Outstanding at December 31............. 1,588,085 $ 6.05 1,653,831 $ 6.74 5,989,415 $ 3.36
========= ========== =========
Options exercisable at December 31..... 597,418 $ 4.46 $ 976,848 $ 5.61 2,057,283 $ 4.44
========= ========== =========
Weighted average fair value of options
granted during the year.............. 834,875 $ 1.74 156,592 $ 3.06 4,604,843 $ 0.62
</TABLE>

F-17
<PAGE> 87
PARADIGM4, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1997, 1998 and 1999

The following table presents weighted average price and life information
about significant option groups outstanding at December 31, 1999.

<TABLE>
<CAPTION>
WEIGHTED
AVERAGE WEIGHTED WEIGHTED
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- --------------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$ 0.50 - $ 0.55 166,365 5.9 years $ 0.52 166,365 $ 0.52
$ 2.00 - $ 2.82 5,012,093 9.8 years 2.23 1,309,523 2.07
$ 5.00 10,000 8.0 years 5.00 7,500 5.00
$10.00 - $11.00 800,957 8.1 years 10.99 573,895 10.99
--------- ---------
5,989,415 9.5 years $ 3.36 2,057,283 $ 4.44
========= =========
</TABLE>

Warrants --

As of December 31, 1999, the Company has issued and outstanding warrants to
purchase 2,787,145 shares of common stock at exercisable prices that range from
$1.47 per share to $4.24 per share.

As of December 31, 1999, the Company has the following outstanding
warrants:

<TABLE>
<CAPTION>
TOTAL
YEAR EXPIRATION EXERCISE NUMBER OF PROCEEDS OF
ISSUED DATE DESCRIPTION PRICE WARRANTS EXERCISE
- ------ ---------- -------------------------------- -------- --------- -----------
<C> <C> <S> <C> <C> <C>
1996(a) 2001 Bridge financing $2.00 114,750 $ 229,500
1997(b) 2002 Bridge financing 3.10 258,435 801,150
1997(b) 2002 Bridge financing 3.11 167,206 520,012
1997(b) 2002 Bridge financing 3.11 249,414 775,676
1997(c) 2004 Credit agreement 4.21 220,273 927,348
1998(d) 2004 Credit agreement 4.21 146,296 615,906
1998(e) 2003 Credit agreement 2.10 236,381 496,400
1999(f) 2004 Lease financing 2.10 56,635 118,934
1999(g) 2004 Subordinated financing 2.10 40,179 84,376
1999(h) 2006 Series F preferred 2.10 184,429 387,301
1999(i) 2006 Consulting services 1.47 103,741 152,499
1999(j) 2009 Settlement warrants 2.10 708,750 1,488,375
1999(k) 2004 Strategic alliance 2.10 10,000 21,000
1999(l) 2004 Vendata acquisition 2.10 28,156 59,128
1999(m) 2004 Credit agreement 2.52 262,500 661,500
--------- ----------
2,787,145 $7,339,105
========= ==========
</TABLE>

- ---------------
(a) During 1996, the Company issued notes under a bridge financing agreement,
which were converted into series A preferred stock. As an incentive for the
bridge financing, the Company issued warrants to purchase shares of its
common stock at an exercise price of $2.00 per share. In 1996, warrants to
purchase 68,410 shares were exercised. As of December 31, 1999, 114,750
warrants were outstanding. These warrants can be exercised through 2001.

(b) During 1997, the Company issued notes under a bridge financing agreement. As
an incentive for the bridge financing, the Company issued warrants to
purchase 258,435 shares of its common stock at an

F-18
<PAGE> 88
PARADIGM4, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1997, 1998 and 1999

exercise price of $3.00 per share, issued warrants to purchase 167,206
shares of its common stock at an exercise price of $3.00 per share, and
issued warrants to purchase 249,414 shares of its common stock at an
exercise price of $3.01 per share. These warrants can be exercised through
2002. The Company valued the warrants at $107,500 and recorded a non-cash
interest charge for such amount.

(c) During 1997, the Company entered into a demand credit agreement. As an
incentive for the credit agreement, the Company issued warrants to purchase
220,273 shares of its common stock at an exercise price of $4.24 per share.
These warrants can be exercised through 2004. The Company valued the
warrants at $47,158 and recorded a non-cash interest charge for such amount.

(d) During 1998, the Company increased its line-of-credit (Note 4). As an
incentive for the agreement, the Company issued warrants to purchase 146,296
shares of its common stock at an exercise price of $4.24 per share. These
warrants can be exercised through 2004. The Company valued the warrants at
$53,199 and recorded a non-cash interest charge for such amount.

(e) During 1998, the Company entered into a demand credit agreement (Note 4). As
an incentive for the credit agreement, the Company issued warrants to
purchase 236,381 shares of its common stock at an exercise price of $2.10
per share. These warrants can be exercised through June 2003. The Company
valued the warrants at $34,000 and recorded a non-cash interest charge for
such amount.

(f) In September 1999, in connection with several leases for computer equipment,
the Company issued warrants to purchase 56,635 shares of common stock at an
exercise price of $2.10 per share to ATTI. The Company valued the warrants
at $66,293 and recorded a non-cash interest charge for such amount.

(g) In December 1999, in connection with the extension of the subordinated note
(Note 4), the Company issued warrants to purchase 40,179 shares of common
stock at $2.10 per share. The Company valued the warrant at $47,026 and
recorded a non-cash interest charge for such amount.

(h) During 1999, in connection with the issuance of series F convertible
preferred stock, the Company issued warrants to purchase 184,429 shares of
its common stock at an exercise price of $2.10 per share. The Company valued
these warrants at $215,856 and recorded a cost related to series F financing
as a reduction to additional paid-in-capital. These warrants can be
exercised through 2006.

(i) During 1999, in connection with consulting services, the Company issued
warrants to purchase 103,741 shares of its common stock at an exercise price
of $1.47 per share. The Company valued these warrants at $84,985 and
recorded a non-cash charge in general and administrative expenses. These
warrants can be exercised through 2006.

(j) During 1999, the Company issued warrants to purchase 708,750 shares of
common stock at an exercise price of $2.10. These warrants were issued by
the Company to certain preferred stockholders to settle potential claims by
the stockholders. The Company valued these warrants at $829,521 and has
charged this amount as a settlement expense in other income (expense), net.
These warrants can be exercised through 2009.

(k) During 1999, in connection with a strategic alliance agreement with Public
Technologies, Inc., the Company issued warrants to purchase 10,000 shares of
its common stock at an exercise price of $2.10 per share. The Company valued
the warrant at $11,700 and recorded a non-cash charge in general and
administrative expenses. These warrants can be exercised through 2004.

(l) During 1999, in connection with the acquisition of certain assets of
Vendata, the Company issued warrants to purchase 28,156 shares of its common
stock at an exercise price of $2.10 per share. These warrants can be
exercised through 2004. The Company valued these warrants at $32,943 and
recorded the amount as additional goodwill.

F-19
<PAGE> 89
PARADIGM4, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1997, 1998 and 1999

(m) During 1999, the Company, as incentive to amend the Credit Agreement, issued
warrants to purchase 262,500 shares of its common stock at an exercise price
of $2.52 per share. The Company valued these warrants at $368,655 and
recorded the amount as deferred financing costs, net in the accompanying
consolidated balance sheet. These warrants can be exercised through 2004.

The Company has reserved approximately 37,533,000 unissued shares of its common
stock for the conversion of preferred stock and exercise of options and
warrants.

See Note 12 for subsequent events and certain anti-dilutive clauses in warrant
agreements associated with (b), (c) and (d) above, which requires a certificate
of adjustment entitling the holders additional warrants to purchase additional
common stock at predetermined prices.

6. CONCENTRATION OF CREDIT RISK:

The Company maintains all of its cash balances in two financial
institutions. The balances are insured by the Federal Deposit Insurance
Corporation up to $100,000. At December 31, 1998 and 1999, the Company had bank
balances in excess of the federally insured limits.

The Company's top five customers accounted for approximately 52% of total
revenue for the year ended December 31, 1999. Two customers represented over 10%
of revenues for the year ended December 31, 1999, accounting for 16% and 15% of
revenues, for the year then ended. As of December 31, 1999, one customer
accounted for 91% of costs and estimated earnings in excess of billings under
uncompleted contracts and one customer accounted for 52% of accounts receivable.
A contract with one customer accounted for all discontinued operations. For the
year ended December 31, 1998, four customers accounted for 98% of the Company's
revenues. As of December 31, 1998, two customers accounted for 90% of accounts
receivable and costs and estimated earnings in excess of billings under
uncompleted contracts.

7. RESTRICTED CASH:

The Company has issued five irrevocable standby letters of credit totaling
approximately $785,000 as security deposits on two rental leases and two
performance bonds. These letters of credit have expiration dates through June
2001. Cash is restricted to the extent that funds must be maintained at the
Company's bank to secure these letters of credit. In addition, approximately
$1,304,457 of cash was restricted at December 31, 1999 in accordance with the
Company's contracts with the Puerto Rico Police Department and State of
Delaware.

8. COMMITMENTS AND CONTINGENCIES:

As of December 31, 1999, the Company leases office space and certain
equipment under various noncancelable operating leases. The monthly rent at its
facilities includes annual charges for maintenance and real estate taxes. Future
minimum lease payments under these operating leases are approximately as follows
for the years ended December 31:

Rent expense for the years ended December 31, 1997, 1998 and 1999 was
approximately $397,000, $982,000 and $1,020,000, respectively.

F-20
<PAGE> 90
PARADIGM4, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1997, 1998 and 1999

In connection with a 1996 purchase of certain research and development
technology relating to integrated wireless systems and application software, the
Company entered into an escrow agreement requiring the deposit of escrow funds
totaling $318,000 (included in other assets). Subsequent to December 31, 1999,
this escrow balance was used to pay the associated liability.

The Company has entered into employment agreements with certain of its
executive officers. These agreements provide for automatic renewal on January 1
of each year, for 1 to 3 years, unless notice of termination or resignation
occurs prior to that date. Each of the agreements provides, among other things,
for base salary, bonuses and termination payments. The termination payments
range from six months of base salary to two times base annual salary plus
guaranteed bonus and certain health benefits for up to two years.

In February 2000, the Company signed an agreement with Wireless Knowledge
Inc. The Company agreed to purchase a minimum of 150,000 Subscriber Access
Licenses (SALs) during the 42 month term of the agreement for approximately $11
million. In addition, the Company has agreed to spend a minimum of $1,000,000
advertising wireless data services using the product brand over the first 18
months of the agreement.

9. INCOME TAXES:

The Company accounts for income taxes under the provisions of SFAS No. 109,
"Accounting for Income Taxes." This statement requires the Company to recognize
deferred tax assets and liabilities for the expected future tax consequences of
events that have been previously recognized in the Company's financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the financial statement
carrying amounts and the tax bases of the assets and liabilities and the net
operating loss carryforwards available for tax reporting purposes, using
applicable tax rates for the years in which the differences are expected to
reverse.

The reconciliation of the statutory federal income tax rate to the
Company's effective income tax rate for the years ended December 31, 1997, 1998,
and 1999, is as follows:

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1997 1998 1999
------ ------ ------
<S> <C> <C> <C>
Statutory rate.............................................. 34.0% 34.0% 34.0%
State tax benefit, net of federal taxes..................... 2.0 -- --
Increase in deferred tax valuation allowance................ (34.0) (34.0) (34.0)
----- ----- -----
2.0% --% --%
===== ===== =====
</TABLE>

The Company has available, at December 31, 1999, unused net operating loss
carryforwards of approximately $47 million, which may be available to offset
future federal and state taxable income, respectively, if any. The future
utilization of these carryforwards may be limited on a permanent basis due to
changes within the Company's current and future ownership structure as defined
within the income tax code. These limitations would have no impact on the
Company's statement of operations as these carryforwards are fully reserved.
Federal carryforwards are scheduled to expire commencing 2016. State
carryforwards are scheduled to expire commencing 2001.

F-21
<PAGE> 91
PARADIGM4, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

December 31, 1997, 1998 and 1999

<TABLE>
<CAPTION>
1998 1999
----------- ------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 6,700,000 $ 13,300,000
Accrued expenses and provision for loss contracts......... 2,300,000 2,700,000
----------- ------------
Total deferred tax assets................................. 9,000,000 16,000,000
Less -- valuation allowance for deferred tax assets....... (9,000,000) (16,000,000)
----------- ------------
Net deferred tax assets................................... $ -- $ --
=========== ============
</TABLE>

10. BENEFIT PLAN:

The Company has a defined contribution plan covering all eligible
employees, which qualifies under Section 401(k) of the Internal Revenue Code.
The Company's 401(k) plan provides that eligible employees may make
contributions of up to 15% of eligible compensation. The Company may make
discretionary matching contributions, limited to a maximum of 6% of employees'
eligible compensation. For the years ending December 31, 1997, 1998 and 1999, no
such discretionary contributions were made.

11. OTHER INCOME (EXPENSE), NET:

During 1998, the Company advanced approximately $613,000 to Data On Air,
Inc. (DAIR) in connection with the proposed acquisition of DAIR by the Company.
During 1998, the planned acquisition was terminated and the Company reserved the
$613,000 advance as uncollectible at December 31, 1998. During 1999, DAIR repaid
the entire $613,000, which has been reflected as other income in the
accompanying consolidated statement of operations for the year ended December
31, 1999.

During 1998, the Company determined that amounts related to a performance
bond previously expensed for a contract was not required. Therefore,
approximately $476,000 was recorded as other income (expense), net as other
income during 1998.

In addition, during 1999, charges related to certain warrants to purchase
common stock were recorded as other expense.

12. SUBSEQUENT EVENTS:

In February 2000, the Company issued 11,524,809 of series G convertible
preferred stock at $2.82 per share ($32,500,000 before costs of issuance). Each
share of the series G preferred stock is convertible into 1 share of the
Company's common stock at the holder's option and automatically converts upon
the occurrence of certain events, including an initial public offering. The
series G preferred stock is entitled to receive cumulative dividends of $0.2256
per share; however, this amount will only become payable upon the occurrence of
certain events (liquidation of the Company or payment of dividends to other
equity holders; this dividend right expires on the conversion of the series G
preferred stock to common stock).

In connection with the sale of the series G convertible preferred stock,
the Company issued warrants to Credit Suisse First Boston Corporation to
purchase 100,437 shares of common stock at $0.01 per share. The Company will
value these warrants at fair market value and will reflect this as an additional
cost of revenue during the first quarter of fiscal 2000.

F-22
<PAGE> 92

[PARADIGM4 LOGO]
<PAGE> 93

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth an estimate of the costs and expenses, other
than the underwriting discounts and commissions, payable by the Registrant in
connection with the issuance and distribution of the common stock being
registered.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 33,000
NASD fee.................................................... 14,000
Nasdaq National Market listing fee.......................... *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Printing expenses........................................... *
Blue sky fees and expenses.................................. *
Transfer Agent and Registrar fees and expenses.............. *
Miscellaneous............................................... *
--------
Total............................................. $ *
========
</TABLE>

- ---------------
* To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The registrant's certificate of incorporation in effect as of the date
hereof, and the registrant's amended and restated certificate of incorporation
to be in effect upon the closing of this offering (collectively, the
"Certificate") provides that, except to the extent prohibited by the Delaware
General Corporation Law, as amended (the "DGCL"), the registrant's directors
shall not be personally liable to the registrant or its stockholders for
monetary damages for any breach of fiduciary duty as directors of the
registrant. Under the DGCL, the directors have a fiduciary duty to the
registrant which is not eliminated by this provision of the Certificate and, in
appropriate circumstances, equitable remedies such as injunctive or other forms
of non-monetary relief will remain available. In addition, each director will
continue to be subject to liability under the DGCL for breach of the director's
duty of loyalty to the registrant, for acts or omissions which are found by a
court of competent jurisdiction to be not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are prohibited by DGCL. This provision
also does not affect the directors' responsibilities under any other laws, such
as the Federal securities laws or state or Federal environmental laws. The
registrant intends to obtain liability insurance for its officers and directors
prior to the closing of this offering.

Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this provision
shall not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) arising under Section 174 of the DGCL, or (iv)
for any transaction from which the director derived an improper personal
benefit. The DGCL provides further that the indemnification permitted thereunder
shall not be deemed exclusive of any other rights to which the directors and
officers may be entitled under the corporation's bylaws, any agreement, a vote
of stockholders or otherwise. The Certificate eliminates the personal liability
of directors to the fullest extent permitted by Section 102(b)(7) of the DGCL
and provides that the registrant shall fully indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative or
investigative) by reason of the fact that such person is or was a director or
officer of the registrant, or is or was serving at the request of the registrant
as a director or officer of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
attorney's fees), judgments, fines

II-1
<PAGE> 94

and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding.

At present, there is no pending litigation or proceeding involving any
director, officer, employee or agent as to which indemnification will be
required or permitted under the Certificate. The registrant is not aware of any
threatened litigation or proceeding that may result in a claim for such
indemnification.

The form of proposed underwriting agreement to be filed as an exhibit
hereto includes provisions regarding the indemnification of our officers and
directors against certain liabilities by the several underwriters.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

The Registrant has sold and issued the following securities within the past
three years:

1. On May 9, 1997, the Registrant issued and sold an aggregate of 100,000
shares of series E preferred stock at $50.00 per share to accredited
investors for an aggregate purchase price of $5,000,000.

2. On June 12, 1998, the Registrant converted $3,955,273 in convertible
promissary notes into 79,105 shares of series E preferred stock at
$50.00 per share to accredited investors for an aggregate purchase price
of approximately $4,000,000.

3. From May 1999 through November 1999, the Registrant issued and sold an
aggregate of 10,794,348 shares of series F preferred stock at $2.10 per
share to accredited investors for an aggregate purchase price of
approximately $22,000,000.

4. On February 14, 2000, the Registrant issued and sold an aggregate of
11,524,809 shares of series G preferred stock at $2.82 per share to
accredited investors for an aggregate purchase price of approximately
$32,500,000.

5. In February 2000, Credit Suisse First Boston Corporation received
warrants to purchase 100,437 shares of common stock at $0.01 per share
as partial compensation for its role as exclusive placement agent and
financial advisor in connection with the Registrant's private placement
of approximately $30,000,000 of equity or equity-linked securities.

The above securities were offered and sold by the registrant in reliance
upon exemptions from registration pursuant to either (i) Section 4(2) of the
Securities Act of 1933, as amended, as transactions not involving any public
offering, or (ii) Rule 701 promulgated under the Securities Act of 1933, as
amended. No underwriters were involved in connection with the sales of
securities referred to in this Item 15.

Immediately prior to the closing of this offering, each outstanding share
of series A, series B and series C preferred stock will be converted into five
shares of common stock, each share of series D and series E preferred stock will
be converted into 19.8413 shares of common stock, and each outstanding share of
series F and series G preferred stock will be converted into one share of common
stock.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) Exhibits

II-2
<PAGE> 95

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
10.3 Registration Rights Agreement, dated as of May 9, 1997, by
and among the Registrant and the investors party thereto.
10.4* Wireless Data Software and Services Distribution and
Marketing Agreement, dated February 28, 2000, by and between
the Registrant and Wireless Knowledge Inc.
10.5* Lease Agreement, dated June 18, 1999, by and between the
Registrant and Teachers Insurance & Annuity Association of
America, Inc.
10.6 Put Agreement, dated as of May 26, 1999, by and between the
Registrant and J. Bruce Boisture.
10.7* FCIC II Message Switch/Hot Files System General Terms and
Conditions, dated December 16, 1996, by and between the
Registrant and the State of Florida's Department of Law
Enforcement.
10.8* Integrated Technologies Services Contract, dated January 26,
1998, by and between the Registrant and the State of Kansas
Sentencing Commission.
10.9* Contrato de Servicios, dated July 16, 1999, by and between
La Policia de Puerto Rico and the Registrant.
10.10* CityTime Agreement, dated April 1998, by and between MCI
Systemhouse Corp. and the City of New York, Office of
Payroll Administration.
10.11* Assignment of CityTime Agreement, dated November 2, 1998, by
and between MCI Systemhouse and the Registrant.
11.1* Statement re: Supplemental Net Loss Per Share.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ernst & Young LLP.
23.3* Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibit 5.1).
24.1 Powers of Attorney (Please see Signature Page).
27.1 Financial Data Schedule.
</TABLE>

- ---------------
* To be filed by amendment.

(b) Financial Statement Schedules

Schedule II -- Valuation and Qualifying Accounts

Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable as is shown in the financial
statements or notes thereto.

ITEM 17. UNDERTAKINGS

The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933, and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.

II-3
<PAGE> 96

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act of 1933 shall be deemed to be part
of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 97

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on this 19(th) day of April, 2000.

PARADIGM4, INC.

By: /s/ J. BRUCE BOISTURE
------------------------------------
Name: J. Bruce Boisture
Title: Chairman, Chief Executive
Officer and President

POWER OF ATTORNEY

We, the undersigned directors and/or officers of Paradigm4, Inc. (the
"Company"), hereby severally constitute and appoint J. Bruce Boisture, Chairman,
Chief Executive Officer and President, Brian Herrman, Vice President and Chief
Financial Officer, and Richard M. Borden, Vice President, General Counsel and
Secretary, and each of them individually, with full powers of substitution and
resubstitution, our true and lawful attorneys, with full powers to them and each
of them to sign for us, in our names and in the capacities indicated below, the
registration statement on Form S-1 filed with the Securities and Exchange
Commission, and any and all amendments to said registration statement (including
post-effective amendments), and any registration statement filed pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, in connection with the
registration under the Securities Act of 1933, as amended, of equity securities
of the Company, and to file or cause to be filed the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as each of them might or could do in person, and hereby ratifying and
confirming all that said attorneys, and each of them, or their substitute or
substitutes, shall do or cause to be done by virtue of this Power of Attorney.

Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated below:

<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<C> <S> <C>
/s/ J. BRUCE BOISTURE Chairman, Chief Executive Officer April 19, 2000
- --------------------------------------------------- and President (Principal
J. Bruce Boisture Executive Officer)

/s/ BRIAN HERRMAN Vice President and Chief Financial April 19, 2000
- --------------------------------------------------- Officer (Principal Financial and
Brian Herrman Accounting Officer)

/s/ MARTIN J. PATTWELL Vice President, Chief Operating April 19, 2000
- --------------------------------------------------- Officer and Director
Martin J. Pattwell

/s/ JOHN BAY Director April 19, 2000
- ---------------------------------------------------
John Bay
</TABLE>

II-5
<PAGE> 98

<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<C> <S> <C>
/s/ THOMAS CIRRITO Director April 19, 2000
- ---------------------------------------------------
Thomas Cirrito

/s/ DONALD DUFFY Director April 19, 2000
- ---------------------------------------------------
Donald Duffy

/s/ ERIC MEYER Director April 19, 2000
- ---------------------------------------------------
Eric Meyer

/s/ TERRENCE QUINN Director April 19, 2000
- ---------------------------------------------------
Terrence Quinn

/s/ PETER KLEINKNECHT Director April 19, 2000
- ---------------------------------------------------
Peter Kleinknecht

/s/ ALEXANDER D. LYNCH Director April 19, 2000
- ---------------------------------------------------
Alexander D. Lynch
</TABLE>

II-6
<PAGE> 99

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

ON FINANCIAL STATEMENT SCHEDULE

To Board of Directors and Shareholders of
Paradigm4, Inc. and Subsidiary

We have audited in accordance with auditing standards general accepted in
the United States, the consolidated balance sheets of Paradigm4, Inc. and
Subsidiary as of December 31, 1998 and 1999, and the related consolidated
statements of operations, shareholders' equity (deficit) and cash flows for each
of the two years in the period ended December 31, 1999, included in this
prospectus, and have issued our report thereon dated March 24, 2000. Our audits
were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The accompanying schedule on page S-3 is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in the audits of the basic consolidated financial statements
and, in our opinion, fairly states, in all material respects, the financial data
required to be set forth therein in relation to the basic consolidated financial
statements taken as a whole.

ARTHUR ANDERSEN LLP

Hartford, Connecticut

March 24, 2000

S-1
<PAGE> 100

REPORT OF INDEPENDENT AUDITORS

ON FINANCIAL STATEMENT SCHEDULE

To Board of Directors and Stockholders of
Paradigm4, Inc.

We have audited the consolidated financial statements of Paradigm4, Inc.
for the year ended December 31, 1997, and have issued our report thereon dated
February 20, 1998 (included elsewhere in the registration statement). Our audit
also included the financial statement schedule listed in Item 16(b) of this
registration statement. This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audit.

In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.

ERNST & YOUNG LLP

New York, New York

February 20, 1998

S-2
<PAGE> 101

SCHEDULE II

PARADIGM4, INC. AND SUBSIDIARY
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

FOR THE THREE YEAR PERIOD ENDED DECEMBER 31, 1999

<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------------------------------------------------- ---------- ---------- ---------- ---------- ----------
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1997:
Reserves which are deducted in the balance sheet
from assets to which they apply -
Allowance for doubtful accounts............. $ -- $ -- $ -- $ -- $ --
Allowance for amounts loaned to Data On Air,
Inc....................................... -- -- -- -- --

For the year ended December 31, 1998:
Reserves which are deducted in the balance sheet
from assets to which they apply -
Allowance for doubtful accounts............. $ -- $ -- $ -- $ -- $ --
Allowance for amounts loaned to Data On Air,
Inc. ..................................... -- 612,703 -- -- 612,703

For the year ended December 31, 1999:
Reserves which are deducted in the balance sheet
from assets to which they apply -
Allowance for doubtful accounts............. $ -- $224,000 $ -- $ -- $224,000
Allowance for amounts loaned to Data On Air,
Inc. ..................................... 612,703 -- -- 612,703 --
</TABLE>

S-3
<PAGE> 102

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
1.1* Form of underwriting agreement.
3.1* Form of amended and restated certificate of incorporation.
3.2* Form of amended and restated by-laws.
4.1* Specimen common stock certificate.
5.1* Opinion of Brobeck, Phleger & Harrison LLP.
10.1 1996 Stock Plan, as amended.
10.2 1999 Stock Plan.
10.3 Registration Rights Agreement, dated as of May 9, 1997, by
and among the Registrant and the investors party thereto.
10.4* Wireless Data Software and Services Distribution and
Marketing Agreement, dated February 28, 2000, by and between
the Registrant and Wireless Knowledge Inc.
10.5* Lease Agreement, dated June 18, 1999, by and between the
Registrant and Teachers Insurance & Annuity Association of
America, Inc.
10.6 Put Agreement, dated as of May 26, 1999, by and between the
Registrant and J. Bruce Boisture.
10.7* FCIC II Message Switch/Hot Files System General Terms and
Conditions, dated December 16, 1996, by and between the
Registrant and the State of Florida's Department of Law
Enforcement.
10.8* Integrated Technologies Services Contract, dated January 26,
1998, by and between the Registrant and the State of Kansas
Sentencing Commission.
10.9* Contrato de Servicios, dated July 16, 1999, by and between
La Policia de Puerto Rico and the Registrant.
10.10* CityTime Agreement, dated April 1998, by and between MCI
Systemhouse Corp. and the City of New York, Office of
Payroll Administration.
10.11* Assignment of CityTime Agreement, dated November 2, 1998, by
and between MCI Systemhouse and the Registrant.
11.1* Statement re: Supplemental Net Loss Per Share.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ernst & Young LLP.
23.3* Consent of Brobeck, Phleger & Harrison LLP (included in
Exhibit 5.1).
24.1 Powers of Attorney (Please see Signature Page).
27.1 Financial Data Schedule.
</TABLE>

- ---------------
* To be filed by amendment.

<PAGE> 1
EXHIBIT 10.1

PARADIGM4, INC.

1996 STOCK PLAN

January 31, 1996

SECTION 1. PURPOSE.

The purpose of the 1996 Stock Plan (the "Plan") is to secure for
Paradigm4, Inc. (the "Company"), its parent (if any) and any subsidiaries of the
Company (collectively the "Related Corporations") the benefits arising from
capital stock ownership by those employees, directors, officers and consultants
of the Company and any Related Corporations who will be responsible for the
Company's future growth and continued success.

The Plan will provide a means whereby (a) employees of the Company and
any Related Corporations may purchase stock in the Company pursuant to options
which qualify as "incentive stock options" ("Incentive Stock Options") under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), (b)
directors, employees, consultants, advisors and vendors of the Company and any
Related Corporations may purchase stock in the Company pursuant to options
granted hereunder which do not qualify as Incentive Stock Options
("Non-Qualified Option" or "Non-Qualified Options"); (c) directors, employees,
consultants, advisors and vendors of the Company and any Related Corporations
may be awarded stock in the Company ("Awards"); and (d) directors, employees,
consultants, advisors and vendors of the Company and any Related Corporations
may make direct purchases of stock in the Company ("Purchases"). Both Incentive
Stock Options and Non-Qualified Options are referred to hereafter individually
as an "Option" and collectively as "Options." As used herein, the terms "parent"
and "subsidiary" mean "parent corporation" and "subsidiary corporation" as those
terms are defined in Section 424 of the Code.

SECTION 2. ADMINISTRATION.

2.1 BOARD OF DIRECTORS AND THE COMMITTEE. The Plan will be administered
by the Board of Directors of the Company whose construction and interpretation
of the terms and provisions hereof shall be final and conclusive. Any director
to whom an option is awarded shall be ineligible to vote upon his or her option,
but options may be granted any such director by a vote of the remainder of the
directors, except as limited below. The Board of Directors may in its sole
discretion grant Options, issue shares upon exercise of such Options, grant
Awards and approve Purchases, all as provided in the Plan. The Board of
Directors shall have authority, subject to the express provisions of the Plan,
to construe the Plan and its related agreements, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms and
provisions of the
<PAGE> 2
respective Option, Award and Purchase agreements, which need not be identical,
and to make all other determinations in the judgment of the Board of Directors
necessary or desirable for the administration of the Plan. The Board of
Directors may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any related agreement in the manner and to the
extent it shall deem expedient to carry the Plan into effect and it shall be the
sole and final judge of such expediency. No director shall be liable for any
action or determination made in good faith. The Board of Directors may delegate
any or all of its powers under the Plan to a Compensation Committee or other
Committee (the "Committee") appointed by the Board of Directors consisting of at
least two members of the Board of Directors. If the Committee is so appointed,
all references to the Board of Directors herein shall mean and relate to such
Committee, unless the context otherwise requires.

2.2 PARTICIPATION BY DIRECTORS. With respect to the participation of
any director in the Plan, his or her selection as a participant and the number
of Option, Award or Purchase shares to be allocated to such director shall be
determined either (i) by the Board of Directors, of which a majority, as well as
a majority of the directors acting in the matter, shall be "disinterested
persons" (as hereinafter defined) or (ii) by, or only in accordance with, the
recommendations of a committee of two or more persons having full authority to
act in the matter, of which all members of such committee shall be disinterested
persons. For the purposes of the Plan, a director or member of such committee
shall be deemed to be a "disinterested person" only if such person qualifies as
a "disinterested person" within the meaning of paragraph (d)(3) of Rule 16b-3
(or any successor rule) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), as such term is interpreted from time to time.

SECTION 3. ELIGIBILITY.

3.1 INCENTIVE STOCK OPTIONS. Employees of the Company or of any Related
Corporation shall be eligible to receive Incentive Stock Options pursuant to the
Plan; provided that no person shall be granted any Incentive Stock Option under
the Plan who, at the time such Option is granted, owns, directly or indirectly,
Common Stock of the Company possessing more than l0% of the total combined
voting power of all classes of stock of the Company or of its Related
Corporations, unless the requirements of Section 6.6(b) hereof are satisfied. In
determining whether this 10% threshold has been reached, the stock attribution
rules of Section 424(d) of the Code shall apply. Directors who are not regular
employees are not eligible to receive Incentive Stock Options.

3.2 NON-QUALIFIED OPTIONS, AWARDS, AND PURCHASES. Non-Qualified
Options, Awards and authorizations to make Purchases may be granted to any
director (whether or not an employee), employee, consultant, advisor or vendor
of the Company or any Related Corporation.

3.3 GENERALLY. The Board of Directors may take into consideration a
<PAGE> 3
recipient's individual circumstances in determining whether to grant an
Incentive Stock Option, a Non-Qualified Option or an Award or to approve a
Purchase. Granting of any Option or Award or approval of any Purchase for any
individual or entity shall neither entitle that individual or entity to, nor
disqualify that individual or entity from, participation in any other grant of
Options or Awards or authorizations to make Purchases.

SECTION 4. STOCK SUBJECT TO PLAN.

Subject to adjustment as provided in Sections 9 and 10 hereof, the
stock to be offered under the Plan shall consist of shares of the Company's
Common Stock, no par value, and the number of shares of stock that may be issued
upon the exercise of all Options and Awards granted under the Plan shall not
exceed in the aggregate One Hundred Sixty Thousand (160,000) shares. Such shares
may be authorized and unissued shares or may be treasury shares. If an Option
granted hereunder shall expire or terminate for any reason without having been
exercised in full, or if the Company shall reacquire any unvested shares issued
pursuant to Awards or Purchases, the unpurchased shares subject thereto and any
unvested shares so reacquired shall again be available for subsequent grants of
Options and Awards and for Purchases under the Plan. Stock issued pursuant to
the Plan may be subject to such restrictions on transfer, repurchase rights or
other restrictions as shall be determined by the Board of Directors.

SECTION 5. GRANTING OF OPTIONS AND AWARDS AND APPROVALS OF PURCHASES.

Options and Awards may be granted and Purchases may be approved under
the Plan at any time after January 20, 1996 and prior to January 31, 2001. The
date of grant of an Option or Award or approval of a Purchase under the Plan
will be the date specified by the Board of Directors at the time such grants
such Option or Award or approves such Purchase; provided, however, that such
date shall not be prior to the date on which the Board of Directors takes such
action. The Board of Directors shall have the right, with the consent of an
optionee, to convert an Incentive Stock Option granted under the Plan to a
Non-Qualified Option pursuant to Section 6.7.

SECTION 6. SPECIAL PROVISIONS APPLICABLE TO OPTIONS.

6.1 PURCHASE PRICE.

(a) The purchase price per share of stock deliverable upon the
exercise of an Option shall be determined by the Board of Directors;
provided, however, that (i) in the case of an Incentive Stock Option,
the exercise price shall not be less than 100% of the fair market value
of such stock on the day the option is granted (except as modified in
Section 6.6(b) hereof), and (ii) in the case of a
<PAGE> 4
Non-Qualified Option, the exercise price shall not be less than 50% of
the fair market value of such stock on the day such Option is granted.

(c) If, at the time an Option is granted under the Plan, the
Company's Common Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes
discussed in this sentence are available prior to the date such Option
is granted (the "Determination Date") and shall mean (i) the average
(on the Determination Date) of the high and low prices of the Common
Stock on the principal national securities exchange on which the Common
Stock is traded, if such Common Stock is then traded on a national
securities exchange; (ii) the last reported sale price (on the
Determination Date) of the Common Stock on the NASDAQ National Market
List, if the Common Stock is not then traded on a national securities
exchange; or (iii) the closing bid price (or average of bid prices)
last quoted (on the Determination Date) by an established quotation
service for over-the-counter securities, if the Common Stock is not
reported on the NASDAQ National Market List. However, if the Common
Stock is not publicly traded at the time an Option is granted under the
Plan, "fair market value" shall be deemed to be the fair value of the
Common Stock as determined by the Board of Directors after taking into
consideration all factors which it deems appropriate, including,
without limitation, recent sale and offer prices of the Common Stock in
private transactions negotiated at arm's length.

6.2 DURATION OF OPTIONS. Subject to Section 6.6(b) hereof, each Option
and all rights thereunder shall be expressed to expire on such date as the Board
of Directors may determine, but in no event later than ten years and one month
from the day on which the Option is granted and shall be subject to earlier
termination as provided herein, unless the Option was designated as an Incentive
Stock Option, in which case it shall expire no later than ten years from the
date on which the Option was granted.

6.3 EXERCISE OF OPTIONS.

(a) Subject to Section 6.6(b) hereof, each Option granted
under the Plan shall be exercisable at such time or times and during
such period as shall be set forth in the instrument evidencing such
Option. To the extent that an Option to purchase shares is not
exercised by an optionee when it becomes initially exercisable, it
shall not expire but shall be carried forward and shall be
<PAGE> 5
exercisable, on a cumulative basis, until the expiration of the
exercise period. No partial exercise may be for less than ten (10) full
shares of Common Stock (or its equivalent).

(b) The Board of Directors shall have the right to accelerate
the date of exercise of any installments of any Option; provided that
the Board of Directors shall not accelerate the exercise date of any
installment of any Option granted to any employee as an Incentive Stock
Option (and not previously converted into a Non-Qualified Option
pursuant to Section 6.7) if such acceleration would violate the annual
vesting limitation contained in Section 422(d)(1) of the Code, which
provides generally that the aggregate fair market value (determined at
the time the Option is granted) of the stock with respect to which
Incentive Stock Options granted to any employee are exercisable for the
first time by such employee during any calendar year (under all plans
of the Company and any Related Corporations) shall not exceed $100,000.

6.4 NONTRANSFERABILITY OF OPTIONS. No Option granted under the
Plan shall be assignable or transferable by the optionee, either voluntarily or
by operation of law, except by will or the laws of descent and distribution.
During the life of the optionee, the Option shall be exercisable only by him or
her. If any optionee should attempt to dispose of or encumber his or her
Options, his or her interest in such Options shall terminate.

6.5 EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH.

(a) If an optionee ceases to be employed by the Company or a
Related Corporation for any reason, including retirement but other than
death, any Option granted to such optionee under the Plan shall
immediately terminate; provided, however, that any portion of such
Option which was otherwise exercisable on the date of termination of
the optionee's employment may be exercised within the three-month
period following the date on which the optionee ceased to be so
employed, but in no event after the expiration of the exercise period.
Any such exercise may be made only to the extent of the number of
shares subject to the Option which were purchasable on the date of such
termination of employment. If the optionee dies during such three-month
period, the Option shall be exercisable by the optionee's personal
representatives, heirs or legatees to the same extent and during the
same period that the optionee could have exercised the Option on the
date of his or her death.

(b) If the optionee dies while an employee of the Company or
any Related Corporation, any Option granted to such optionee under the
Plan shall be exercisable by the optionee's personal representatives,
heirs or legatees, for the purchase of that number of shares and to the
same extent that the optionee could have exercised the option on the
date of his or her death. The Option or any unexercised portion thereof
shall terminate unless so exercised prior to the earlier of the
expiration of six months from the date of such death or the expiration
of the
<PAGE> 6
exercise period.

6.6 DESIGNATION OF INCENTIVE STOCK OPTIONS; LIMITATIONS.

Options granted under the Plan which are intended to be Incentive Stock
Options qualifying under Section 422 of the Code shall be designated as
Incentive Stock Options and shall be subject to the following additional terms
and conditions:

(a) Dollar Limitation. The aggregate fair market value
(determined at the time the option is granted) of the Common Stock for
which Incentive Stock Options are exercisable for the first time during
any calendar year by any person under the Plan (and all other incentive
stock option plans of the Company and any Related Corporations) shall
not exceed $100,000. In the event that Section 422(d)(1) of the Code is
amended to alter the limitation set forth therein so that following
such amendment such limitation shall differ from the limitation set
forth in this Section 6.6(a), the limitation of this Section 6.6(a)
shall be automatically adjusted accordingly.

(b) 10% Stockholder. If any employee to whom an Incentive
Stock Option is to granted pursuant to the provisions of the Plan is on
the date of grant the owner of stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company or
any Related Corporations, then the following special provisions shall
be applicable to the Incentive Stock Option granted to such individual:

(i) The option price per share of the Common Stock
subject to such Incentive Stock Option shall not be less than
110% of the fair market value of one share of Common Stock on
the date of grant; and

(ii) The option exercise period shall not exceed five
years from the date of grant.

In determining whether the 10% threshold has been reached, the stock
attribution rules of Section 424(d) of the Code shall apply.

(c) Except as modified by the preceding provisions of this
Section 6.6, all of the provisions of the Plan shall be applicable to
Incentive Stock Options granted hereunder.

6.7 CONVERSION OF INCENTIVE STOCK OPTIONS INTO NON-QUALIFIED
OPTIONS; TERMINATION OF ISOS. The Board of Directors, at the written request of
any optionee, may in its discretion take such actions as may be necessary to
convert such optionee's Incentive Stock Options (or any installments or portions
of installments thereof) that have not been exercised on the date of conversion
into Non-Qualified Options at any time prior
<PAGE> 7
to the expiration of such Incentive Stock Options, regardless of whether the
optionee is an employee of the Company or a Related Corporation at the time of
such conversion. Such actions may include, but not be limited to, extending the
exercise period or reducing the exercise price of the appropriate installments
of such Options. At the time of such conversion, the Board of Directors (with
the consent of the optionee) may impose such conditions on the exercise of the
resulting Non-Qualified Options as the Board of Directors in its discretion may
determine; provided that such conditions shall not be inconsistent with the
Plan. Nothing in the Plan shall be deemed to give any optionee the right to have
such optionee's Incentive Stock Options converted into Non-Qualified Options,
and no such conversion shall occur until and unless the Board of Directors takes
appropriate action. The Board of Directors, with the consent of the optionee,
may also terminate any portion of any Incentive Stock Option that has not been
exercised at the time of such termination.

6.8 RIGHTS AS A STOCKHOLDER. The holder of an Option shall have no
rights as a stockholder with respect to any shares covered by the Option until
the date of issue of a stock certificate to him or her for such shares. Except
as otherwise expressly provided in the Plan, no adjustment shall be made for
dividends or other rights for which the record date is prior to the date such
stock certificate is issued.

SECTION 7. SPECIAL PROVISIONS APPLICABLE TO PURCHASES.

All approvals of Purchases which provide that the Company has a right
to the terms and conditions set forth in the related agreement (the "Stock
Restriction Agreement") approved by the Board of Directors, and shall be subject
to the other terms and conditions of this Section 7.

7.1 CONDITIONS. All approvals of Purchases shall be subject to the
following conditions:

(a) Prior to the issuance and transfer of Restricted Shares,
the purchaser shall pay to the Company the purchase price (the
"Purchase Price") of the Restricted Shares in cash or in such other
manner as shall be as approved by the Board of Directors.

(b) Restricted Shares issued and transferred to a purchaser
may, if required by the Board of Directors, be deposited with the
Treasurer or other officer of the Company designated by the Board of
Directors to be held until the lapse of the restrictions upon such
Restricted Shares, and each purchaser shall execute and deliver to the
Company stock powers enabling the Company to exercise its rights
hereunder.

(c) Certificates for Restricted Shares shall, if the Company
shall deem it advisable, bear a legend to the effect that they are
issued subject to specified
<PAGE> 8
restrictions.

(d) Certificates representing the Restricted Shares shall be
registered in the name of the purchaser and shall be owned by such
purchaser. Such purchaser shall be the holder of record of such
Restricted Shares for all purposes, including voting and receipt of
dividends paid with respect to such Restricted Shares.

7.2 NONTRANSFERABILITY. A purchaser's Restricted Shares may not be
sold, assigned, transferred, alienated, commuted, anticipated, or otherwise
disposed of, except (subject to the provisions of such purchaser's Stock
Restriction Agreement) by will or the laws of descent and distribution, or
pledged or hypothecated as collateral for a loan or as security for the
performance of any obligation, or be otherwise encumbered, and are not subject
to attachment, garnishment, execution or other legal or equitable process, prior
to the lapse of restrictions on such Restricted Shares, and any attempt at
action in contravention of this Section shall be null and void. If any purchaser
should attempt to dispose of or encumber his or her Restricted Shares prior to
the lapse of the restrictions imposed on such Restricted Shares, his or her
interest in the Restricted Shares awarded to him or her shall terminate.

SECTION 8. GENERAL RESTRICTION.

No shares shall be issued and delivered upon exercise of any Option or
the making of any Award or Purchase unless and until, in the opinion of counsel
for the Company, any applicable registration requirements of the Securities Act
of 1933, any applicable listing requirements of any national securities exchange
on which stock of the same class is then listed, and any other requirements of
law or of any regulatory bodies having jurisdiction over such issuance and
delivery, shall have been fully complied with. Each optionee, grantee and
purchaser may, by accepting an Option or Award or making a Purchase, be required
to represent and agree in writing, for himself or herself and for his or her
transferees by will or the laws of descent and distribution, that the stock
acquired by him, her or them is being acquired for investment. The requirement
for any such representation may be waived at any time by the Board of Directors.

SECTION 9. RECAPITALIZATION.

In the event that dividends are payable in Common Stock of the Company
or in the event there are splits, sub-divisions or combinations of shares of
Common Stock of the Company, the number of shares available under the Plan shall
be increased or decreased proportionately, as the case may be, and the number of
shares deliverable upon the exercise thereafter of any Option previously granted
shall be increased or decreased proportionately, as the case may be, without
change in the aggregate purchase price.
<PAGE> 9
SECTION 10. REORGANIZATION.

In case the Company is merged or consolidated with another corporation
and the Company is not the surviving corporation, or, in case the property or
stock of the Company is acquired by any other corporation, or in case of a
reorganization or liquidation of the Company, the Board of Directors of the
Company, or the board of directors of any corporation assuming the obligations
of the Company hereunder, shall, as to outstanding Options, either (i) make
appropriate provision for the protection of any such outstanding Options by the
substitution on an equitable basis of appropriate stock of the Company or of the
merged, consolidated or otherwise reorganized corporation which will be issuable
in respect of the shares of Common Stock of the Company, provided only that the
excess of the aggregate fair market value of the shares subject to the Options
immediately after such substitution over the purchase price thereof is not more
than the excess of the aggregate fair market value of the shares subject to such
Options immediately before such substitution over the purchase price thereof;
(ii) upon written notice to the optionees, provide that all unexercised Options
must be exercised within a specified number of days of the date of such notice
or such Options will be terminated; or (iii) upon written notice to the
optionees, provide that the Company or the merged, consolidated or otherwise
reorganized corporation shall have the right, upon the effective date of any
such merger, consolidation, sale of assets or reorganization, to purchase all
Options held by each optionee and unexercised as of that date at an amount equal
to the aggregate fair market value on such date of the shares subject to the
Options held by such optionee over the aggregate purchase price therefor, such
amount to be paid in cash or, if stock of the merged, consolidated or otherwise
reorganized corporation is issuable in respect of the shares of the Common Stock
of the Company, then, in the discretion of the Board of Directors, in stock of
such merged, consolidated or otherwise reorganized corporation equal in fair
market value to the aforesaid amount. In any such case the Board of Directors
shall, in good faith, determine fair market value and may, in its discretion,
advance the lapse of any waiting or installment periods and exercise dates.

SECTION 11. NO SPECIAL EMPLOYMENT RIGHTS.

Nothing contained in the Plan or in any Option, Award or Purchase
documentation shall confer upon any optionee or recipient of an Award or
purchaser any right with respect to the continuation of his or her employment by
the Company (or any Related Corporation) or interfere in any way with the right
of the Company (or any Related Corporation), subject to the terms of any
separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the optionee,
recipient or purchaser from the rate in existence at the time of the grant of an
Option or the making of an Award or Purchase. Whether an authorized leave of
absence, or absence in military or government service, shall constitute
termination of employment shall be determined by the Board of Directors.
<PAGE> 10
SECTION 12. AMENDMENT OF THE PLAN.

The Board of Directors may at any time and from time to time modify or
amend the Plan in any respect, except that without the approval of the
stockholders of the Company, the Board of Directors may not (a) materially
increase the benefits accruing to individuals who participate in the Plan; (b)
materially increase the maximum number of shares of stock which may be issued
under the Plan (except for permissible adjustments provided in the Plan); or (c)
materially modify the requirements as to eligibility for participation in the
Plan. The termination or any modification or amendment of the Plan shall not,
without the consent of an optionee, recipient of an Award or purchaser, affect
his or her rights under an Option or Award previously granted to, or a Purchase
previously made by, him or her. With the consent of the affected optionee,
recipient of an Award or purchaser, the Board of Directors may amend outstanding
agreements relating to Options, Awards and Purchases, in a manner not
inconsistent with the Plan. The Board of Directors hereby reserves the right to
amend or modify the terms and provisions of the Plan and of any outstanding
Options to the extent necessary to qualify any or all Options under the Plan for
such favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under Section 422 of the
Code; provided, however, that the consent of an optionee is required if such
amendment or modification would cause unfavorable income tax treatment for such
optionee.

SECTION 13. WITHHOLDING.

The Company's obligation to deliver shares of stock upon the exercise
of any Non-Qualified Option or the granting of an Award or making of a Purchase
shall be subject to the satisfaction by the optionee, recipient of the Award or
purchaser of all applicable federal, state and local income and employment tax
withholding requirements.

SECTION 14. EFFECTIVE DATE AND DURATION OF THE PLAN.

14.1 EFFECTIVE DATE. The Plan shall become effective when adopted by
the Board of Directors, but no Incentive Stock Option granted under the Plan
shall become exercisable unless and until the Plan shall have been approved by
the Company's stockholders. If such stockholder approval is not obtained within
12 months after the date of the Board's adoption of the Plan, then any Incentive
Stock Options previously granted under the Plan shall terminate and no further
Incentive Stock Options shall be granted. Subject to such limitation, Options
may be granted under the Plan at any time after the effective date and before
the date fixed herein for termination of the Plan.

14.2 DURATION. Unless sooner terminated in accordance with Section l0
hereof, the Plan shall terminate upon the earlier of (i) the tenth anniversary
of the date of its adoption by the Board of Directors or (ii) the date on which
all shares available for
<PAGE> 11
issuance under the Plan shall have been issued pursuant to the exercise or
cancellation of Options granted hereunder. If the date of termination is
determined under (i) above, then Options outstanding on such date shall continue
to have force and effect in accordance with the provisions of the instruments
evidencing such Options.

<PAGE> 12

Amendment to

Paradigm4, Inc. 1996 Stock Plan

Effective as of October 9, 1996

"SECTION 4. Stock Subject to Plan.

Subject to adjustment as provided in Sections 9 and 10 hereof, the
stock to be offered under the Plan shall consist of shares of the Company's
Common Stock, no par value, and the number of shares of stock that may be
issued upon the exercise of all Options and Awards granted under the Plan
shall not exceed in the aggregate Two Hundred Eighty Thousand (280,000)
shares. Such shares may be authorized and unissued shares or may be
treasury shares. If an Option granted hereunder shall expire or terminate
for any reason without having been exercised in full, or if the Company
shall reacquire any unvested shares issued pursuant to Awards or Purchases,
the unpurchased shares subject thereto and any unvested shares so
reacquired shall again be available for subsequent grants of Options and
Awards and for Purchases under the Plan. Stock issued pursuant to the Plan
may be subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Board of Directors."

END

<PAGE> 1
EXHIBIT 10.2

PARADIGM4, INC.

1999 STOCK PLAN

May 21, 1999

SECTION 1. PURPOSE.

The purpose of the 1999 Stock Plan (the "Plan") is to secure for
Paradigm4, Inc., (the "Company"), its parent (if any) and any subsidiaries of
the Company (collectively the "Related Corporations") the benefits arising from
capital stock ownership by those employees, directors, officers and consultants
of the Company and any Related Corporations who will be responsible for the
Company's future growth and continued success.

The Plan will provide a means whereby (a) employees of the Company and
any Related Corporations may purchase stock in the Company pursuant to options
which qualify as "incentive stock options" ("Incentive Stock Options") under
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), (b)
directors, employees and consultants of the Company and any Related Corporations
may purchase stock in the Company pursuant to options granted hereunder which do
not qualify as Incentive Stock Options ("Non-Qualified Option" or "Non-Qualified
Options"); (c) directors, employees and consultants of the Company and any
Related Corporations may be awarded stock in the Company ("Awards"); (d)
directors, employees and consultants of the Company and any Related Corporations
may receive stock appreciation rights ("SARs"); and (e) directors, employees and
consultants of the Company and any Related Corporations may make direct
purchases of stock in the Company ("Purchases"). Both Incentive Stock Options
and Non-Qualified Options are referred to hereafter individually as an "Option"
and collectively as "Options." As used herein, the terms "parent" and
"subsidiary" mean "parent corporation" and "subsidiary corporation" as those
terms are defined in Section 424 of the Code. Options, Awards, SARs and
Purchases are referred to hereafter individually as a "Plan Benefit" and
collectively as "Plan Benefits." Directors, employees and consultants of the
Company and any Related Corporations are referred to herein as "Participants."

SECTION 2. ADMINISTRATION.

2.1 BOARD OF DIRECTORS AND THE COMMITTEE. The Plan will be administered
by the Board of Directors of the Company whose construction and interpretation
of the terms and provisions hereof shall be final and conclusive. Any director
to whom a Plan Benefit is awarded shall be ineligible to vote upon his or her
Plan Benefit, but Plan Benefits may be granted any such director by a vote of
the remainder of the directors, except as limited below. The Board of Directors
may in its sole discretion grant Options, issue shares upon exercise of such
Options, grant Awards, grant SARs and approve Purchases, all as provided in the
Plan. The Board of
<PAGE> 2
Directors shall have authority, subject to the express provisions of the Plan,
to construe the Plan and its related agreements, to prescribe, amend and rescind
rules and regulations relating to the Plan, to determine the terms and
provisions of the respective Option, Award, SAR and Purchase agreements, which
need not be identical, and to make all other determinations in the judgment of
the Board of Directors necessary or desirable for the administration of the
Plan. The Board of Directors may correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any related agreement in the
manner and to the extent it shall deem expedient to carry the Plan into effect
and it shall be the sole and final judge of such expediency. No director shall
be liable for any action or determination made in good faith. The Board of
Directors may delegate any or all of its powers under the Plan to a Compensation
Committee or other Committee (the "Committee") appointed by the Board of
Directors consisting of at least two members of the Board of Directors. If the
Company has a class of stock registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), then members of the
Committee shall at all times be: (i) "outside directors" as such term is defined
in Treas. Reg. ? 1.162-27(e)(3) (or any successor regulation); and (ii)
"non-employee directors" within the meaning of Rule 16b-3 (or any successor
rule) under the Exchange Act, as such terms are interpreted from time to time.
If the Committee is so appointed, all references to the Board of Directors
herein shall mean and relate to such Committee, unless the context otherwise
requires.

2.2 COMPLIANCE WITH SECTION 162(M) OF THE CODE. Section 162(m) of the Code,
added by the Omnibus Budget Reconciliation Act of 1993, generally limits the tax
deductibility to publicly held companies of compensation in excess of $1,000,000
paid to certain "covered employees" ("Covered Employees"). If the Company is
subject to Section 162(m) of the Code, it is the Company's intention to preserve
the deductibility of such compensation to the extent it is reasonably
practicable and to the extent it is consistent with the Company's compensation
objectives. For purposes of this Plan, Covered Employees of the Company shall be
those employees of the Company described in Section 162(m)(3) of the Code.

SECTION 3. ELIGIBILITY.

3.1 INCENTIVE STOCK OPTIONS. Participants who are employees shall be
eligible to receive Incentive Stock Options pursuant to the Plan; provided that
no person shall be granted any Incentive Stock Option under the Plan who, at the
time such Option is granted, owns, directly or indirectly, Common Stock of the
Company possessing more than 10% of the total combined voting power of all
classes of stock of the Company or of its Related Corporations, unless the
requirements of Section 6.6(b) hereof are satisfied. In determining whether this
10% threshold has been reached, the stock attribution rules of Section 424(d) of
the Code shall apply. Directors who are not regular employees are not eligible
to receive Incentive Stock Options.

3.2 NON-QUALIFIED OPTIONS, AWARDS, SARS AND PURCHASES. Non-Qualified
Options, Awards, SARs and authorizations to make Purchases may be granted to any
Participant.
<PAGE> 3
3.3 GENERALLY. The Board of Directors may take into consideration a
Participant's individual circumstances in determining whether to grant an
Incentive Stock Option, a Non-Qualified Option, an Award or an SAR or to approve
a Purchase. Granting of any Option, Award or SAR or approval of any Purchase for
any individual shall neither entitle that individual to, nor disqualify that
individual from, participation in any other grant of Plan Benefits.

SECTION 4. STOCK SUBJECT TO PLAN.

Subject to adjustment as provided in Sections 10 and 11 hereof, the stock
to be offered under the Plan shall consist of shares of the Company's Common
Stock, par value $.01 per share, and the maximum number of shares of stock which
will be reserved for issuance, and in respect of which Plan Benefits may be
granted pursuant to the provisions of the Plan, shall not exceed in the
aggregate 5,000,000 shares. Such shares may be authorized and unissued shares or
may be treasury shares. If an Option or SAR granted hereunder shall expire or
terminate for any reason without having been exercised in full, or if the
Company shall reacquire any unvested shares issued pursuant to Awards or
Purchases, the unpurchased shares subject thereto and any unvested shares so
reacquired shall again be available for subsequent grants of Plan Benefits under
the Plan. Stock issued pursuant to the Plan may be subject to such restrictions
on transfer, repurchase rights or other restrictions as shall be determined by
the Board of Directors.

SECTION 5. GRANTING OF OPTIONS, AWARDS AND SARS AND APPROVALS OF PURCHASES.

Options, Awards and SARs may be granted and Purchases may be approved under
the Plan at any time after May 24, 1999 and prior to May 24, 2009. The date of
grant of an Option, Award or SAR or approval of a Purchase under the Plan will
be the date specified by the Board of Directors at the time the Board of
Directors grants such Option, Award or SAR or approves such Purchase; provided,
however, that such date shall not be prior to the date on which the Board of
Directors takes such action. The Board of Directors shall have the right, with
the consent of a Participant, to convert an Incentive Stock Option granted under
the Plan to a Non-Qualified Option pursuant to Section 6.7. Plan Benefits may be
granted alone or in addition to other grants under the Plan

SECTION 6. SPECIAL PROVISIONS APPLICABLE TO OPTIONS AND SARS.

6.1 PURCHASE PRICE AND SHARES SUBJECT TO OPTIONS AND SARS.

(a) The purchase price per share of stock deliverable upon the
exercise of an Option shall be determined by the Board of Directors,
provided, however, that (i) in the case of an Incentive Stock Option,
the exercise price shall not be less than 100% of the fair market value
of such stock on the day the option is granted (except as modified in
Section 6.6(b) hereof), and (ii) in the case of a Non-Qualified Option,
the exercise price
<PAGE> 4
shall not be less than 50% of the fair market value of such stock on
the day such Option is granted.

(b) Options granted under the Plan may provide for the payment
of the exercise price by delivery of (i) cash or a check payable to the
order of the Company in an amount equal to the exercise price of such
Options, (ii) shares of Common Stock of the Company owned by the
Participant having a fair market value equal in amount to the exercise
price of the Options being exercised, or (iii) any combination of (i)
and (ii). The fair market value of any shares of the Company's Common
Stock which may be delivered upon exercise of an Option shall be
determined by the Board of Directors. The Board of Directors may also
permit Participants, either on a selective or aggregate basis, to
simultaneously exercise Options and sell the shares of Common Stock
thereby acquired, pursuant to a brokerage or similar arrangement,
approved in advance by the Board of Directors, and to use the proceeds
from such sale as payment of the purchase price of such shares.

(c) If, at the time an Option is granted under the Plan, the
Company's Common Stock is publicly traded, "fair market value" shall be
determined as of the last business day for which the prices or quotes
discussed in this sentence are available prior to the date such Option
is granted (the "Determination Date") and shall mean (i) the average
(on the Determination Date) of the high and low prices of the Common
Stock on the principal national securities exchange on which the Common
Stock is traded, if such Common Stock is then traded on a national
securities exchange; (ii) the last reported sale price (on the
Determination Date) of the Common Stock on the Nasdaq Stock Market if
the Common Stock is not then traded on a national securities exchange;
or (iii) the closing bid price (or average of bid prices) last quoted
(on the Determination Date) by an established quotation service for
over-the-counter securities, if the Common Stock is not reported on the
Nasdaq Stock Market. However, if the Common Stock is not publicly
traded at the time an Option is granted under the Plan, "fair market
value" shall be deemed to be the fair value of the Common Stock as
determined by the Board of Directors after taking into consideration
all factors which it deems appropriate, including, without limitation,
recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.

(d) If the Company is subject to Section 162(m) of the Code,
the maximum number of shares with respect to which Options or SARs may
be granted to any employee, including any cancellations or repricings
which may occur, shall be limited to 5,000,000 shares in any calendar
year.

6.2 DURATION OF OPTIONS AND SARS. Subject to Section 6.6(b) hereof, each
Option and SAR and all rights thereunder shall be expressed to expire on such
date as the Board of Directors may determine, but in no event later than ten
years from the day on which the Option or SAR is granted and shall be subject to
earlier termination as provided herein.
<PAGE> 5
6.3 EXERCISE OF OPTIONS AND SARS.

(a) Subject to Section 6.6(b) hereof, each Option and SAR
granted under the Plan shall be exercisable at such time or times and
during such period as shall be set forth in the instrument evidencing
such Option or SAR. To the extent that an Option or SAR is not
exercised by a Participant when it becomes initially exercisable, it
shall not expire but shall be carried forward and shall be exercisable,
on a cumulative basis, until the expiration of the exercise period. No
partial exercise may be for less than ten (10) full shares of Common
Stock (or its equivalent).

(b) The Board of Directors shall have the right to accelerate
the date of exercise of any installments of any Option or SAR; provided
that the Board of Directors shall not accelerate the exercise date of
any installment of any Option granted to a Participant as an Incentive
Stock Option (and not previously converted into a Non-Qualified Option
pursuant to Section 6.7) if such acceleration would violate the annual
vesting limitation contained in Section 422(d)(1) of the Code, which
provides generally that the aggregate fair market value (determined at
the time the Option is granted) of the stock with respect to which
Incentive Stock Options granted to any Participant are exercisable for
the first time by such Participant during any calendar year (under all
plans of the Company and any Related Corporations) shall not exceed
$100,000.

6.4 NONTRANSFERABILITY OF OPTIONS AND SARS.

No Option or SAR granted under the Plan shall be assignable or transferable
by the Participant, either voluntarily or by operation of law, except by will or
the laws of descent and distribution or unless, with respect to Non-Qualified
Options and SARs, the Participant's non-qualified stock option agreement
granting such options (the "Non-Qualified Stock Option Agreement") or the
Participant's SAR agreement granting such SARs (the "SAR Agreement") provides
otherwise. Unless otherwise provided by the Non-Qualified Stock Option Agreement
or the SAR Agreement, during the life of the Participant, the Option or SAR
shall be exercisable only by him or her. If any Participant should attempt to
dispose of or encumber his or her Options or SARs, other than in accordance with
the applicable terms of a Non-Qualified Stock Option Agreement or SAR Agreement,
his or her interest in such Options or SARs shall terminate.

6.5 EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH.

(a) If a Participant ceases to be employed by the Company or a
Related Corporation for any reason, including retirement but other than
death, any Option or SAR granted to such Participant under the Plan
shall immediately terminate; provided, however, that any portion of
such Option or SAR which was otherwise exercisable on the date of
termination of the Participant's employment may be exercised (i) within
the
<PAGE> 6
twelve-month period following the date on which the Participant ceased
to be so employed, but in no event after the expiration of the exercise
period, if such Participant's employment was terminated due to a
"disability" within Section 22(e)(3) of the Code, or (ii) within the
three-month period following the date on which the Participant ceased
to be so employed, but in no event after the expiration of the exercise
period, if such Participant's employment was terminated for any other
reason (other than death or disability). Any such exercise may be made
only to the extent of the number of shares subject to the Option or SAR
which were purchasable on the date of such termination of employment.
If the Participant dies during such twelve-month or three-month period,
as applicable, the Option or SAR shall be exercisable by the
Participant's personal representatives, heirs or legatees to the same
extent and during the same period that the Participant could have
exercised the Option or SAR on the date of his or her death.

(b) If the Participant dies while an employee of the Company
or any Related Corporation, any Option or SAR granted to such
Participant under the Plan shall be exercisable by the Participant's
personal representatives, heirs or legatees, for the purchase of that
number of shares and to the same extent that the Participant could have
exercised the Option or SAR on the date of his or her death. The Option
or SAR or any unexercised portion thereof shall terminate unless so
exercised prior to the earlier of the expiration of twelve months from
the date of such death or the expiration of the exercise period.

(c) In the case of a Non-Qualified Option or SAR, the Board of
Directors may vary the terms set forth in Sections 6.5(a) and 6.5(b) by
providing for different provisions in the applicable Non-Qualified
Stock Option Agreement or SAR Agreement.

6.6 DESIGNATION OF INCENTIVE STOCK OPTIONS; LIMITATIONS.

(b) 10% Stockholder. If any employee to whom an Incentive
Stock Option is to be granted pursuant to the provisions of the Plan is
on the date of grant the owner of
<PAGE> 7
stock possessing more than 10% of the total combined voting power of
all classes of stock of the Company or any Related Corporations, then
the following special provisions shall be applicable to the Incentive
Stock Option granted to such individual:

(i) The option price per share of the Common
Stock subject to such Incentive Stock Option shall not be less
than 110% of the fair market value of one share of Common
Stock on the date of grant; and

(ii) The option exercise period shall not
exceed five years from the date of grant.

In determining whether the 10% threshold has been reached, the stock
attribution rules of Section 424(d) of the Code shall apply.

(c) Except as modified by the preceding provisions of this
Section 6.6, all of the provisions of the Plan shall be applicable to
Incentive Stock Options granted hereunder.

6.7 CONVERSION OF INCENTIVE STOCK OPTIONS INTO NON-QUALIFIED OPTIONS;
TERMINATION OF INCENTIVE STOCK OPTIONS. The Board of Directors, at the written
request of any Participant, may in its discretion take such actions as may be
necessary to convert such Participant's Incentive Stock Options (or any
installments or portions of installments thereof) that have not been exercised
on the date of conversion into Non-Qualified Options at any time prior to the
expiration of such Incentive Stock Options, regardless of whether the
Participant is an employee of the Company or a Related Corporation at the time
of such conversion. Such actions may include, but not be limited to, extending
the exercise period or reducing the exercise price of the appropriate
installments of such Options. At the time of such conversion, the Board of
Directors (with the consent of the Participant) may impose such conditions on
the exercise of the resulting Non-Qualified Options as the Board of Directors in
its discretion may determine, provided that such conditions shall not be
inconsistent with the Plan. Nothing in the Plan shall be deemed to give any
Participant the right to have such Participant's Incentive Stock Options
converted into Non-Qualified Options, and no such conversion shall occur until
and unless the Board of Directors takes appropriate action. The Board of
Directors, with the consent of the Participant, may also terminate any portion
of any Incentive Stock Option that has not been exercised at the time of such
termination.

6.8 STOCK APPRECIATION RIGHTS. An SAR is the right to receive, without
payment, an amount equal to the excess, if any, of the fair market value of a
share of Common Stock on the date of exercise over the grant price, which amount
will be multiplied by the number of shares with respect to which the SARs shall
have been exercised. The grant of SARs under the Plan shall be subject to the
following terms and conditions and shall contain such additional terms and
conditions, not inconsistent with the express terms of the Plan, as the Board of
Directors shall deem desirable:
<PAGE> 8
(a) Grant. SARs may be granted in tandem with, in addition to
or completely independent of any Plan Benefit.

(b) Grant Price. The grant price of an SAR may be the fair
market value of a share of Common Stock on the date of grant or such
other price as the Board of Directors may determine.

(c) Exercise. An SAR may be exercised by a Participant in
accordance with procedures established by the Board of Directors or as
otherwise provided in any agreement evidencing any SARs. The Board of
Directors may provide that an SAR shall be automatically exercised on
one or more specified dates.

(d) Form of Payment. Payment upon exercise of an SAR may be
made in cash, in shares of Common Stock or any combination thereof, as
the Board of Directors shall determine.

(e) Fair Market Value. Fair market value shall be determined
in accordance with Section 6.1(c) with the "Determination Date" being
determined by reference to the date of grant or the date of exercise of
an SAR, as applicable.

6.9 RIGHTS AS A STOCKHOLDER.

The holder of an Option or SAR shall have no rights as a stockholder with
respect to any shares covered by the Option or SAR until the date of issue of a
stock certificate to him or her for such shares. Except as otherwise expressly
provided in the Plan, no adjustment shall be made for dividends or other rights
for which the record date is prior to the date such stock certificate is issued.

6.10 SPECIAL PROVISIONS APPLICABLE TO NON-QUALIFIED OPTIONS AND SARS
GRANTED TO COVERED EMPLOYEES.

If the Company is subject to Section 162(m) of the Code, in order for the
full value of Non-Qualified Options or SARs granted to Covered Employees to be
deductible by the Company for federal income tax purposes, the Company may
intend for such Non-Qualified Options or SARs to be treated as "qualified
performance-based compensation" as described in Treas. Reg. ?1.162-27(e) (or any
successor regulation). In such case, Non-Qualified Options or SARs granted to
Covered Employees shall be subject to the following additional requirements:

(a) such options and rights shall be granted only by the
Committee; and

(b) the exercise price of such Options and the grant price of
such SARs granted shall in no event be less than the fair
market value of the Common Stock as of the date of grant
of such Options or SARs.
<PAGE> 9
SECTION 7. SPECIAL PROVISIONS APPLICABLE TO AWARDS

7.1 GRANTS OF AWARDS. The Board of Directors may grant a Participant an
Award subject to such terms and conditions as the Board of Directors deems
appropriate, including, without limitation, restrictions on the pledging, sale,
assignment, transfer or other disposition of such shares and the requirement
that the Participant forfeit all or a portion of such shares back to the Company
upon termination of employment.

7.2 CONDITIONS. Approvals of Awards may be subject to the following
conditions:

(a) Each Participant receiving an Award shall enter into an
agreement (a "Stock Restriction Agreement") with the Company, if
required by the Board of Directors, in a form specified by the Board of
Directors agreeing to such terms and conditions of the Award as the
Board of Directors deems appropriate.

(b) Shares issued and transferred to a Participant pursuant to
an Award may, if required by the Board of Directors, be deposited with
the Treasurer or other officer of the Company designated by the Board
of Directors to be held until the lapse of the restrictions upon such
shares, and each Participant shall execute and deliver to the Company
stock powers enabling the Company to exercise its rights hereunder.

(c) Certificates for shares issued pursuant to an Award shall,
if the Company shall deem it advisable, bear a legend to the effect
that they are issued subject to specified restrictions.

(d) Certificates representing the shares issued pursuant to an
Award shall be registered in the name of the Participant and shall be
owned by such Participant. Such Participant shall be the holder of
record of such shares for all purposes, including voting and receipt of
dividends paid with respect to such shares.

7.3 NONTRANSFERABILITY. Shares issued pursuant to an Award may not be sold,
assigned, transferred, alienated, commuted, anticipated, or otherwise disposed
of (except, subject to the provisions of such Participant's Stock Restriction
Agreement, by will or the laws of descent and distribution), or pledged or
hypothecated as collateral for a loan or as security for the performance of any
obligation, or be otherwise encumbered, and are not subject to attachment,
garnishment, execution or other legal or equitable process, prior to the lapse
of restrictions on such shares, and any attempt at action in contravention of
this Section shall be null and void. If any Participant should attempt to
dispose of or encumber his or her shares issued pursuant to an Award prior to
the lapse of the restrictions imposed on such shares, his or her interest in
such shares shall terminate.

7.4 EFFECT OF TERMINATION OF EMPLOYMENT OR DEATH ON AWARDS. Unless
otherwise
<PAGE> 10
provided in the applicable Stock Restriction Agreement, if, prior to the lapse
of restrictions applicable to Awards, the Participant ceases to be an employee
of the Company or the Related Companies for any reason, Awards to such
Participant, as to which restrictions have not lapsed, shall be forfeited to the
Company, effective on the date of the Participant's termination of employment.
The Board of Directors shall have the sole power to decide in each case to what
extent leaves of absence shall be deemed a termination of employment.

SECTION 8. SPECIAL PROVISIONS APPLICABLE TO PURCHASES.

All approvals of Purchases which provide that the Company has a right to
repurchase the shares subject to such Purchase (the "Restricted Shares") shall
be subject to the terms and conditions set forth in the related agreement (the
"Stock Purchase Restriction Agreement") approved by the Board of Directors, and
shall be subject to the other terms and conditions of this Section 8.

8.1 CONDITIONS. All approvals of Purchases shall be subject to the
following conditions:

(a) Prior to the issuance and transfer of Restricted Shares,
the Participant shall pay to the Company the purchase price (the
"Purchase Price") of the Restricted Shares in cash or in such other
manner as shall be as approved by the Board of Directors.

(b) Restricted Shares issued and transferred to a Participant
may, if required by the Board of Directors, be deposited with the
Treasurer or other officer of the Company designated by the Board of
Directors to be held until the lapse of the restrictions upon such
Restricted Shares, and each Participant shall execute and deliver to
the Company stock powers enabling the Company to exercise its rights
hereunder.

(c) Certificates for Restricted Shares shall, if the Company
shall deem it advisable, bear a legend to the effect that they are
issued subject to specified restrictions.

(d) Certificates representing the Restricted Shares shall be
registered in the name of the Participant and shall be owned by such
Participant. Such Participant shall be the holder of record of such
Restricted Shares for all purposes, including voting and receipt of
dividends paid with respect to such Restricted Shares.

8.2 NONTRANSFERABILITY. A Participant's Restricted Shares may not be sold,
assigned, transferred, alienated, commuted, anticipated, or otherwise disposed
of (except, subject to the provisions of such Participant's Stock Purchase
Restriction Agreement by will or the laws of descent and distribution), or
pledged or hypothecated as collateral for a loan or as security for the
performance of any obligation, or be otherwise encumbered, and are not subject
to attachment, garnishment, execution or other legal or equitable process, prior
to the lapse of restrictions on such Restricted Shares, and any attempt at
action in contravention of this Section shall be null
<PAGE> 11
and void. If any Participant should attempt to dispose of or encumber his or her
Restricted Shares prior to the lapse of the restrictions imposed on such
Restricted Shares, his or her interest in the Restricted Shares awarded to him
or her shall terminate.

SECTION 9. REQUIREMENTS OF LAW.

9.1 VIOLATIONS OF LAW. No shares shall be issued and delivered upon
exercise of any Option or the making of any Award or Purchase or the payment of
any SAR unless and until, in the opinion of counsel for the Company, any
applicable registration requirements of the Securities Act of 1933, as amended,
any applicable listing requirements of any national securities exchange on which
stock of the same class is then listed, and any other requirements of law or of
any regulatory bodies having jurisdiction over such issuance and delivery, shall
have been fully complied with. Each Participant may, by accepting Plan Benefits,
be required to represent and agree in writing, for himself or herself and for
his or her transferees by will or the laws of descent and distribution, that the
stock acquired by him, her or them is being acquired for investment. The
requirement for any such representation may be waived at any time by the Board
of Directors.

9.2 COMPLIANCE WITH RULE 16B-3. If the Company has a class of stock
registered pursuant to Section 12 of the Exchange Act, the intent of this Plan
is to qualify for the exemption provided by Rule 16b-3 under the Exchange Act.
To the extent any provision of the Plan does not comply with the requirements of
Rule 16b-3, it shall be deemed inoperative to the extent permitted by law and
deemed advisable by the Board of Directors and shall not affect the validity of
the Plan. In the event Rule 16b-3 is revised or replaced, the Board of Directors
may exercise discretion to modify this Plan in any respect necessary to satisfy
the requirements of the revised exemption or its replacement.

SECTION 10. RECAPITALIZATION.

In the event that dividends are payable in Common Stock of the Company or
in the event there are splits, sub-divisions or combinations of shares of Common
Stock of the Company, the number of shares available under the Plan shall be
increased or decreased proportionately, as the case may be, and the number of
shares deliverable upon the exercise thereafter of any Option previously granted
shall be increased or decreased proportionately, as the case may be, without
change in the aggregate purchase price, and the number of shares to which
granted SARs relate shall be increased or decreased proportionately, as the case
may be, and the grant price of such SARs shall be decreased or increased
proportionately, as the case may be.

SECTION 11. REORGANIZATION.
<PAGE> 12
In case the Company is merged or consolidated with another corporation
and the Company is not the surviving corporation, or, in case the property or
stock of the Company is acquired by any other corporation, or in case of a
reorganization or liquidation of the Company, the Board of Directors of the
Company, or the board of directors of any corporation assuming the obligations
of the Company hereunder, shall, as to outstanding Plan Benefits, either (i)
make appropriate provision for the protection of any such outstanding Plan
Benefits by the substitution on an equitable basis of appropriate stock of the
Company or of the merged, consolidated or otherwise reorganized corporation
which will be issuable in respect of the shares of Common Stock of the Company,
provided only that the excess of the aggregate fair market value of the shares
subject to the Plan Benefits immediately after such substitution over the
purchase price thereof is not more than the excess of the aggregate fair market
value of the shares subject to such Plan Benefits immediately before such
substitution over the purchase price thereof, (ii) upon written notice to the
Participants, provide that all unexercised Plan Benefits must be exercised
within a specified number of days of the date of such notice or such Plan
Benefits will be terminated, or (iii) upon written notice to the Participants,
provide that the Company or the merged, consolidated or otherwise reorganized
corporation shall have the right, upon the effective date of any such merger,
consolidation, sale of assets or reorganization, to purchase all Plan Benefits
held by each Participant and unexercised as of that date at an amount equal to
the aggregate fair market value on such date of the shares subject to the Plan
Benefits held by such Participant over the aggregate purchase price therefor,
such amount to be paid in cash or, if stock of the merged, consolidated or
otherwise reorganized corporation is issuable in respect of the shares of the
Common Stock of the Company, then, in the discretion of the Board of Directors,
in stock of such merged, consolidated or otherwise reorganized corporation equal
in fair market value to the aforesaid amount. In any such case the Board of
Directors shall, in good faith, determine fair market value and may, in its
discretion, advance the lapse of any waiting or installment periods and exercise
dates.

SECTION 12. NO SPECIAL EMPLOYMENT RIGHTS.

Nothing contained in the Plan or in any Plan Benefit documentation shall
confer upon any Participant receiving a grant of any Plan Benefit any right with
respect to the continuation of his or her employment by the Company (or any
Related Corporation) or interfere in any way with the right of the Company (or
any Related Corporation), subject to the terms of any separate employment
agreement to the contrary, at any time to terminate such employment or to
increase or decrease the compensation of the Participant from the rate in
existence at the time of the grant of any Plan Benefit. Whether an authorized
leave of absence, or absence in military or government service, shall constitute
termination of employment shall be determined by the Board of Directors.

SECTION 13. AMENDMENT OF THE PLAN.
<PAGE> 13
The Board of Directors may at any time and from time to time modify or
amend the Plan in any respect. The termination or any modification or amendment
of the Plan shall not, without the consent of a recipient of any Plan Benefit,
affect his or her rights under any Plan Benefit previously granted. With the
consent of the affected Participant, the Board of Directors may amend
outstanding agreements relating to any Plan Benefit, in a manner not
inconsistent with the Plan. The Board of Directors hereby reserves the right to
amend or modify the terms and provisions of the Plan and of any outstanding
Options to the extent necessary to qualify any or all Options under the Plan for
such favorable federal income tax treatment (including deferral of taxation upon
exercise) as may be afforded incentive stock options under Section 422 of the
Code, provided, however, that the consent of an optionee is required if such
amendment or modification would cause unfavorable income tax treatment for such
optionee.

SECTION 14. WITHHOLDING.

The Company's obligation to deliver shares of stock upon the exercise of
any Option or the granting of an Award or to make payment upon any exercise of
any SAR or making of a Purchase shall be subject to the satisfaction by the
Participant of all applicable federal, state and local income and employment tax
withholding requirements. Subject in particular cases to the disapproval of the
Board of Directors, the Company may accept shares of stock of equivalent fair
market value (as determined in accordance with Section 6.1(c)) in payment of any
such withholding tax obligations if the Participant selects to make payment in
such manner.

SECTION 15. EFFECTIVE DATE AND DURATION OF THE PLAN.

15.1 EFFECTIVE DATE. The Plan shall become effective when adopted by the
Board of Directors, but no Incentive Stock Option granted under the Plan (or any
other Plan Benefits granted to Covered Employees, if the Company is subject to
Section 162(m) of the Code) shall become exercisable unless and until the Plan
shall have been approved by the Company's stockholders. If such stockholder
approval is not obtained within 12 months after the date of the Board's adoption
of the Plan, then any Incentive Stock Options previously granted under the Plan
shall terminate and no further Incentive Stock Options shall be granted. Subject
to such limitation, Options may be granted under the Plan at any time after the
effective date and before the date fixed herein for termination of the Plan.

15.2 DURATION. Unless sooner terminated in accordance with Section 11
hereof, the Plan shall terminate upon the earlier of (i) the tenth anniversary
of the date of its adoption by the Board of Directors or (ii) the date on which
all shares available for issuance under the Plan shall have been issued pursuant
to any Awards or Purchases or the exercise or cancellation of Options and SARs
granted hereunder. If the date of termination is determined under (i) above,
then Plan Benefits outstanding on such date shall continue to have force and
effect in accordance with the provisions of the instruments evidencing such Plan
Benefits.
<PAGE> 14
SECTION 16. GOVERNING LAW.

The Plan and all actions taken thereunder shall be governed by the laws of
the State of New Jersey.

<PAGE> 1
EXHIBIT 10.3

EXECUTION COPY

REGISTRATION RIGHTS AGREEMENT

by and among

PARADIGM4, INC.

CRESTWOOD CAPITAL INTERNATIONAL, LTD.,

CRESTWOOD CAPITAL PARTNERS L.P.,

P.V. II, L.P.,

MEYER DUFFY VENTURES III, L.P.,

FURMAN SELZ L.L.C.,

APPLIED TELECOMMUNICATIONS TECHNOLOGIES, INC.,

A.T.T. IV, N.V.

and certain additional Persons referred to herein

Dated as of May 9, 1997

<PAGE> 2

TABLE OF CONTENTS

Page
----

1. Certain Definitions .................................................... 1
2. Registration Rights .................................................... 2
2.1. Demand Registrations .............................................. 2
2.2. Piggyback Registrations ........................................... 5
2.3. Allocation of Securities Included in Registration Statement ....... 6
2.4. Registration Procedures ........................................... 7
2.5. Registration Expenses ............................................. 12
2.6. Certain Limitations on Registration Rights ........................ 12
2.7. Limitations on Sale or Distribution of Other Securities ........... 12
2.8. Indemnification ................................................... 13

3. Underwritten Offerings ................................................. 16
3.1. Requested Underwritten Offerings .................................. 16
3.2. Piggyback Underwritten Offerings .................................. 16
4. General ................................................................ 17
4.1. Rule l44 .......................................................... 17
4.2. Preparation: Reasonable Investigation ............................. 17
4.3. Nominees for Beneficial Owners .................................... 17
4.4. Notices and Other Communications .................................. 17
4.5. Amendments ........................................................ 19
4.6. Miscellaneous ..................................................... 20
4.7. No Inconsistent Agreements ........................................ 21

<PAGE> 3

EXECUTION COPY

REGISTRATION RIGHTS AGREEMENT, dated as of May 9, 1997, by and among
PARADIGM4 INC., Delaware corporation (the "Company") on the one hand, and the
several holders of securities of the Company executing this Agreement and
identified on Schedule I hereto, as amended from time to time (sometimes
referred to herein individually as a, "Holder" and collectively as the
"Holders"), on the other.

W I T N E S S E T H:

WHEREAS, the Holders are the holders of Company Securities (as such
term and other capitalized terms not otherwise defined herein are defined in
Section 1), including those listed on Schedule I hereto; and

WHEREAS, the Holders and the Company wish to provide for the Holders
to have certain rights to have their shares of Common Stock registered under the
Securities Act, on and subject to the terms and conditions hereinafter set
forth;

NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the panics hereto
hereby agree as follows;

1. Certain Definitions.

As used in this Agreement, the following terms shall have the
meanings ascribed to them below;

"Commission"; the Securities and Exchange Commission or any
successor agency.

"Company Securities"; Common Stock, par value $.001 per share, of
the Company ("Common Stock"), together with any convertible securities, options
or warrants pursuant to which Common Stock is issuable, directly or indirectly.

"Holder" or "Holders"; Each Holder identified on Schedule I hereto,
any holder of Company Securities who or which hereafter becomes a party to this
Agreement, and any Person who shall hereafter acquire Registrable Securities
from any Holder and to whom such Holder assigns his or it; rights under this
Agreement.

"IPO"; initial public offering pursuant to which equity securities
of the Company become registered under Section 12 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act").

"Management Shareholders"; John Bay, Joseph Dion and Florin Vicol.

<PAGE> 4

"Person": any natural person, corporation, partnership, limited
liability company, firm, association, trust, government, governmental agency or
other entity, whether acting in an individual, fiduciary, or other capacity.

"Registrable Securities": Shares of Common Stock currently held or
hereafter acquired by any Holder, or issuable pursuant to any Company Securities
currently held or hereafter acquired by any Holder, or otherwise issued with
respect to any securities referred to in this definition, whether by way of
stock dividend or stock split, in connection with a combination or
reorganization or otherwise, and including without limitation the Company
Securities listed on Schedule I hereto; provided, that (i) in the case of the
Management Shareholders, only Common Stock issuable pursuant to the Company
Securities identified on Schedule identified on Schedule I hereto shall be
deemed Registrable Securities, and (ii) any shares of Common Stock constituting
Registrable Securities shall cease to be such if and when they (A) are
distributed to the public pursuant to a registration statement under the
Securities Act or Rule 144 thereunder, (B) become subject to resale pursuant to
Rule 144(k) under the Securities Act (or any successor provision) or (C) shall
have otherwise been transferred and the new certificate evidencing ownership
thereof does riot bear a restrictive legend pursuant to the Securities Act and
is not subject to a stop transfer order delivered by or on behalf of the
Company.

For all purposes of this Agreement, a "majority in interest" or
other percentage of the Registrable Securities shall be determined as if all
outstanding Company Securities were converted into Common Stock, and such
percentage shall be based upon the number of shares of Common Stock that would
be deemed to be Registrable Securities pursuant to the preceding sentence at the
time the calculation is made.

"Securities Act"; the Securities Act of 1933, as amended.

"Shareholders' Agreement" that certain Shareholders' Agreement of
even date herewith between the Company, the Holders and certain other parties
thereto.

2. Registration Rights.

2.1. Demand Registrations.

(a) (i) Subject to Sections 2.1(b) and 2.3 below, at any time and
from time to time alter the earlier of (x) the first anniversary of the
consummation of an IPO, (y) the earliest date that any other Person, by
agreement with the Company, is entitled to demand registration, and (z) such
date that is 36 months after the date hereof, Holders holding Registrable
Securities with an aggregate value of at least that set forth in Section
2.l(b)(v) shall have the right to require the Company to file a registration
statement under the Securities Act covering all or any part of their respective
Registrable Securities, by delivering a written request (a "Demand Request")
therefor to the Company specifying the number and class and series of
Registrable Securities to be included in such registration by such Holder and
the intended method of distribution thereof. If the Company is then eligible to
effect a registration on Form S-3 (or any

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<PAGE> 5

successor form), such Holder may, in such Demand Request, or the Company may, in
response thereto, designate such registration as an "S-3 Registration". All such
requests by any Holder pursuant to this Section 2.1 (a)(i) are referred to
herein as "Demand Registration Requests," and the registrations so requested are
referred to herein as "Demand Registrations" (with respect to any Demand
Registration, the Holder or Holders making such demand for registration being
referred to as the "Initiating Holder"). As promptly as practicable, but no
later than 15 days after receipt of a Demand Registration Request, the Company
shall give written notice (the "Demand Exercise Notice") of such Demand
Registration Request to all Holders of record of Registrable Securities. Any
Demand Registration which is not an S-3 Registration is sometimes referred to
herein as a "Standard Registration".

(ii) The Company, subject to Sections 2.3 and 2.6, shall include in
each Demand Registration (x) the Registrable Securities of the Initiating Holder
and (y) the Registrable Securities of any other Holder which shall have made a
written request to the Company for inclusion thereof in such registration (which
request shall specify the maximum number and class and series of Registrable
Securities intended to be disposed of by such Holder(s)) within 20 days after
the receipt of the Demand exercise Notice.

(iii) The Company shall, as expeditiously as possible following a
Demand Registration Request, use its best efforts to (x) effect such
registration under the Securities Act (including, without limitation, by means
of a shelf registration pursuant to Rule 415 under the Securities Act if so
requested and if the Company is then eligible to use such a registration) of the
Registrable Securities which the Company has been so requested to register, for
distribution in accordance with such intended method of distribution, and (y) if
requested by the Initiating Holder, obtain acceleration of the effective data of
the registration statement relating to such registration.

(b) The Demand Registration rights granted to the Holders in Section
2.1(a) are subject to the following limitations; (i) the Company shall not be
required to cause to become effective pursuant to Section 2.1(a) more than two
Standard Registrations in the aggregate, provided that a member of either the
ATTI Group or the Meyer Duffy Group (as such terms are defined in the
Shareholders' Agreement) must be an Initiating Holder of any Standard
Registration, and if either of such Holders is not an Initiating Holder of the
first Standard Registration, no second Standard Registration shall occur unless
such a Holder is an Initiating Holder thereof; (ii) the Company shall not be
required to cause more than one Standard Registration pursuant to Section 2.1(a)
to be declared effective within any 12-month period; (iii) the Company shall not
be required to cause to become effective a registration pursuant to this Section
2.1 unless the Initiating Holder in connection therewith has a bona fide intent
to sell Registrable Securities pursuant to such registration; (iv) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company and prepared in good faith stating that in the good faith judgment
of the Board of Directors of the Company it would be seriously detrimental to
the Company and its stockholders for such registration to be effected at such
time (a "Valid Business Reason"), the Company may postpone filing a registration
statement relating to a. Demand Registration Request once in a given 12 month
period until such Valid Business Reason no longer exists, but in no event for
more than 180 days, and, in case a registration

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<PAGE> 6

statement has been filed relating to a Demand Registration Request the Company
may cause such registration statement to be withdrawn; provided, however, that
once any registration becomes effective the Company may not cause its
effectiveness to be terminated and the Company may not postpone amending or
supplementing such registration statement; provided, further, that if the
Company determines to postpone filing or withdraw a registration statement
pursuant to this clause (iv) the Company shall give written notice of its
determination to postpone or withdraw such registration statement and, when
applicable, of the fact that the Valid Business Reason for such postponement or
withdrawal no longer exists, in each case, promptly after the occurrence
thereof; and (v) each Demand Registration must include equity securities with a
proposed offering price of $500,000, in the aggregate. If the Company shall give
any notice of postponement or withdrawal of any registration statement, the
Company shill not, during the period of postponement or withdrawal, register any
Common Stock, other than pursuant to a registration statement on Form S-4 or S-8
(or an equivalent registration form then in effect). If the Company shall
postpone filing or shall withdraw any registration statement filed under Section
2.1(a) (whether pursuant to clause (iv) above or as a result of any stop order,
injunction or other order or requirement of the Commission or any other
governmental agency or court), the Company shall not be considered to have
enacted an effective registration for the purposes of this Section 2.1 until the
Company shall have filed a new registration statement covering the Registrable
Securities covered by the withdrawn registration statement and such registration
statement shall have been declared effective and shall not have been withdrawn.
If the Company shall give any notice of withdrawal or postponement of filing of
a registration statement, the Company shall, at such time as the Valid Business
Reason that caused such withdrawal or postponement no longer exists (but in no
event later than 180 days after the date of the postponement), use its best
efforts to effect the registration under the Securities Act of the Registrable
Securities covered by such withdrawn or postponed registration statement in
accordance with Section 2.1 (unless the Holder delivering the Demand
Registration Request shall have withdrawn such request in which case the Company
shall not be considered to have effected an effective registration for the
purposes of this Section 2.1).

(c) The Company, subject to Sections 2.3 and 2.6, may elect to
include in any registration statement pursuant to Section 2.1(a) authorized but
unissued shares of Common Stock or shares of Common Stock held by the Company as
treasury shares, if shares of Common Stock are being registered by any Holder
pursuant to such registration statement, provided that such inclusion shall be
permitted only to the extent that it is pursuant to and subject to the terms of
the underwriting agreement or arrangement, if any, entered into by the Holders
of Registrable Securities pursuant to the Demand Registration to which such
registration statement relates.

(d) The managing underwriter and each other underwriter for any
Demand Registration shall be selected by the Company; provided that such
managing underwriter shall be reasonably acceptable to the Initiating Holder
making the demand for such registration (it being agreed that any nationally
recognized investment bank shall be deemed to be reasonably acceptable to such
Initiating Holder).

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<PAGE> 7

(e) Registrations pursuant to this Section 2.1 shall be on Form S-3
(or any successor form), if permitted, or on Form S-1 (or any successor form),
as shall be selected by the Company.

2.2. Piggyback Registrations.

(a) If, at any time, the Company proposes or is required to register
any of its equity securities under the Securities Act (other than pursuant to
(i) registrations solely of securities in connection with an employee benefit
plan or dividend reinvestment plan or a merger, consolidation or reorganization
subject to Form S-4, or (ii) a Demand Registration under Section 2.1) pursuant
to a registration statement on Form SB-1, Form SB-2, Form S-1, Form S-2 or Form
S-3 (or an equivalent general registration form then in effect), whether or not
for its own account, the Company shall give prompt written notice of its
intention to do so to each of the Holders of record of Registrable Securities.
Upon the written request of any Holder, made within 15 days following the
receipt of any such written notice (which request shall specify the maximum
number of Registrable Securities intended to be disposed of by such Holder and
the intended method of distribution thereof) the Company shall, subject to
Sections 2.2(b), 2.3 and 2.6 hereof, use its best efforts to cause all such
Registrable Securities, the Holders of which have so requested the registration
thereof to be registered under the Securities Act (together with the securities
which the Company at the time proposes to register), to permit the sale or other
disposition by the Holders (in accordance with the intended method of
distribution thereof) of the Registrable Securities to be so registered. No
registration effected under this Section 2.2(a) shall relieve the Company of its
obligations to effect Demand Registrations upon request under Section 2.1.

(b) If, at any time after giving written notice of its intention to
register any equity securities and prior to the effective date of the
registration statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
equity securities, the Company may, at its election, give written notice of such
determination to all Holders of record of Registrable Securities and (i) in the
case of a determination not to register, shall be relieved of its obligation to
register any Registrable Securities in connection with such abandoned
registration, without prejudice, however, to the rights of Holders under Section
2.1, and (ii) in case of a determination to delay such registration of its
equity securities, shall be permitted to delay the registration of such
Registrable Securities for the same period as the delay in registering such
other equity securities.

(c) Any Holder shall have the right to withdraw its request for
inclusion of its Registrable Securities in any registration statement pursuant
to this Section 2.2 by giving written notice to the Company of its request to
withdraw, provided, however, that (i) such request must be made in writing prior
to the earlier of the execution of the underwriting agreement or the execution
of the custody agreement with respect to such registration and (ii) such
withdrawal shall be irrevocable and, after making such withdrawal, a Holder
shall no longer have any right to include Registrable Securities in the
registration as to which such withdrawal was made.

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<PAGE> 8

2.3. Allocation of Securities Included in Registration Statement.

(a) If any Demand Registration involves an underwritten offering and
the managing underwriter shall advise the Company that, in its view, the number
of securities requested to be included in such registration (including those
securities requested by the Company to be included in such registration) exceeds
the largest number (the "Section 2.1 Sale Number") that can be sold in an
orderly manner in such offering within a price range acceptable to the Holders
of Registrable Securities proposed to be registered, the Company shall include
in such registration;

(i) If such registration is an IPO, (I) all shares of Common Stock
that the Company proposes to register for its own account; and (II) to the
extent that the number of shares of Common Stock proposed to be registered by
the Company is less than the Section 2.1 Sale Number, the remaining equity
securities to be included in such registration (the "Remaining IPO Securities")
shall be allocated on a pro rata basis among all Holders requesting that
Registrable Securities be included in such registration and all Persons
requesting that Piggyback Registration Securities (as defined below) be included
in such registration, based on the number of Registrable Securities or other
equity securities of the Company subject to piggyback registration rights (such
securities, "Piggyback Registration Securities"), as the case may be, owned by
each Holder requesting inclusion of Registrable Securities in such registration
and each Person requesting inclusion of Piggyback Registration Securities in
such registration;

(ii) if such registration is not an IPO, all Registrable Securities
requested to be included in such registration by Holders of Registrable
Securities, and all Piggyback Registration Securities requested to be included
in such registration; provided, however, that if the aggregate number of such
Registrable Securities and such Piggyback Registration Securities exceeds the
Section 2.1 Sale Number, the number of such securities (not to exceed the
Section 2.1 Sale Number) to be included in such registration shall be allowed on
a pro rata basis among all Holders requesting that Registrable Securities be
included in such registrations and all Persons requesting that Piggyback
Registration Securities be included in such registration, based on the number of
Registrable Securities or Piggyback Registration Securities, as the case may be,
then owned by each Holder or other Person requesting inclusion in such
registration in relation to the number of Registrable Securities and Piggyback
Registration Securities owned by all Holders and all other Persons requesting
inclusion of Registrable Securities and Piggyback Registration Securities as the
case may be, in such registration.

If as a result of the proration provisions of this Section 2.3(a),
any Holder shall not be entitled to include all Registrable Securities in a
registration that such Holder has requested to be included, such Holder may
elect to withdraw his request to include Registrable Securities in such
registration or may reduce the number requested to be included; provided,
however, that (x) such request must be made in writing prior to the earlier of
the execution of the underwriting agreement or the execution of the custody
agreement with respect to such registration and (y) such withdrawal shall be
irrevocable and, after making such withdrawal, a Holder shall no longer have any
right to include Registrable Securities in the registration as to which such
withdrawal was made.

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<PAGE> 9

(b) If any registration pursuant to Section 2.2 (a "Piggyback
Registration") involves an underwritten offering and the managing underwriter
shall advise the Company that, in its view, the number of Securities requested
to be included in such registration exceeds the number (the "Section 2.2 Sale
Number") that can be sold in an orderly manner in such registration within a
price range acceptable to the Company, the Company shall include in such
registration;

(i) all equity securities that the Company proposes to register for
its own account (the "Company Securities"), and

(ii) to the extent that the number of Company Securities is less
than the Section 2.2 Sale Number, the remaining equity securities to be included
in such registration shall, subject to the following sentence, be allocated
among all Holders, all Persons Holding Piggyback Registration Securities and the
holders of any shares of Common Stock held by employees of the Company (other
than plan or option shares eligible for registration on Form S-8 or a similar or
successor form) and proposed by the Company to be registered ("Management
Shares") on a pro rata basis, based upon the number of Registrable Securities,
Piggyback Registration Securities or Management Shares of the Company, as the
case may be, owned by each Holder and each Person requesting inclusion of
Piggyback Registration Securities or Management Shares in such Piggyback
Registration. Notwithstanding the foregoing, however, the managing underwriter
shall be authorized to determine whether it would be preferable to include a
lesser number of Management Shares (or no Management Shares) in such
registration, and in the event of such a determination only such lesser number
of Management Shares (or no Management Shares) shall be so included, to be
allocated among the holders of Management Shares so included (if any), on the
other, on a pro rata basis as set forth above. In such event, the number of
Piggyback Registration Securities to be included in such registration pursuant
to such determination shall be allocated among the Holders and other Persons
requesting inclusion thereof of on a pro rata basis as set forth above.

2.4. Registration Procedure. If and whenever the Company is required by
the provisions of this Agreement to use its best efforts to effect or cause the
registration of any Registrable Securities under the Securities Act as provided
in this Agreement, the Company shall, as expeditiously as possible:

(a) prepare and file with the Commission a registration statement
on an appropriate registration form of the Commission for the disposition of
such Registrable Securities in accordance with the intended method of deposition
thereof, which form (i) shall be selected by the Company and (ii) shall, in the
case of a shelf registration, be available for the sale of the Registrable
Securities by the selling Holders thereof and such registration statement shall
comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the Commission
to be filed therewith, and the Company shall use its best efforts to cause such
registration statement to become and remain effective (provided, however, that
before filing a registration statement or prospectus or any amendments or
supplements thereto, or comparable statements under securities or blue sky laws
of any jurisdiction, the Company will furnish to the counsel of any Holder
participating in the

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<PAGE> 10

planned offering and the underwriters, if any, copies of all such documents
proposed to be filed (including all exhibits thereto), which documents will be
subject to the reasonable review and reasonable comment of such counsel, and the
Company shall not file any registration statement or amendment thereto or any
prospectus or supplement thereto to which the holders of a majority of the
Registrable Securities covered by such registration statement or the
underwriters, if any, shall reasonably object in writing);

(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective for
such period (which shall not be required to exceed 150 days in the case of a
registration pursuant to Section 2.1 or 120 days in the case of a registration
pursuant to Section 2.2) as any seller of Registrable Securities pursuant to
such registration statement shall request and to comply with the provisions of
the Securities Act with respect to the sale or other disposition of all
Registrable Securities covered by such registration statement in accordance with
the intended methods of disposition by the seller or sellers thereof as set
forth in such registration statement;

(c) furnish, without charge, to each seller of such Registrable
Securities and each underwriter, if any, of the securities covered by such
registration statement such number of copies of such registration statement,
each amendment and supplement thereto (in each ease including all exhibits), and
the prospectus included in such registration statement (including each
preliminary prospectus) in conformity with the requirements of the Securities
Act, and other documents, as such seller and underwriter may reasonably request
in order to facilitate the public sale or other disposition of the Registrable
Securities owned by such seller (the Company hereby consenting to the use in
accordance with all applicable law of each such registration statement (or
amendment or post-effective amendment thereto) and each such prospectus (or
preliminary prospectus or supplement thereto) by each such seller of Registrable
Securities and the underwriters, if any, in connection with the offering and
sale of the Registrable Securities covered by such registration statement or
prospectus);

(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such other applicable
securities or "blue sky" laws of such jurisdictions as any sellers of
Registrable Securities or any managing underwriter, if any, shall reasonably
request, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such sellers or underwriter, if any, to
consummate the disposition of the Registrable Securities in such jurisdictions,
except that in no event shall the Company be required to qualify to do business
as a foreign corporation in any jurisdiction where it would not, but for the
requirements of this paragraph (d), be required to be so qualified, to subject
itself to taxation in any such jurisdiction or to consent to general service of
process in any such jurisdiction;

(e) promptly notify each Holder selling Registrable Securities
covered by such registration statement and each managing underwriter, if any;
(i) when the registration statement, any pre-effective amendment, the prospectus
or any prospectus supplement related thereto or post-effective amendment to the
registration statement has been flied and, with respect

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<PAGE> 11

to the registration statement or any post-effective amendment) when the same has
become effective; (ii) of any request by the Commission or state securities
authority for amendments or supplements to the registration statement or the
prospectus related thereto or for additional information; (iii) of the issuance
by the Commission of any stop order suspending the effectiveness of the
registration statement or the initiation of any proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect to the
suspension of the qualification of any Registrable Securities for sale under the
securities or blue sky laws of any jurisdiction or the initiation of any
proceeding for such purpose; (v) of the existence of any fact of which the
Company becomes aware which results in the registration statement, the
prospectus related thereto or any document incorporated therein by reference
containing an untrue statement of a material fact or omitting to state a
material fact required to be stated therein or necessary to make any statement
therein not misleading; and (vi) if at any time the representations and
warranties contemplated by Section 3 below cease to be true and correct in all
material respects; and, if the notification relates to an event described in
clause (v), the Company shall promptly prepare and furnish to each such seller
and each underwriter, if any, a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein in the light of the
circumstances under which they were made not misleading;

(f) comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders, as soon as
reasonably practicable after the effective date of the registration statement
(and in any event within 16 months thereafter), an earnings statement (which
need not be audited) covering the period of at least twelve consecutive months
beginning with the first day of the Company's first calendar quarter after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 1.1 (a) of the Securities Act and Rule 158
thereunder;

(g) (i) cause all such Registrable Securities covered by such
registration statement to be listed on the principal securities exchange on
which similar securities issued by the Company are then listed (if any), if the
listing of such Registrable Securities is then permitted under the rules of such
exchange, or (ii) if no similar securities are then so listed, cause all such
Registrable Securities to be, at the Company's option, listed on a national
securities exchange or, as a NASDAQ security within the meaning of Rule 11Aa2-1
promulgated by the Commission pursuant to the Exchange Act or, failing that,
secure NASDAQ authorization for such shares and without limiting the generality
of the foregoing, take all actions that may be required by the Company as the
issuer of such Registrable Securities in order to facilitate the managing
underwriter's arranging for the registration of at least two market makers as
such with respect to such shares with the National Association of Securities
Dealers, Inc. (the "NASD");

(h) provide and cause to be maintained a transfer agent and
registrar for all such Registrable Securities covered by such registration
statement not later than the effective date of such registration statement;

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<PAGE> 12

(i) enter into such customary agreements (including, if applicable,
an underwriting agreement) and take such other actions as the Holders shall
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities, provided that the underwriting agreement if any, shall
be reasonably satisfactory in form and substance to the Company. The Holders of
the Registrable Securities which are to be distributed by such underwriters
shall be parties to such underwriting agreement and may, at their option,
require that the Company make to and for the benefit of such Holders the
representations, warranties and covenants of the Company which are being made to
and for the benefit of such underwriters and which are of the type customarily
provided to institutional investors in secondary offerings;

(j) obtain an opinion from the Company's counsel and a "cold
comfort" letter from the Company's independent public accountants in customary
form and covering such matters as are customarily covered by such opinions and
"cold comfort" letters delivered to underwriters in underwritten public
offerings, which opinion and letter shall be reasonably satisfactory to be
underwriter if any, and to Holders and furnish to each Holder participating in
the offering and to each underwriter, if any, a copy of such opinion and letter
addressed to such Holder or underwriter;

(k) deliver promptly to each Holder participating in the offering
and each underwriter, if any, copies of all correspondence between the
Commission and the Company, its counsel or auditors or with the Commission or
its staff with respect to the registration statement, other than those portions
of any such correspondence and memoranda which contain information subject to
attorney-client privilege with respect to the Company, and, upon receipt of such
confidentiality agreements as the Company may, reasonably request, make
reasonably available for inspection by any seller of such Registrable Securities
covered by such registration statement, by any underwriter, if any,
participating in any disposition to be effected pursuant to such registration
statement and by any attorney, accountant or other agent retained by any such
seller or any such under after all pertinent financial and other records,
pertinent corporate documents and properties of the Company, and cause all of
the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;

(l) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of the registration statement;

(m) provide a CUSIP number for all Registrable Securities, not later
than the effective date of the registration statement;

(n) make reasonably available its employees and personnel and
otherwise provide reasonable assistance to the underwriters (taking into account
the needs of the Company's businesses and the requirements of the marketing
process) in the marketing of Registrable Securities in any underwritten
offering;

(o) promptly prior to the filing of any document which is to be
incorporated by reference into the registration statement or the prospectus
after the initial filing of such

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<PAGE> 13

registration statement, provide copies of such document to counsel to the
selling holders of Registrable Securities and to the managing underwriter, if
any, and make the Company's representatives reasonably available for discussion
of such document and make such changes in such document prior to the filing
thereof as counsel for such selling holders or underwriters may reasonably
request;

(p) furnish to each Holder participating in the offering and the
managing underwriter, without charge, at least one signed copy of the
registration statement and any post-effective amendments thereto, including
financial statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference);

(q) cooperate with the selling Holders of Registrable Securities and
the managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates not bearing any restrictive legends representing the
Registrable Securities to be sold, and cause such Registrable Securities to be
issued in such denominations and registered in such names in accordance with the
underwriting agreement prior to any Sale of Registrable Securities to the
underwriters or, if not an underwritten offering, in accordance with the
instructions of the selling Holders of Registrable Securities, at least three
business days prior to any sale of Registrable Securities; and

(r) take all such other commercially reasonable actions as are
necessary or advisable in order to expedite or facilitate the disposition of
such Registrable Securities.

The Company may require as a condition precedent to the Company's
obligations under this Section 2.4 that each seller of Registrable Securities as
to which any registration is being effected furnish the Company such information
regarding such seller and the distribution of such securities as the Company may
from time to time reasonably request provided that such information shall be
used only in connection with such registration.

Each Holder of Registrable Securities agrees that upon receipt of
any notice from the Company of the happening of any event of the kind described
in clause (v) of paragraph (e) of this Section 2.4, such Holder will discontinue
such Holder's disposition of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until such holder's receipt of
the copies of the supplemented or amended prospectus contemplated by paragraph
(e) of this Section 2.4 and if so directed by the Company will deliver to the
Company (at the Company's expense) all copies, other than permanent file copies,
then in such Holder's possession of rite prospectus covering such Registrable
Securities that was in effect at the time of receipt of such notice. In the
event the Company shall give any such notice, the applicable period set forth in
paragraph (b) of this Section 2.4 shall be extended by the number of days during
such period from and including the date of the giving of such notice to and
including the date when each seller of any Registrable Securities covered by
such registration statement shall have received the copies of the supplemented
or amended prospectus contemplated by paragraph (e) of this Section 2.4.

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<PAGE> 14

2.5. Registration Expenses. The Company shall, whether or not any
registration pursuant to this Agreement becomes effective, pay all expenses
incident to the Company's performance of or compliance with this Article 2,
including (i) Commission, stock exchange or NASD registration and filing fees
and all listing fees and fees with respect to the inclusion of securities in
NASDAQ (ii) fees and expenses of compliance with state securities or "blue sky"
laws and in connection with the preparation of a "blue sky" survey, including
without limitation, reasonable fees and expenses of blue sky counsel, (iii)
printing expenses, (iv) messenger and delivery expenses, (v) internal expenses
(including, without limitation, all salaries and expenses of the Company's
officers and employees performing legal and accounting duties), (vi) expenses
incurred in connection with any road show, (vii) fees and disbursements of
counsel for the Company, (viii) with respect to each registration, the fees and
disbursements of one counsel for the selling Holders selected by Holders of a
majority of the Registrable Securities included in such registration as well as
of one local counsel (as applicable), (ix) fees and disbursements of all
independent public accountants (including the expenses of any audit and/or "cold
comfort" letter) and fees and expenses of other persons, including special
experts, retained by the Company and (x) any other fees and disbursements of
underwriters, if any, customarily paid by issuers or sellers of securities.
Notwithstanding the foregoing, (A) the provisions of this Section 2.5 shall be
deemed amended to the extent necessary to cause these expense provisions to
comply with "blue sky" laws of each state in which the offering is made and (B)
in connection with any registration hereunder, each Holder of Registrable
Securities being registered shall pay all underwriting discounts and commissions
and transfer taxes, if any, attributable to such Registrable Securities.

2.6. Certain Limitations on Registration Rights. In the case of any
registration under Section 2.1 pursuant to an underwritten offering, or in the
case of a registration under Section 2.2, if the Company has determined to enter
into an underwriting agreement in connection therewith, all Registrable
Securities to be included in such registration shall be subject to an
underwriting agreement and no Person may participate in such registration unless
such Person agrees to sell such Person's securities on the basis provided
therein and completes and/or executes all questionnaires and other documents
(other than powers of attorney) which must be executed in connection therewith.

2.7. Limitations on Sale or Distribution of Other Securities. To the
extent requested in writing by a managing underwriter of any registration
pursuant to which Holders are selling Registrable Securities, the Company hereby
agrees not to effect any private or public sale as distribution of any equity
securities of the Company (other than as part of such underwritten public
offering), during the period reasonably requested by such managing underwriter,
not to exceed 180 days after the effective date of the registration pursuant to
which such underwritten public offering is effected (except that the Company may
effect any sale or distribution of any such securities pursuant to a
registration on Form S-4 (if reasonably acceptable to the managing underwriter)
or Form S-8, or any successor or similar form which is then in effect).

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<PAGE> 15

2.8. Indemnification.

(a) In the event of any registration of any securities of the
Company under the Securities Act pursuant to this Article 2, the Company will,
and hereby does, indemnify and hold harmless, to the fullest extent permitted by
law, the seller of any Registrable Securities covered by such registration
statement, its directors, officers, fiduciaries, employees and stockholders or
general and limited partners (and the directors, officers, employees and
stockholder thereof), each other Person who participates as an underwriter in
the offering or sale of such securities, each officer, director, employee,
stockholder or partner of such underwriter, and each other Person, if any, who
controls such seller or any such underwriter within the meaning of the
Securities Act, against any and all losses, claims, damages or liabilities,
joint or several, actions or proceedings (whether commenced or threatened) in
respect thereof ("Claims") and expenses (including reasonable fees of counsel
and any amounts paid in any settlement effected with the Company's consent,
which consent shall not be unreasonably withheld or delayed) to which each such
indemnified party may become subject under the Securities Act or otherwise,
insofar as such Claims or expenses arise out of or are based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement under which such securities were registered under the
Securities Act or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary, final or summary prospectus or any
amendment or supplement thereto, together with the documents incorporated by
reference therein, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or (iii) any violation by the Company of any federal,
state or common law rule or regulation applicable to the Company and relating to
action required of or inaction by the Company in connection with any such
registration, and the Company will reimburse any such indemnified party for any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such Claim as such expenses are
incurred; provided, that the Company shall not be liable to any such indemnified
party in any such case to the extent such Claim or expense arises out of or is
based upon any untrue statement or alleged untrue statement of a material fact
or omission or alleged omission of a material fact made in such registration
statement or amendment thereof or supplement thereto or in any such prospectus
or any preliminary, final or summary prospects in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such indemnified party specifically for use therein. Such indemnity and
reimbursement of expenses shall remain in full force and effect regardless of
any investigation made by or on behalf of such indemnified party and shall
survive the transfer of such securities by such seller.

(b) Each Holder of Registrable Securities that are included in the
securities as to which any registration under Section 2.1 or 2.2 is being
effected (and if the Company requires as a condition to including any
Registrable Securities in any registration statement filed in accordance with
Section 2.1 or 2.2, any underwriters shall, severally and not jointly, indemnify
and hold harmless (in the same manner and to the same extent as set forth in
paragraph (a) of this Section 2.8) to the extent permitted by law the Company,
its officers and directors, each Person

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<PAGE> 16

controlling the Company within the meaning of the Securities Act and all other
prospective sellers and their directors, officers, general and limited partners
and respective controlling Persons with respect to any untrue statement or
alleged untrue statement of any material fact in, or omission or alleged
omission of any material fact from, such registration statement, any
preliminary, final or summary prospectus contained therein, or any amendment or
supplement thereto, if such statement or alleged statement or omission or
alleged omission was made in reliance upon and in conformity with written
information furnished to the Company or its representatives by or on behalf of
such Holder or underwriter, specifically stating that it is for use in such
registration statement, preliminary, final or summary prospectus or amendment or
supplement or document incorporated by reference into any of the foregoing;
provided, however, that the aggregate amount which any such Holder Shall be
required to pay pursuant to this Section 2.8(b) and Sections 2.8(c) and (e)
shall be limited to the amount of the net proceeds received by such person upon
the sale of the Registrable Securities pursuant to the registration statement
giving rise to such claim. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such indemnified party
and shall survive the transfer of such securities by such Holder.

(c) Indemnification similar to that specified in the preceding
paragraphs (a) and (b) of this Section 2.8 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any state securities and "blue sky" laws.

(d) Any person entitled to indemnification under this Agreement
shall notify promptly the indemnifying party in writing of the commencement of
any action or proceeding with respect to which a claim for indemnification may
be made pursuant to this Section 2.8, but the failure of any indemnified party
to provide such notice shall not relieve the indemnifying party of its
obligations under the preceding paragraphs of this Section 2.8, except to the
extent the indemnifying party is materially prejudiced thereby, and shall not
relieve the indemnifying party from any liability which it may have to any
indemnified party otherwise than under this Article 2. In case any action or
proceeding is brought against an indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, unless in the reasonable opinion of outside
counsel to the indemnified party a conflict of interest between such indemnified
and indemnifying parties may exist in respect of such claim, to assume the
defense thereof jointly with any other indemnifying party similarly notified, to
the extent that it chooses, with counsel reasonably satisfactory to such
indemnified party (who shall not, except with the consent of the indemnified
party, be counsel to the indemnifying party), and after notice from the
indemnifying party to such indemnified party that it so chooses, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation; provided,
however, that (i) if the indemnifying party fails to take reasonable steps
necessary to defend diligently the action or proceeding within 20 business days
after receiving notice from such indemnified party that the indemnified party
believes it has failed to do so; or (ii) if such indemnified party who is a
defendant in any action or proceeding which is also brought against the
indemnifying party reasonably shall have concluded that then may be one or more
legal defenses available to such

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<PAGE> 17

indemnified party which are not available to the indemnifying party; or (iii) if
representation of both parties by the same counsel is otherwise inappropriate
under applicable standards of professional conduct, then, in any such case, the
indemnified party shall have the right to assume or continue its own defense as
set forth above (but with no more than one firm of counsel reasonably acceptable
to the Company for all indemnified parties in each jurisdiction, except to the
extent any indemnified party or parties reasonably shall have concluded that
there may be legal defenses available to such party which are not available to
the other indemnified parties or to the extent representation of all indemnified
parties by the same counsel is otherwise inappropriate under applicable
standards of professional conduct) and the indemnifying party shall be liable
for any expenses therefor. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of, or
consent to the entry of any judgment with respect to, any pending or threatened
action or claim in respect of which indemnification or contribution may be
soughht hereunder (whether or not the indemnified party is an actual or
potential party to such action or claim) unless such settlement, compromise or
judgment (A) includes an unconditional release of the indemnified party from all
liability arising out of such action or claim and (B) does not include a
statement as to or an admission of fault, culpability, or a failure to act by or
on behalf of any indemnified party and, if the indemnifying party is the
Company, such settlement, compromise or judgment is reasonably acceptable to the
Company.

(e) If for any reason the forgoing indemnity is unavailable or is
insufficient to hold harmless an indemnified party under Sections 2.8(a), (b) or
(c), then each indemnifying party shall contribute to the amount paid or payable
by such indemnified party as a suit of any Claim in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one
hand and the indemnified party on the other from such offering of securities.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the indemnifying party or the indemnified party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such untrue statement or omission. If, however, the allocation provided
in the immediately preceding sentence is not permitted by applicable law, then
each indemnifying party shall contribute to the amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only such
relative benefits but also the relative fault of the indemnifying party on the
one hand, and the indemnified party, on the other hand, as well as any other
relevant equitable considerations. The relative fault shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the indemnifying partly or the indemnified
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The parties
hereto agree that it would not be just and equitable if contributions pursuant
to this Section 2.8(e) were to be determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to in the preceding sentences of this Section 2.8(e).
The amount paid or payable in respect of any Claim shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such Claim. No person guilty of
fraudulent misrepresentation

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<PAGE> 18

(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Notwithstanding anything in this Section 2.8(e) to the
contrary, no indemnifying party (other than the Company) shall be required
pursuant to flits Section 2.8(e) to contribute any amount in excess of the net
proceeds received by such Indemnifying party from the sale of Registrable
Securities in the offering to which the losses, claims, damages or liabilities
of the indemnified parties relate, less the amount of any indemnification
payment made pursuant to Sections 2.8(b) and (c).

(f) The indemnity agreements contained herein shall be in addition
to any other rights to indemnification or contribution which any indemnified
party may have pursuant to law or contract and shall remain operative and in
full force and effect regardless of any investigation made or omitted by or on
behalf of any indemnified party and shall survive the transfer of the
Registrable Securities by any such party.

(g) The indemnification and contribution required by this Section
2.8 shall be made by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are received or expense,
loss, damage or liability is incurred.

3. Underwritten Offerings.

3.1. Requested Underwritten Offerings. If requested by the underwriters
for any underwritten offering by the Holders pursuant to a registration
requested under Section 2.1, the Company shall enter into a customary
underwriting agreement with the underwriters, Such underwriting agreement shall
be reasonably satisfactory in form and substance to the Holders which requested
such registration and shall contain such representations and warranties by, and
such other agreements on the part of, the Company and such other terms as are
generally prevailing in agreements of that type, including, without limitation,
indemnities and contribution agreements. Any Holder participating in the
offering shall be a party to such underwriting agreement and may, at its option,
require that any or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such Holder and that
any or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the obligations of
such Holder.

3.2. Piggyback Underwritten Offerings. In the case of a registration
pursuant to Section 2.2 hereof, if the Company shall have determined to enter
into any underwriting agreements In connection therewith, all of the Holder's
Registrable Securities to be included in such registration shall be subject to
such underwriting agreements. Any Holder participating in such registration may,
at its option, require that any or all of the representations and warranties by,
and the other agreements on the part of; the Company to end for the benefit of
such underwriters shall also be made to and for the benefit of such Holder and
that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such Holder. Such underwriting agreement shall also contain such
representations and warranties by the participating Holders as are customary in
agreements of that type.

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<PAGE> 19

4. General.

4.1. Rule 144. If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act in respect of the
Common Stock or securities of the Company convertible into or exchangeable or
exercisable for Common Stock, the Company covenants that it will timely file the
reports required to be filed by it under the Securities Act or the Exchange Act
(including, but not limited to, the reports under Sections 13 and 15(d) of the
Exchange Act referred to in subparagraph (c)(1) of Rule 144 under the Securities
Act), and will take such further action as any Holder of Registrable Securities
may reasonably request, all to the extent required from time to time to enable
such Holder to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (i) Rule 144
under the Securities Act, as such Rule may be amended from time to time, or (ii)
any similar rule or regulation hereafter adopted by the Commission. Upon the
request of any Holder of Registrable Securities, the Company will deliver to
such Holder a written statement as to whether it has complied with such
requirements.

4.2 Preparation: Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the Holders participating in
the offering, their underwriters, if any, and their respective counsel,
accountants and other representatives and agents the opportunity to participate
in the preparation of such registration statement, each prospectus included
therein or flied with the Commission, and, to the extent practicable, each
amendment thereof or supplement thereto, and give each of them reasonable access
to its books and records and properties and such opportunities to discuss the
business of the Company and such other matters with the Company's directors,
officers and employees and the independent public accountants who have certified
its financial statements, and the Company will supply, or cause its directors
officers, employees and independent accountants to supply, all other information
reasonably requested by each of them, as shall be reasonably necessary or
appropriate, in the opinion of the Holders' and such underwriters' respective
counsel, to conduct a reasonable investigation within the meaning of the
Securities Act it being understood that such information may be material
non-public information).

4.3. Nominees for Beneficial Owners. If Registrable Securities are held by
a nominee for the beneficial owner thereof, the beneficial owner thereof may, at
its option, be treated as the Holder of such Registrable Securities for purposes
of any request or other action by any Holder or Holders of Registrable
Securities pursuant to this Agreement (or any determination of any number of
percentage of shares constituting Registrable Securities had by any holder or
Holders of Registrable Securities contemplated by this Agreement); provided that
the Company shall have received assurances reasonably satisfactory to it of such
beneficial ownership.

4.4. Notices and Other Communications. All notices, consents, requests,
instructions, approvals, documents and other communications provided for herein
shall be duly given, if in writing and delivered personally, by facsimile (with
a confirmation copy to be son by first class mail) or sent by nationally
recognized overnight courier service to:

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<PAGE> 20

THE COMPANY:

Paradigm, Inc.
385 Third Avenue
New York, New York 10022
Attn: John Bay
Telecopy No. (212) 303-5699

With a copy to:

Shipman & Goodwin, L.L.P.
One American Row
Hartford, Connecticut 06103
Telecopy No. (860) 251-5900
Attn: Richard M. Borden

APPLIED TELECOMMUNICATIONS TECHNOLOGIES INC.,
A.T.T. IV, N.V., AND DENNIS CAMERON:

c/o Applied Telecommunications Technologies Inc.
20 William Street
Wellesley, Massachusetts 02181
Attn: Dennis P. Cameron
Telecopy No. (617) 239-0377

With a copy to:

Goldstein & Manello, P.C.
265 Franklin Street
Boston, Massachusetts 02110-3192
Attn: Stephen M. Honig
Telecopy No. (617) 439-8988

MEYER DUFFY VENTURES III, L.P., MD STRATEGIC, L.P.,
P.V. II, L.P., SEEDLING FUND, L.P. AND STAR PARTNERS:

c/o Meyer, Duffy & Associates, Inc.
237 Park Avenue, 8th Floor
New York, New York 10017
Attn: Eric Meyer
Telecopy No. (212) 808-3493

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<PAGE> 21

With a copy to:

Christy & Viener
620 Fifth Avenue
New York, New York 10020
Attn: Anthony J. Carroll
Telecopy No. (212) 632-5555

FURMAN SELZ L.L.C.:

Furman Selz L.L.C.
230 Park Avenue
New York, New York 10169
Attn: Michael Garin
Telecopy No. (212) 692-9693

CRESTWOOD CAPITAL INTERNATIONAL LTD. AND
CRESTWOOD CAPITAL PARTNERS L.P.:

c/o Furman Selz L.L.C.
230 Park Avenue
New York, New York 10169
Attn: Terry Quinn
Telecopy No. (212) 808-2614

THE OTHER HOLDERS PARTY HERETO:

At the addresses therefor set forth in the books and
records maintained by the Company.

or to such other address as any party may, from time to time, designate in a
written notice given in a like manner.

4.5. Amendments. This Agreement may be amended as to the Holders, and
their respective successors arid assigns, and the Company may take any action
herein prohibited, or omit to perform any act required to be performed by it, if
the Company shall obtain the written consent or waiver of the holders of at
least a majority of the then outstanding Registrable Securities. This Agreement
may not be waived, changed, modified, or discharged orally, but only by an
agreement in writing signed by the party or parties against whom enforcement of
any waiver, change, modifications or discharge is sought or by parties with the
right to consent to such waiver, change, modification or discharge on behalf of
such party.

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<PAGE> 22

4.6 Miscellaneous.

(a) This Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and the respective successors and
assigns of the parties hereto, whether so expressed or not. No Person other than
a Holder shall be entitled to any benefits under this Agreement, except as
otherwise expressed, provided herein. This Agreement and the rights of the
parties hereunder may be assigned by any of the parties hereto to any transferee
of Registrable Securities.

(b) If any term, provision, covenant or restriction of this
Agreement or any exhibit hereto is held by a court of competent jurisdiction to
be invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Agreement and such exhibits shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
It is hereby stipulated end declared to be the intention of the parses that they
would have executed the remaining terms, provisions, covenants and restations
without including any of such which may be hereafter declared invalid, void or
unenforceable.

(c) Each of the parties hereto acknowledges and agrees that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction to prevent breached of the provisions of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state thereof having jurisdiction, this being in addition to any
other remedy to which they may be entitled at law or equity.

(d) This Agreement may be executed in one or more counterparts, all
of which shall be considered one and the same agreement, and shall become
effective when one or more of the counterparts have been signed by each party
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.

(e) This Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York, without giving effect to
conflict of laws principles.

(f) Each Holder agrees that, as to such Holder, the provisions of
this Agreement supersede the provisions of any agreements relating to the
registration of securities in any of the following agreements; each of the
Bridge Loan Subscription Agreements, dated approximately January 17, 1996,
pursuant to which the Company issued certain convertible notes and warrants, the
Subscription Agreements, dated approximately January 31, 1996, pursuant to which
the Company issued shares of Preferred Stock designated as "Series A Preferred
Stock," the Off-Shore Subscription Agreements, dated January 31, 1996, pursuant
to which the Company issued shares of Preferred Stock designated as "Series A
Preferred Stock," the Series B Subscription Agreement, dated June 11, 1995,
pursuant to which the Company issued shares of Preferred Stock designated as
"Series B Preferred Stock," the Convertible Notes, in the original principal
amount of $250,000, in the aggregate, dated September 10, 1996, issued

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<PAGE> 23

by the Company, the Series C Subscription Agreements, dated approximately
October 15, 1996, pursuant to which the Company issued shares of Preferred Stock
designated as "Series C Preferred Stock," and the Series D Subscription
Agreements, dated December 20, 1996, pursuant to which the Company issued shares
of Preferred Stock designated as "Series D Preferred Stock, and the Demand Note,
dated March 12, 1997, issued by the Company in favor of Furman Selz L.L.C., and
the Subscription Agreements, dated as of April 25, 1997, pursuant to which the
Company issued Demand Promissory Notes of even date therewith having an
aggregate principal amount of $1,000,000.

4.7. No Inconsistent Agreements. the Company represents and warrants to
the Holders that as of the date hereof it is not party to any agreement
containing provisions or granting rights which are inconsistent with the rights
granted by It to the Holders in this Agreement or which otherwise conflict with
the provisions hereof. The Company agrees that, after the date hereof, it will
not enter into any agreement which contains provisions or grants

-21-
<PAGE> 24

rights which are inconsistent with the rights granted by it to the holders in
this Agreement or with otherwise conflict with the provisions hereof.

IN WITNESS WHEREOF, the Company and Holders have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized.

PARADIGM4, INC. FURMAN SELZ L.L.C.

By /s/ John Bay By /s/ Ted B. Muftic
------------------------------------ -------------------------------------
Name: John Bay Name: Ted B. Muftic
Title: President and Chief Executive Title: Vice President
Officer

APPLIED TELECOMMUNICATIONS A.T.T. IV, N.V.
TECHNOLOGIES, INC.

By /s/ Dennis P. Cameron By /s/ Dennis P. Cameron
------------------------------------ -------------------------------------
Dennis P. Cameron, President Dennis P. Cameron, Attorney-in-Fact

CRESTWOOD CAPITAL P.V. II, L.P.
INTERNATIONAL LTD.

By By /s/ Eric Meyer
------------------------------------ -------------------------------------
Name: Eric Meyer, General Partner
Title:

CRESTWOOD CAPITAL PARTNERS L.P. MD STRATEGIC, L.P.

By By /s/ Eric Meyer
------------------------------------ -------------------------------------
Name: Eric Meyer, General Partner
Title:

MEYER DUFFY VENTURES III, L.P. STAR PARTNERS

By /s/ Eric Meyer By /s/ Eric Meyer
------------------------------------ -------------------------------------
Eric Meyer, General Partner Eric Meyer, Attorney-in-Fact

-22-
<PAGE> 25

rights which are inconsistent with the rights granted by it to the holders in
this Agreement or with otherwise conflict with the provisions hereof

IN WITNESS WHEREOF, the Company and Holders have caused this
Agreement to be executed and delivered by their respective officers thereunto
duly authorized.

PARADIGM4, INC. FURMAN SELZ L.L.C.

APPLIED TELECOMMUNICATIONS A.T.T. IV, N.V.
TECHNOLOGIES, INC.

By /s/ Dennis P. Cameron By /s/ Dennis P. Cameron
------------------------------------ -------------------------------------
Dennis P. Cameron, President Dennis P. Cameron, Attorney-in-Fact

CRESTWOOD CAPITAL P.V. II, L.P.
INTERNATIONAL LTD.

By /s/ Steven Blecher By /s/ Eric Meyer
------------------------------------ -------------------------------------
Name: Steven Blecher Eric Meyer, General Partner
Title: General Partner

CRESTWOOD CAPITAL PARTNERS L.P. MD STRATEGIC, L.P.

By /s/ Michael Weisberg By /s/ Eric Meyer
------------------------------------ -------------------------------------
Name: Exec. VIP. / S.P. Eric Meyer, General Partner
Title: Michael Weisberg

MEYER DUFFY VENTURES III, L.P. STAR PARTNERS

By /s/ Eric Meyer By /s/ Eric Meyer
------------------------------------ -------------------------------------
Eric Meyer, General Partner Eric Meyer, Attorney-in-Fact

-22-
<PAGE> 26

SEEDLING FUND, L.P. DENNIS CAMERON

By /s/ Eric Meyer By /s/ Dennis Cameron
------------------------------------ -------------------------------------
Eric Meyer, Attorney-in-Fact Dennis Cameron

PREDICTIVE VENTURES, L.P.

By /s/ Eric Meyer
------------------------------------
Name: Eric Meyer
Title: General Partner

-23-
<PAGE> 27

Each of the undersigned hereby executes and delivers the
Registration Rights Agreement, dated as of May 9, 1997, between Paradigm4, Inc.,
a Delaware corporation, and certain of its security holders, thereby becoming a
Holder thereunder, as of May 9, 1997.

MEYER DUFFY & ASSOCIATES, INC.

By
------------------------------------ -------------------------------------
Eric Meyer, President Eric Meyer

ESTATE OF WILLIAM R. McELROY,
- --------------------------------------- F.B.O. ANN MINOR
Boyce Meyer
By
-----------------------------------
Paul R. Minor, Trustee
- ---------------------------------------
Michael Garin
By
- --------------------------------------- -----------------------------------
Theodore B. Muftic Howard S. Tuthill, Trustee

- --------------------------------------- -------------------------------------
John Bay Terence M. Quinn

- --------------------------------------- -------------------------------------
Joseph Dion Ian A. Reddin

/s/ Florin Vicol
- --------------------------------------- -------------------------------------
Florin Vicol Elaine G. Reddin

-------------------------------------
William P. Whalen

-24-
<PAGE> 28

Registration Rights Agreement

Schedule I

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Common
Investor Address Common Series A Series B Series C Series D Series E Warrants
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Applied
Telecommunications 20 William St.
Technologies, Inc. Wellesley, MA 02181 4,800 2,400
- ----------------------------------------------------------------------------------------------------------------------------------
Applied
Telecommunications 20 William St.
Technologies IV N.W. Wellesley, MA 02181 30,000
- ----------------------------------------------------------------------------------------------------------------------------------
c/o Paradigm4, Inc.
888 Third Ave, Suite 450
Bay, John New York, NY 10022 1,000 700
- ----------------------------------------------------------------------------------------------------------------------------------
c/o Applied Telecommunications
Technologies Inc.
20 William St.
Cameron, Dennis Wellesley, MA 02181 200 100
- ----------------------------------------------------------------------------------------------------------------------------------
c/o Donovan D. Blachar
Director
Crestwood Capital 12 Duke Lane
International Ltd. Dublin, 2. Ireland 4,000 2,000
- ----------------------------------------------------------------------------------------------------------------------------------
c/o Michael Weisberg
Crestwood Capital 230 Park Ave.
Partners L.P. New York, NY 10188 8,000 3,000
- ----------------------------------------------------------------------------------------------------------------------------------
c/o Paradigm4, Inc.
885 Third Ave, Suite 450
Dion, Joseph New York, NY 10022 2,805 200
- ----------------------------------------------------------------------------------------------------------------------------------
c/o Meyer, Duffy & Assoc.
237 Park Ave.
Duffy, Donald New York, NY 10017 25,000
- ----------------------------------------------------------------------------------------------------------------------------------
c/o Paradigm4, Inc.
885 Third Ave, Suite 450
Evans, Keith New York, NY 10022
- ----------------------------------------------------------------------------------------------------------------------------------
230 Park Ave.
Furman Selz LLC New York, NY 10169 20,000 10,000
- ----------------------------------------------------------------------------------------------------------------------------------
c/o Meyer, Duffy & Assoc.
237 Park Ave. 8th Floor
MD Strategic LP New York, NY 10017 13,682 8,000 6,000 5,000
- ----------------------------------------------------------------------------------------------------------------------------------
52,500
- ----------------------------------------------------------------------------------------------------------------------------------
2,500
- ----------------------------------------------------------------------------------------------------------------------------------
Meyer, Duffy & Associates 237 Park Ave, 8th Floor
Inc. New York, NY 10017
- ----------------------------------------------------------------------------------------------------------------------------------
c/o Meyer, Duffy & Assoc.
Meyer, Duffy Ventures 237 Park Ave, 8th Fl
III, L.P. New York, NY 10017 5,000 3,000 5,000 37,000 4,500
- ----------------------------------------------------------------------------------------------------------------------------------
c/o Meyer, Duffy & Assoc.
237 Park Ave, 8th Fl
Meyer, Eric New York, NY 10017 25,000
- ----------------------------------------------------------------------------------------------------------------------------------
c/o Meyer, Duffy & Assoc.
237 Park Ave, 8th Fl
PV II, L.P. New York, NY 10017 25,000 2,000 5,000 8,000 2,000
- ----------------------------------------------------------------------------------------------------------------------------------
c/o Meyer, Duffy & Assoc.
237 Park Ave, 8th Fl
Star Partners, L.P. New York, NY 10017 8,750 2,000 5,000
- ----------------------------------------------------------------------------------------------------------------------------------
12 Old Rodding Road
Quinn, Terence M. Weston, CT 05883 2,800
- ----------------------------------------------------------------------------------------------------------------------------------
c/o Paradigm4, Inc.
885 Third Ave, Suite 450
Vicol, Florin C. New York, NY 10022 1,000 100
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE> 1
EXHIBIT 10.6

PUT AGREEMENT

THIS PUT AGREEMENT (this "Agreement") is made as of the May 26, 1999
(the "Effective Date") by and between PARADIGM4, Inc., a Delaware corporation
with its principal place of business at 363 Route 46 West, Fairfield, NJ 07004
(the "Company") and J. BRUCE BOISTURE, an individual with whose principal place
of residence is 49 High Street, Farmington, CT 06032 (the "Executive").

RECITALS

WHEREAS, the Company and the Executive desire that the Executive shall
have the opportunity to sell the Shares to the Company;

WHEREAS, the Executive is an employee of Company and an integral part
of its management who participates in the decision-making process relative to
short- and long-term planning and policy for Company;

WHEREAS, Company, acting through its Board of Directors, has determined
that it would be in the best interests of Company and Executive to assure
continuity in the management of Company's administration and operations by
entering into a Put Agreement in connection with the retention of the services
of Executive;

WHEREAS, Company desires to establish and maintain the management
expertise which is essential to enhance shareholder value; and

WHEREAS, as an inducement for Executive to join Company, Company has
determined that it would be in the best interests of Company and Executive to
assure that Executive is treated fairly in the advent of a possible change of
control in order to prevent Executive from being distracted or otherwise having
his performance adversely affected by a possible change in control.

NOW THEREFORE, each of the parties hereto, in consideration of the
mutual covenants set forth herein, agrees as follows:

ARTICLE ONE
DEFINITIONS

For purposes of this Agreement, the following terms shall have the
following meanings:

1.1. Affiliate shall mean, as to any Person, (i) the spouse or lineal
descendants of such Person or any of the parties referred to in the subsequent
clauses of this definition, (ii) a trust for the benefit of such Person or any
of the parties referred to in the foregoing clause of this definition, (iii) any
corporation, partnership, limited liability company, or other entity of which
such Person is an officer, director, member or general partner, or which is
otherwise controlled
<PAGE> 2
by such Person or by any of the parties referred to in this or any of the
foregoing clauses of this definition, (iv) any other Person that directly, or
indirectly through one or more intermediaries, controls, or is controlled by, or
is under common control with, such Person, and (v) the members, partners, former
partners, former members, directors and officers, as the case may be, of such
Person or of any of the parties referred to in the foregoing clauses of this
definition.

1.2. ATTI Group shall mean any of Dennis Cameron, Advanced
Telecommunications Technologies, Inc., ATT IV, N.V., and any of their respective
Affiliates (other than limited partners) and any other Person or account as to
whom any of the foregoing persons exercises or has exercised investment
discretion.

1.3. Beneficial Ownership shall be determined in accordance with the
provisions of Rule 13d-3 under the Exchange Act as such Rule may be in effect
from time to time or any successor rule or regulation.

1.4. Company Group shall mean any of the ATTI Group, the Furman Selz
Group, the Meyer Duffy Group, the Management Group or the Crestwood Group.

1.5. Crestwood Group shall mean Crestwood Capital International, LTD.
and Crestwood Capital Partners, L.P.

1.6. Distribution shall have the meaning ascribed to it in Section
1.24.

1.7 Effective Date shall have the meaning ascribed to in the preamble
of this Agreement.

1.8. Equity Security shall mean any capital stock (including the Common
and Preferred Stock) of the Company, whether now or hereafter authorized, and
rights, options, warrants or rights to purchase capital stock, and securities of
any type whatsoever that are, or may become, convertible into or exchangeable or
exercisable for capital stock; the number of shares represented by an Equity
Security which is an option, warrant, right or convertible security shall be the
number of shares of such capital stock which would be issued upon the immediate
exercise of such option, warrant or right of conversion of such convertible
security, without regard to when such option, warrant or right may in fact be
exercised or such convertible security may in fact be converted.

1.9. Exchange Act shall mean the Securities Exchange Act of 1934, as
amended.

1.10. Furman Selz Group shall mean any of ING Barings Furman Selz, LLC
and any of its Affiliates and any other Person or account as to whom any of the
foregoing persons exercises or has exercised investment discretion.

1.11. Management Group shall mean the group comprised of the Management
Shareholders.

1.12. Management Shareholders shall mean the persons listed on Schedule
I hereto and

2
<PAGE> 3
any additional officers of the Company who own Equity Securities.

1.13. Meyer Duffy Group shall mean any of Eric Meyer, Donald Duffy,
Meyer Duffy Ventures III, L.P., MD Strategic L.P., P.V. II, L.P., Star Partners
Predictive Ventures, L.P., Seedling Fund, L.P. and any of their respective
Affiliates (other than limited partners) and any other Person or account as to
whom any of the foregoing persons exercises or has exercised investment
discretion.

1.14. Non-Qualified Stock Option Agreement shall have the meaning
ascribed to it in Section 1.16.

1.15. Notice of Put shall have the meaning ascribed to it in Section
2.2 herein.

1.16. Permitted Transferee shall have the meaning ascribed to it in
Section 5 of the Executive's Non-Qualified Stock Option Agreement dated as of
May 26, 1999 (the "Non-Qualified Stock Option Agreement").

1.17. Person shall mean any individual, firm, corporation, business
trust, partnership, limited liability company or other entity, and shall include
any successor (by merger or otherwise) of such entity.

1.18. Put shall have the meaning ascribed to it in Section 2.1 herein.
The term "Put", when used as a verb, shall also mean the Executive's exercise of
the Put.

1.19. Preferred Stockholder shall mean a holder of shares of the Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock and Series F Preferred Stock of the
Company.

1.20. Put Closing shall have the meaning ascribed to it in Section 3.1
herein.

1.21. Put Date shall have the meaning ascribed to it in Section 3.1
herein.

1.22. Put Price shall have the meaning ascribed to it in Section 2.1
herein.

1.23. Sale shall have the meaning ascribed in Section 2.1 herein.

1.24. Securities Act shall mean the Securities Act of 1933, as amended.

1.25. Sell, as to any Equity Security, shall mean to sell, to offer to
sell, to accept any offer to purchase, or in any other way directly or
indirectly transfer, assign, distribute, encumber or otherwise dispose of such
Equity Security, either voluntarily or involuntarily, but shall not include any
sale, transfer or other disposition of Equity Securities (i) in an underwritten
public offering of such Equity Security pursuant to a registration statement
under the Securities Act, or a sale pursuant to Rule 144 (or a successor rule or
regulation) thereunder, (ii) by any Preferred Stockholders to a then current
Affiliate of such Preferred Stockholder or to a member of any Group to which
such Preferred Stockholder is then associated, or (iii) the distribution of
Equity

3
<PAGE> 4
Securities by any member of the ATTI Group, the Meyer Duffy Group, the Furman
Selz Group or the Crestwood Group to any of their respective limited partners or
other passive investors (a distribution contemplated by this clause (iii) being
sometimes referred to as a "Distribution").

1.26. Shares shall mean (i) 1,320,000 shares of the Company's common
stock, par value $.01 per share ("Common Shares"), subject to options granted to
the Executive on May 26, 1999 (or if such options have been exercised, the
Common Shares purchased thereby) plus (ii) if a Sale occurs with a Common Share
equivalent purchase price in excess of $6.00 per share, 330,000 Common Shares
subject to options granted to the Executive on May 26, 1999 (or if such options
have been exercised, the Common Shares purchased thereby), plus such additional
number of shares subject to such options in (i) and (ii) above as shall be fixed
from time to time in accordance with the provisions of Sections 8 of the
Incentive Stock Option Agreement and the Non-Qualified Stock Option Agreement,
respectively.

1.27. Trigger Event shall have the meaning ascribed to it in Section
2.1 herein.

ARTICLE TWO
RIGHT TO PUT SHARES

2.1 Right to Put. In the event that any one or more of the Preferred
Stockholders shall Sell, in a single transaction or a series of related
transactions (a "Sale"), to any Person or group of Persons (other than to any
(i) member of any Company Group to which the Preferred Stockholder(s) is (are)
then associated or (ii) Permitted Transferee, 50% or more of the aggregate
Equity Securities held collectively by all of the Preferred Stockholders taken
together, and the Executive is not concurrently provided with an offer to
participate in such Sale on substantially the same terms as the Preferred
Stockholder(s) (a "Trigging Event"), then the Executive shall have the right to
require the Company to purchase from the Executive (the "Put"), and upon
exercise of the Put the Company shall purchase from the Executive, up to that
number of the Shares (the "Put Shares") equal in percentage to the percentage of
Equity Securities Sold by the Preferred Stockholder(s), for a price per share
equal to the common stock equivalent Sale price received by the Preferred
Stockholder(s) in such Sale minus the applicable exercise price for any options
which are the subject of the Put and which have not been exercised prior to the
Put Date (the "Put Price").

2.2 Method of Exercise. The Executive may exercise the Put and his
rights related hereunder to sell the Put Shares to the Company by delivering to
the Company, at its office referred to above, a notice of Put (a "Notice of
Put") in the form attached hereto as Annex A.

2.3 Time of Exercise. The rights of the Executive to Put all or such
portion of the Shares as shall be specified in the Notice of Put of the Shares
shall become exercisable immediately upon completion of the Sale by the
Preferred Stockholders.

ARTICLE THREE
CLOSING

4
<PAGE> 5
3.1. Put Closing.

(a) The closing (the "Put Closing") of the purchase and sale
of the Put Shares pursuant to Section 2 hereof shall be held on the
date (the "Put Date") which is the thirtieth (30th) day after delivery
of the Notice of Put.

(b) At the Put Closing, the Executive will deliver the Put
Shares to the Company, and the Company will deliver to the Executive
the Put Price for the Put Shares made the subject of the Notice of Put
in cash, certified or bank check, or by wire transfer.

3.2 Insufficient Surplus, Etc. In the event that a payment by the
Company in respect of all or a portion of the Put Price shall not be permitted
by Section 170 of the Delaware General Corporation Law, the portion so
restricted (the "Restricted Portion") may be deferred by the Company until and
shall be payable by the Company in installments or one lump sum, as appropriate,
at such time or times as (a) the Company has adequate surplus, as defined in and
computed in accordance with Sections 154 and 244 of the Delaware General
Corporation Law or (b) in the case there shall be no such adequate surplus, the
Company has adequate net profits for the then current fiscal year and/or the
preceding fiscal year or in any subsequent fiscal year, in any such case to the
extent required for purposes of permitting the payment in full of the applicable
Put Price without contravention of said Section 170. During any such time period
that the Company is not able to pay the Restricted Portion of the Put Price, the
Put Closing shall be held in abeyance as to those Shares which would have been
purchased had the Restricted Portion been available and the Executive shall be
entitled to retain, and he shall be deemed to be the Beneficial Owner of, all of
the Put Shares which have not been purchased until such time as the entire
amount of the Put Price shall have been paid in full. Nothing herein shall
impair, as between the Company and the Executive, the obligation of the Company,
which is unconditional and absolute, to pay to the Executive the full amount of
the Put Price in accordance with the terms hereof; nor shall anything herein
prevent the Executive from exercising all remedies otherwise permitted by
applicable law or hereunder upon default by the Company in payment of the full
amount of the Put Price or otherwise in respect of the provisions of this
Agreement.

ARTICLE FOUR
ADDITIONAL COVENANTS

4.1 Changes in Terms of Capital Stock. From and after the date of
delivery by the Executive of his Notice of Put, the Company shall not effect or
permit any change in or amendment to any document or instrument pertaining to
the terms of its capital stock unless such change or amendment is of a nature
that would not prevent the Put or prevent the Company's satisfying consummation
of the Put.

4.2 Preservation of Rights. If, in the reasonable determination of the
Board of Directors of the Company made in good faith, any event occurs as to
which the provisions of this Put Agreement are not strictly applicable but it
would be equitable to preserve the rights of the Executive to participate in a
Triggering Event in accordance with the basic intent and principles of this Put
Agreement or if the other provisions of this Put Agreement would not preserve
the rights of the Executive in accordance with such basic intent and principles,
then the Company

5
<PAGE> 6
shall appoint, at its sole expense, a firm of independent public accountants of
recognized standing (which may be the regular auditors of the Company) to
determine, and report on what adjustments, if any, are necessary to preserve the
rights of the Executive in accordance with the basic intent and principles of
this Put Agreement. The determination of such firm shall be final and binding
and the Company shall take whatever action is required in order to comply with
the recommendation of such firm as set forth in its report.

4.3 Executive's Remedies. The Company acknowledges that the Executive's
rights herein and the benefits to be derived therefrom are unique. Accordingly,
in the event the Company shall breach any of the terms or conditions of this Put
Agreement, the Executive may proceed to protect and enforce his rights by any
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein, for an injunction
against a violation of any of the terms hereof, or the pursuit of any other
remedy which he may have by virtue of this Put Agreement or pursuant to
applicable law. The Company shall pay to the Executive upon demand the costs and
expenses of collection and of any other actions referred to in this Section 4.3,
including without limitation reasonable attorneys' fees, expenses and
disbursements.

4.4 Course of Dealing. No course of dealing and no delay on the part of
the Executive in exercising any of his rights shall operate as a waiver thereof
or otherwise prejudice his rights, nor shall any single or partial exercise of
any right, power or remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy hereunder. No right, power or
remedy conferred hereby or by applicable law on the Executive shall be exclusive
of any other right, power or remedy referred to herein or therein or now or
hereafter available at law, in equity, by statute or otherwise.

4.5 Further Assurances. Each of the Company and the Executive agree to
execute and deliver and take such other and further action as may be reasonably
requested by the other in order that each of the parties hereto may realize the
full benefits intended to be derived from this Put Agreement.

ARTICLE FIVE
MISCELLANEOUS

5.1 Notices. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), or (b)
when received by the addressee, if sent by certified mail or a nationally
recognized overnight delivery service (receipt requested), in each case to the
appropriate addresses set forth below (or to such other addresses as a party may
designate by notice to the other party):

(a) If to Company:

PARADIGM4, INC.
100 Wells Street
Suite 2K

6
<PAGE> 7
Exhibit 10.6

Hartford, CT 06103

Attention: General Counsel

(b) If to Executive:

J. BRUCE BOISTURE
49 High Street
Farmington, CT 06032

5.2 Applicable Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New Jersey (excluding
application of any choice of law doctrines that would make applicable the law of
any other state).

5.3 Headings. The section headings appear as a matter of convenience
only and do not constitute a part of this Agreement and shall not affect the
construction hereof.

5.4. Assignment. This Agreement shall inure to the benefit of, and be
binding upon, the successors and assigns of each of the parties hereto; provided
that the Company may not assign its rights or delegate its obligations
hereunder.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the Effective Date.

COMPANY:

PARADIGM4, INC.

By: /s/ RICHARD M. BORDEN
----------------------
Name: Richard M. Borden
----------------------
Title: Vice President
----------------------

EXECUTIVE:

/s/ J. BRUCE BOISTURE
------------------------
J. Bruce Boisture

7
<PAGE> 8
ANNEX A

NOTICE OF PUT

1. In accordance with a Put Agreement (the "Put Agreement") dated as of May 26,
1999 by and between the undersigned (the "Executive") and PARADIGM4, INC. (the
"Company"), the undersigned hereby exercises his right to sell, and does hereby
sell upon receipt of the Put Price as defined in the Put Agreement, the number
of Put Shares set forth below. "Put Shares" shall have the meaning ascribed to
it in the Put Agreement.

2. The Put Price is to be paid in the manner set forth in the Put Agreement.

3. All capitalized terms used herein and not otherwise defined herein shall have
the respective meanings assigned to them in the Put Agreement.

4. Other Instructions:

Number of Put Shares to be Purchased

J. Bruce Boisture

Dated:
<PAGE> 9
SCHEDULE I

SCHEDULE OF MANAGEMENT SHAREHOLDERS

NAME AND ADDRESS

John Bay
c/o Paradigm4, Inc.
885 Third Avenue
Suite 450
New York, NY 10022

Thomas Welch
c/o Paradigm4, Inc.
885 Third Avenue
Suite 450
New York, NY 10022

Florin Vicol
c/o Paradigm4, Inc.
885 Third Avenue
Suite 450
New York, NY 10022

Keith Evans
c/o Paradigm4, Inc.
885 Third Avenue
Suite 450
New York, NY 10022

Joseph Dion
c/o Paradigm4, Inc.
885 Third Avenue
Suite 450
New York, NY 10022

<PAGE> 1
EXHIBIT 23.1

CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS

As independent public accountants, we hereby consent to the use of our
reports dated March 24, 2000, (and to references to our Firm) included in or
made a part of this registration statement.

ARTHUR ANDERSEN LLP

Hartford, Connecticut
April 19, 2000

<PAGE> 1
EXHIBIT 23.2

CONSENT OF INDEPENDENT AUDITORS

We consent to the reference to our firm under the caption "Experts" and to
the use of our reports dated February 20, 1998, in the Registration Statement
(Form S-1 No. 333- ) and related Prospectus of Paradigm4, Inc. for the
registration of shares of its common stock.

/s/ Ernst & Young LLP

New York, New York
April 18, 2000

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,841,635
<SECURITIES> 0
<RECEIVABLES> 3,476,145
<ALLOWANCES> 224,000
<INVENTORY> 4,666,580
<CURRENT-ASSETS> 14,234,868
<PP&E> 5,256,445
<DEPRECIATION> 3,414,951
<TOTAL-ASSETS> 18,802,173
<CURRENT-LIABILITIES> 30,540,203
<BONDS> 0
0
11,363
<COMMON> 2,798
<OTHER-SE> (11,844,283)
<TOTAL-LIABILITY-AND-EQUITY> 18,802,173
<SALES> 10,030,986
<TOTAL-REVENUES> 10,030,986
<CGS> 15,146,409
<TOTAL-COSTS> 14,721,276
<OTHER-EXPENSES> 135,737
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,983,845
<INCOME-PRETAX> (21,956,281)
<INCOME-TAX> 1,010
<INCOME-CONTINUING> (21,957,291)
<DISCONTINUED> (474,652)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,431,943)
<EPS-BASIC> (8.20)
<EPS-DILUTED> (8.20)

</TABLE>