Signal Technology, Inc.
Exhibit Number 1030

APPLIED SIGNAL TECHNOLOGY, INC.
EXECUTIVE RETENTION AND SEVERANCE PLAN

Effective August 19, 2004

 

     Establishment and Purpose of Plan
      1. Establishment. The Applied Signal Technology, Inc. Executive Retention
         and Severance Plan (the “Plan”) is hereby established by the
         Compensation Committee of the Board of Directors of Applied Signal
         Technology, Inc., effective August 19, 2004 (the “Effective Date”).
      2. Purpose. The Company draws upon the knowledge, experience and advice of
         its Executive Officers in order to manage its business for the benefit
         of the Company’s stockholders. Due to the widespread awareness of the
         possibility of mergers, acquisitions and other strategic alliances in
         the Company’s industry, the topics of compensation and other employee
         benefits in the event of a Change in Control or other circumstances
         that may result in termination of employment are issues in competitive
         recruitment and retention efforts. The Committee recognizes that the
         possibility or pending occurrence of a Change in Control could lead to
         uncertainty regarding the consequences of such an event and could
         adversely affect the Company’s ability to attract, retain and motivate
         present and future Executive Officers. The Committee has therefore
         determined that it is in the best interests of the Company and its
         stockholders to provide for the continued dedication of its Executive
         Officers notwithstanding the possibility or occurrence of circumstances
         that may result in termination of employment by establishing this Plan
         to provide Executive Officers with enhanced financial security in the
         event of a termination of employment. The purpose of this Plan is to
         provide its Participants with specified compensation and benefits in
         the event of a termination of employment under circumstances specified
         herein.

     Definitions and Construction.
      1. Definitions. Whenever used in this Plan, the following terms shall have
         the meanings set forth below:
          a.  “Annual Bonus” means as applicable, either:
               i.  with respect to a Participant’s Involuntary Termination, the
                   greater of (i) an amount equal to the aggregate of all
                   bonuses earned by the Participant (whether or not actually
                   paid) under the terms of the programs, plans or agreements
                   providing for such bonuses for the fiscal year of the Company
                   immediately prior to such termination of employment (without
                   giving effect to any reduction in the Participant’s bonus
                   constituting Good Reason), or (ii) the aggregate of all
                   annual bonuses that would be earned by the Participant at the
                   targeted annual rate (assuming attainment of 100% of all
                   applicable performance goals) under the terms of the
                   programs, plans or agreements providing for such bonuses in
                   which the Participant was participating for the fiscal year
                   of the Participant’s Involuntary Termination (without giving
                   effect to any reduction in the Participant’s bonus
                   constituting Good Reason); or
               ii. with respect to a Participant’s Termination Upon a Change in
                   Control, the greater of (i) the aggregate of all bonuses
                   earned by the Participant (whether or not actually paid)
                   under the terms of the programs, plans or agreements
                   providing for such bonuses for the fiscal year of the Company
                   immediately preceding the fiscal year of the Change in
                   Control, (ii) the aggregate of all bonuses earned by the
                   Participant (whether or not actually paid) under the terms of
                   the programs, plans or agreements providing for such bonuses
                   for the fiscal year of the Company immediately preceding the
                   fiscal year of the Participant’s Termination Upon a Change in
                   Control, or (iii) the aggregate of all annual bonuses that
                   would be earned by the Participant at the targeted annual
                   rate (assuming attainment of 100% of all applicable
                   performance goals) under the terms of the programs, plans or
                   agreements providing for such bonuses in which the
                   Participant was participating for the fiscal year of the
                   Participant’s Termination Upon a Change in Control.
         
          b.  “Base Salary Rate” means, as applicable, either:
               i.  with respect to a Participant’s Involuntary Termination, the
                   Participant’s monthly base salary rate in effect immediately
                   prior to such termination of employment (without giving
                   effect to any reduction in the Participant’s base salary rate
                   constituting Good Reason); or
               ii. with respect to a Participant’s Termination Upon a Change in
                   Control, the greater of (i) the Participant’s monthly base
                   salary rate in effect immediately prior to such termination
                   of employment (without giving effect to any reduction in the
                   Participant’s base salary rate constituting Good Reason) or
                   (ii) the Participant’s monthly base salary rate in effect
                   immediately prior to the applicable Change in Control.
                   For this purpose, base salary does not include any bonuses,
                   commissions, fringe benefits, car allowances, other irregular
                   payments or any other compensation except base salary.
         
          c.  “Board” means the Board of Directors of the Company.
          d.  “Cause” means the occurrence of any of the following, as
              determined in good faith by a vote of not less than two-thirds of
              the entire membership of the Board at a meeting of the Board
              called and held in whole or in part for such purpose:
               i.   the Participant’s commission of any material act of fraud,
                    embezzlement, dishonesty, intentional falsification of any
                    employment or other Company Group records, or any criminal
                    act which impairs Participant’s ability to perform his or
                    her duties with the Company Group; or
               ii.  the Participant’s willful misconduct, breach of fiduciary
                    duty for personal profit or material failure to abide by the
                    Company’s code of conduct or other policies (including,
                    without limitation, policies relating to confidentiality and
                    reasonable workplace conduct); o
               iii. the Participant’s unauthorized use or disclosure of
                    confidential information or trade secrets of any member of
                    the Company Group; or
               iv.  the Participant’s conviction (including any plea of guilty
                    or nolo contendere) for a felony causing material harm to
                    the reputation and standing of any member of the Company
                    Group.
         
          e.  “Change in Control” means the occurrence of any of the following:
               i.   any “person” (as such term is used in Sections 13(d) and
                    14(d) of the Exchange Act), other than a trustee or other
                    fiduciary holding securities of the Company under an
                    employee benefit plan of the Company, becomes the
                    “beneficial owner” (as defined in Rule 13d‑3 promulgated
                    under the Exchange Act), directly or indirectly, of
                    securities of the Company representing more than fifty
                    percent (50%) of (i) the outstanding shares of common stock
                    of the Company or (ii) the total combined voting power of
                    the Company’s then‑outstanding securities entitled to vote
                    generally in the election of directors;
               ii.  the Company is party to a merger, consolidation or similar
                    corporate transaction, or series of related transactions,
                    which results in the holders of the voting securities of the
                    Company outstanding immediately prior to such transaction(s)
                    failing to retain immediately after such transaction(s)
                    direct or indirect beneficial ownership of more than fifty
                    percent (50%) of the total combined voting power of the
                    securities entitled to vote generally in the election of
                    directors of the Company or the surviving entity outstanding
                    immediately after such transaction(s);
               iii. the sale or disposition of all or substantially all of the
                    Company’s assets or consummation of any transaction, or
                    series of related transactions, having similar effect (other
                    than a sale or disposition to one or more subsidiaries of
                    the Company); or
               iv.  a change in the composition of the Board within any
                    consecutive two-year period as a result of which fewer than
                    a majority of the directors are Incumbent Directors;
                    provided, however, that a Change in Control shall be deemed
                    not to include a transaction described in subsections (1) or
                    (2) of this Section in which a majority of the members of
                    the board of directors of the continuing, surviving or
                    successor entity, or parent thereof, immediately after such
                    transaction is comprised of Incumbent Directors.
         
          f.  “Change in Control Period” means a period:
               i.  commencing on the first to occur of (i) the date of the first
                   public announcement of a definitive agreement that would
                   result in a Change in Control (even though still subject to
                   approval by the Company’s stockholders and other conditions
                   and contingencies) or (ii) the consummation of a Change in
                   Control, and
               ii. ending on the first to occur of (i) the first public
                   announcement by the Company of the termination of such
                   definitive agreement, provided that the Company does not,
                   within three (3) months thereafter, enter into a discussion
                   with the same party or parties that leads to any such
                   definitive agreement or (ii) the date occurring twelve (12)
                   months following the date of the consummation of such Change
                   in Control.
         
          g.  “Chief Executive Officer” means the individual who serves as the
              Company’s Chief Executive Officer as appointed by the Board,
              including the individual who, immediately prior to the
              consummation of a Change in Control, serves as the Company’s Chief
              Executive Officer as appointed by the Board.
          h.  “COBRA” means the group health plan continuation coverage
              provisions of the Consolidated Omnibus Budget Reconciliation Act
              of 1985 and any applicable regulations promulgated thereunder
          i.  “Code” means the Internal Revenue Code of 1986, as amended, or any
              successor thereto and any applicable regulations promulgated
              thereunder.
          j.  “Committee” means the Compensation Committee of the Board.
          k.  “Company” means Applied Signal Technology, Inc., a California
              corporation, and, following a Change in Control, a Successor that
              agrees to assume all of the rights and obligations of the Company
              under this Plan or a Successor which otherwise becomes bound by
              operation of law under this Plan.
          l.  “Company Group” means the group consisting of the Company and each
              present or future parent and subsidiary corporation or other
              business entity thereof.
          m.  “Exchange Act” means the Securities Exchange Act of 1934, as
              amended.
          n.  “Executive Officer” means an individual appointed by the Board as
              an executive officer of the Company subject to Section 16 of the
              Exchange Act and serving in such capacity both upon becoming a
              Participant and immediately prior to the first to occur of (1) a
              condition constituting Good Reason with respect to such
              individual, (2) such individual’s termination of employment with
              the Company Group or (3) the consummation of a Change in Control
          o.  “Good Reason” means:
               1. The occurrence during a Change in Control Period of any of the
                  following conditions without the Participant’s informed
                  written consent, which condition(s) remain(s) in effect twenty
                  (20) days after written notice to the Company from the
                  Participant of such condition(s):
                   a. a material, adverse change in the Participant’s position,
                      duties, substantive functional responsibilities or
                      reporting responsibilities, causing the Participant’s
                      position to be of materially lesser rank or responsibility
                      within the Company or an equivalent business unit of its
                      parent; or
                   b. a decrease in the Participant’s base salary rate or a
                      decrease in the Participant’s target bonus amount (subject
                      to applicable performance requirements with respect to the
                      actual amount of bonus compensation earned by the
                      Participant); or
                   c. any failure by the Company Group to (i) continue to
                      provide the Participant with the opportunity to
                      participate, on terms no less favorable than those in
                      effect for the benefit of any employee group which
                      customarily includes a person holding the employment
                      position or a comparable position with the Company Group
                      then held by the Participant, in any benefit or
                      compensation plans and programs, including, but not
                      limited to, the Company Group’s life, disability, health,
                      dental, medical, savings, profit sharing, stock purchase
                      and retirement plans, if any, in which the Participant was
                      participating immediately prior to such failure, or their
                      equivalent, or (ii) provide the Participant with all other
                      fringe benefits (or their equivalent) from time to time in
                      effect for the benefit of any employee group which
                      customarily includes a person holding the employment
                      position or a comparable position with the Company Group
                      then held by the Participant; or
                   d. the relocation of the Participant’s work place for the
                      Company Group to a location that increases the regular
                      commute distance between the Participant’s residence and
                      work place by more than thirty (30) miles (one-way), or,
                      following the consummation of a Change in Control, the
                      imposition of business travel requirements substantially
                      more demanding of the Participant than such travel
                      requirements existing immediately prior to the Change in
                      Control; or
                   e. following the consummation of a Change in Control, any
                      material breach of this Plan by the Company Group with
                      respect to the Participant.
              
               2. The occurrence, other than during a Change in Control Period,
                  of the following condition without the Participant’s informed
                  written consent, which condition remains in effect twenty
                  (20) days after written notice to the Company from the
                  Participant of such condition: a decrease in the Participant’s
                  base salary rate or a decrease in the Participant’s bonus
                  amount (subject to applicable performance requirements with
                  respect to the actual amount of bonus compensation earned by
                  the Participant), unless such decrease is equivalent in amount
                  and duration to decreases made concurrently for all other
                  employees of the Company Group with responsibilities,
                  organizational level and title comparable to those of the
                  Participant.
               3. The existence of Good Reason shall not be affected by the
                  Participant’s temporary incapacity due to physical or mental
                  illness not constituting a Permanent Disability. The
                  Participant’s continued employment for a period not exceeding
                  sixty (60) days following the occurrence of any condition
                  constituting Good Reason shall not constitute consent to, or a
                  waiver of rights with respect to, such condition. For the
                  purposes of any determination regarding the existence of Good
                  Reason, any claim by the Participant that Good Reason exists
                  shall be presumed to be correct unless the Company establishes
                  to the Board that Good Reason does not exist, and the Board,
                  acting in good faith, affirms such determination by a vote of
                  not less than two-thirds of its entire membership (excluding
                  the Participant if the Participant is a member of the Board).
         
          p.  “Incumbent Director” means a director who either (1) is a member
              of the Board as of the Effective Date, or (2) is elected, or
              nominated for election, to the Board with the affirmative votes of
              at least a majority of the Incumbent Directors at the time of such
              election or nomination, but (3) who was not elected or nominated
              in connection with an actual or threatened proxy contest relating
              to the election of directors of the Company.
          q.  “Involuntary Termination” means the occurrence of either of the
              following events other than during a Change in Control Period:
               i.  termination by the Company Group of the Participant’s
                   employment for any reason other than Cause; or
               ii. the Participant’s resignation for Good Reason (as described
                   above) from employment with the Company Group, provided that
                   such resignation occurs within sixty (60) days following the
                   occurrence of the condition constituting Good Reason;
                   provided, however, that Involuntary Termination shall not
                   include any termination of the Participant’s employment which
                   is (i) for Cause, (ii) a result of the Participant’s death or
                   Permanent Disability, or (iii) a result of the Participant’s
                   voluntary termination of employment other than for Good
                   Reason.
         
          r.  “Option” means any option to purchase shares of the capital stock
              of the Company or of any other member of the Company Group granted
              to a Participant by the Company or any other Company Group member
              prior to a Change in Control or termination of employment,
              including any such option which is assumed by, or for which a
              replacement option is substituted by, the Successor or any other
              member of the Company Group in connection with the Change in
              Control.
          s.  “Participant” means each Executive Officer designated by the
              Committee to participate in the Plan, provided in either case that
              such individual has executed a Participation Agreement
          t.  “Participation Agreement” means an Agreement to Participate in the
              Applied Signal Technology, Inc. Executive Retention and Severance
              Plan in the form attached hereto as Exhibit A or in such other
              form as the Committee may approve from time to time; provided,
              however, that, after a Participation Agreement has been entered
              into between a Participant and the Company, it may be modified
              only by a supplemental written agreement executed by both the
              Participant and the Company. The terms of such forms of
              Participation Agreement need not be identical with respect to each
              Participant. For example, a Participation Agreement may limit the
              duration of a Participant’s participation in the Plan or may
              modify the definition of “Change in Control” with respect to a
              Participant.
          u.  “Permanent Disability” means a Participant’s incapacity due to
              bodily injury or disease which (1) prevents the Participant from
              engaging in the full-time performance of the Participant’s duties
              for a period of six (6) consecutive months and (2) will, in the
              opinion of a qualified physician, be permanent and continuous
              during the remainder of the Participant’s life.
          v.  “Release” means a general release of all known and unknown claims
              against the Company and its affiliates and their stockholders,
              directors, officers, employees, agents, successors and assigns
              substantially in the form attached hereto as Exhibit B (“General
              Release of Claims [Age 40 and over]”) or Exhibit C (“General
              Release of Claims [Under age 40]”), whichever is applicable, with
              any modifications thereto determined by legal counsel to the
              Company to be necessary or advisable to comply with applicable law
              or to accomplish the intent of Section 8 (Exclusive Remedy)
              hereof.
          w.  “Restrictive Covenants Agreement” means an agreement between a
              Participant and the Company substantially in the form attached
              hereto as Exhibit D with any modifications thereto determined by
              legal counsel to the Company to be necessary or advisable to
              comply with applicable law.
          x.  “Restricted Stock” means any compensatory award of shares of the
              capital stock of the Company or of any other member of the Company
              Group granted to a Participant by the Company or any other Company
              Group member prior to a Change in Control or termination of
              employment or acquired upon the exercise of an Option granted
              prior to a Change in Control or termination of employment,
              including any shares issued in exchange for any such shares by a
              Successor or any other member of the Company Group in connection
              with a Change in Control.
          y.  “Restricted Stock Units” means any compensatory award of rights to
              receive shares of the capital stock or cash in an amount measured
              by the value of shares of the capital stock of the Company or of
              any other member of the Company Group granted to a Participant by
              the Company or any other Company Group member prior to a Change in
              Control or termination of employment or acquired upon the exercise
              of an Option granted prior to a Change in Control or termination
              of employment, including any such rights issued in exchange for
              any such rights by a Successor or any other member of the Company
              Group in connection with a Change in Control.
          z.  “Severance Benefit Period” means (1) with respect to a Participant
              who is the Chief Executive Officer, a period of twenty-four
              months, and (2) with respect to a Participant who is an Executive
              Officer, a period of twelve months.
          aa. “Successor” means any successor in interest to substantially all
              of the business and/or assets of the Company.
          ab. “Termination in the Absence of a Change in Control” means any
              termination of the Participant’s employment with the Company Group
              which is not a Termination Upon a Change in Control.
          ac. “Termination Upon a Change in Control” means the occurrence of any
              of the following events:
               i.  termination by the Company Group of the Participant’s
                   employment for any reason other than Cause during a Change in
                   Control Period; or
               ii. the Participant’s resignation for Good Reason from employment
                   with the Company Group during a Change in Control Period,
                   provided that such resignation occurs within sixty (60) days
                   following the occurrence of the condition constituting Good
                   Reason;
                   provided, however, that Termination Upon a Change in Control
                   shall not include any termination of the Participant’s
                   employment which is (i) for Cause, (ii) a result of the
                   Participant’s death or Permanent Disability, or (iii)  a
                   result of the Participant’s voluntary termination of
                   employment other than for Good Reason.
     
      2. Construction. Captions and titles contained herein are for convenience
         only and shall not affect the meaning or interpretation of any
         provision of the Plan. Except when otherwise indicated by the context,
         the singular shall include the plural and the plural shall include the
         singular. Use of the term “or” is not intended to be exclusive, unless
         the context clearly requires otherwise.

 1.  Eligibility and Participation
     The Committee shall designate those Executive Officers who shall be
     eligible to become a Participant in the Plan. To become a Participant, an
     Executive Officer must execute a Participation Agreement.
 2.  Termination in the Absence of a Change in Control.
     In the event of a Participant’s Termination in the Absence of a Change in
     Control, the Participant shall be entitled to receive the applicable
     compensation and benefits described in this Section 4
     1. Involuntary Termination. If the Participant’s Termination in the Absence
        of a Change in Control constitutes an Involuntary Termination, the
        Participant shall be entitled to receive:
         a. Accrued Obligations.
             i.   all salary, commissions and accrued but unused vacation earned
                  through the date of the Participant’s termination of
                  employment;
             ii.  reimbursement within ten (10) business days of submission of
                  proper expense reports of all expenses reasonably and
                  necessarily incurred by the Participant in connection with the
                  business of the Company Group prior to his or her termination
                  of employment; and
             iii. the benefits, if any, under any Company Group retirement plan,
                  nonqualified deferred compensation plan, Option or other
                  stock-based compensation plan or agreement, health benefits
                  plan or other Company Group benefit plan to which the
                  Participant may be entitled pursuant to the terms of such
                  plans or agreements.
        
         b. Severance Benefits. Provided that the Participant both (i) executes
            and does not revoke the Release applicable to such Participant at or
            following the time of the Participant’s Involuntary Termination and
            (ii) executes the Restrictive Covenants Agreement applicable to such
            Participant, the Participant shall be entitled to receive the
            following severance payments and benefits:
            1. Cash Severance Payments. The Participant shall be entitled to
               receive an amount equal to the Participant’s Base Salary Rate
               multiplied by the number of months in the Severance Benefit
               Period applicable to the Participant. In addition, the
               Participant shall be entitled to receive an amount equal to the
               Participant’s Annual Bonus for one year. Such amounts shall be
               paid collectively and apportioned and paid (less applicable tax
               withholding) in approximately equal installments commencing on
               the first regular payday of the Company following the last to
               occur of (i) the Participant’s termination of employment, or
               (ii) the last day on which the Participant may revoke the Release
               in accordance with its terms or (iii) the Participant’s execution
               of the Restrictive Covenants Agreement and continuing on each
               successive regular payday during the remainder of the Severance
               Benefit Period applicable to the Participant; provided, however,
               that should the Participant elect to terminate the Restrictive
               Covenants Agreement at any time, the Participant shall lose all
               rights to further severance payments hereunder, but shall have no
               obligation to repay to the Company any severance payments paid to
               Participant as of the date of termination of the Restrictive
               Covenants Agreement.
            2. Health Benefits. For the period commencing immediately following
               the Participant’s termination of employment and continuing for
               the duration of the Severance Benefit Period applicable to the
               Participant, the Company shall arrange to provide the Participant
               and his or her dependents with health benefits (including medical
               and dental) substantially similar to those provided to the
               Participant and his or her dependents immediately prior to the
               date of such termination of employment. Such benefits shall be
               provided to the Participant at the same premium cost to the
               Participant and at the same coverage level as in effect as of the
               Participant’s termination of employment; provided, however, that
               the Participant shall be subject to any change in the premium
               cost and/or level of coverage applicable generally to all
               employees holding the position or comparable position with the
               Company Group which the Participant held immediately prior to
               termination of employment. The Company may satisfy its obligation
               to provide a continuation of health benefits by paying that
               portion of the Participant’s premiums required under COBRA that
               exceed the amount of premiums that the Participant would have
               been required to pay for continuing coverage had he or she
               continued in employment. If the Company is not reasonably able to
               continue such coverage under the Company’s health benefit plans,
               the Company shall provide substantially equivalent coverage under
               other sources or will reimburse (without a tax gross-up) the
               Participant for premiums (in excess of the Participant’s premium
               cost described above) incurred by the Participant to obtain his
               or her own such coverage. If the Participant and/or the
               Participant’s dependents become eligible to receive such coverage
               under another employer’s health benefit plans during the
               applicable Severance Benefit Period, the Participant shall report
               such eligibility to the Company, and the Company’s obligations
               under this subsection shall be secondary to the coverage provided
               by such other employer’s plans. For the balance of any period in
               excess of the applicable Severance Benefit Period during which
               the Participant is entitled to continuation coverage under COBRA,
               the Participant shall be entitled to maintain coverage for
               himself or herself and the Participant’s eligible dependents at
               the Participant’s own expense.
         c. Effect of Breach of Restrictive Covenants Agreement. If the Board,
            acting in good faith, determines by a vote of not less than
            two-thirds of its entire membership, that any action or failure to
            act by a Participant constitutes a material breach of the
            Restrictive Covenants Agreement executed by such Participant, the
            Company may, in its sole discretion, terminate any further provision
            of severance payments and benefits under Section 4.1(b) and require
            the Participant to promptly repay to the Company any severance
            payments or benefits under Section 4.1(b) provided to the
            Participant following the date of such material breach; provided,
            however, that should the Participant elect to terminate the
            Restrictive Covenants Agreement at any time, the Participant shall
            lose all rights to further severance payments hereunder, but shall
            have no obligation to repay to the Company any severance payments
            paid to Participant as of the date of termination of the Restrictive
            Covenants Agreement. The Company shall be entitled, at its sole
            discretion, to set off any amounts that the Participant is required
            to repay to the Company pursuant to this Section 4.1(c) against any
            amount owed to the Participant by the Company, including any amount
            owed to the Participant pursuant to Section 4.1(a).
     
     2. Other Termination. If the Participant’s Termination in the Absence of a
        Change in Control results from any reason other than Involuntary
        Termination, the Participant shall be entitled to receive:
         a. all salary, commissions and accrued but unused vacation earned
            through the date of the Participant’s termination of employment;
         b. bonuses earned prior to the date of the Participant’s termination of
            employment; provided that, for bonuses that are based on achievement
            of periodic financial or operating targets, no bonus or partial
            bonus shall be earned for the applicable bonus period in which the
            termination of employment occurs;
         c. reimbursement within ten (10) business days of submission of proper
            expense reports of all expenses reasonably and necessarily incurred
            by the Participant in connection with the business of the Company
            Group prior to his or her termination of employment; and
         d. the benefits, if any, under any Company Group retirement plan,
            nonqualified deferred compensation plan, Option or other stock-based
            compensation plan or agreement, health benefits plan or other
            Company Group benefit plan to which the Participant may be entitled
            pursuant to the terms of such plans or agreements.

 3.  Treatment of Equity Awards Upon a Change in Control
     1. Options. Notwithstanding any provision to the contrary contained in any
        plan or agreement evidencing an Option held by a Participant, in the
        event of a Change in Control in which the surviving, continuing,
        successor, or purchasing corporation or other business entity or parent
        thereof, as the case may be (the “Acquiror”), does not assume the
        Company’s rights and obligations under the then-outstanding Options held
        by the Participant or substitute for such Options substantially
        equivalent options for the Acquiror’s stock, then the vesting and
        exercisability of each such Option shall be accelerated in full
        effective as of the date ten (10) days prior to but conditioned upon the
        consummation of the Change in Control, provided that, except as
        otherwise set forth in Section 5 below, the Participant remains an
        employee or other service provider with the Company Group immediately
        prior to the Change in Control.
     2. Other Equity Awards. Except as set forth in Section 5.1 above, the
        treatment of stock-based compensation upon the consummation of a Change
        in Control shall be determined in accordance with the terms of the plans
        or agreements providing for such awards.
 4.  Termination Upon a Change in Control
     In the event of a Participant’s Termination Upon a Change in Control, the
     Participant shall be entitled to receive the compensation and benefits
     described in this Section 6, provided that if the date of the Participant’s
     termination of employment occurs prior to the consummation of the
     applicable Change in Control, then (i) the Participant’s termination of
     employment shall be treated initially as an Involuntary Termination, and
     the Participant shall be entitled to receive the compensation and benefits
     determined in accordance with Section 4.1, subject to satisfaction of the
     conditions set forth in such Section; and (ii) upon the consummation of
     such Change in Control, if at all, the Participant shall cease to receive
     compensation and benefits determined in accordance with Section 4 and shall
     instead be entitled to receive the compensation and benefits described in
     this Section 6 (with the date of the consummation of the Change of Control
     being treated as the date of termination of employment for the purpose of
     determining the time at which payments due within a ten (10) business day
     period must be made), against which shall be credited the compensation and
     benefits previously provided in accordance with Section 4.
     1. Accrued Obligations. The Participant shall be entitled to receive:
         a. all salary, commissions and accrued but unused vacation earned
            through the date of the Participant’s termination of employment;
         b. reimbursement within ten (10) business days of submission of proper
            expense reports of all expenses reasonably and necessarily incurred
            by the Participant in connection with the business of the Company
            Group prior to his or her termination of employment; and
         c. the benefits, if any, under any Company Group retirement plan,
            nonqualified deferred compensation plan, stock-based compensation
            plan or agreement (other than any such plan or agreement pertaining
            to Options, Restricted Stock or Restricted Stock Units, or other
            stock-based compensation whose treatment is prescribed by Section 5
            above), health benefits plan or other Company Group benefit plan to
            which the Participant may be entitled pursuant to the terms of such
            plans or agreements.
     
     2. Severance Benefits. Provided that the Participant both (i) executes and
        does not revoke the Release applicable to such Participant at or
        following the time of the Participant’s Termination Upon a Change in
        Control and (ii) executes the Restrictive Covenants Agreement applicable
        to such Participant, the Participant shall be entitled to receive the
        following severance payments and benefits:
         a. Cash Severance Payment. The Participant shall be entitled to receive
            an amount equal to the Participant’s Base Salary Rate multiplied by
            the number of months in the Severance Benefit Period applicable to
            the Participant. In addition, the Participant shall be entitled to
            receive an amount equal to the Participant’s Annual Bonus for one
            year. Such amount shall be apportioned and paid (less applicable tax
            withholding) in approximately equal installments commencing on the
            first regular payday of the Company following the last to occur of
            (i) the Participant’s termination of employment, or (ii) the last
            day on which the Participant may revoke the Release in accordance
            with its terms or (iii) the Participant’s execution of the
            Restrictive Covenants Agreement and continuing on each successive
            regular payday during the remainder of the Severance Benefit Period
            applicable to the Participant; provided, however, that should the
            Participant elect to terminate the Restrictive Covenants Agreement
            at any time, the Participant shall lose all rights to further
            severance payments hereunder, but shall have no obligation to repay
            to the Company any severance payments paid to Participant as of the
            date of termination of the Restrictive Covenants Agreement
         b. Health, Life Insurance and Long-Term Disability Benefits. For the
            period commencing immediately following the Participant’s
            termination of employment and continuing for the duration of the
            Severance Benefit Period applicable to the Participant, the Company
            shall arrange to provide the Participant and his or her dependents
            with health (including medical and dental), life insurance and
            long-term disability benefits substantially similar to those
            provided to the Participant and his or her dependents immediately
            prior to the date of such termination of employment (without giving
            effect to any reduction in such benefits constituting Good Reason).
            Such benefits shall be provided to the Participant at the same
            premium cost to the Participant and at the same coverage level as in
            effect as of the Participant’s termination of employment (without
            giving effect to any reduction in such benefits constituting Good
            Reason); provided, however, that the Participant shall be subject to
            any change in the premium cost and/or level of coverage applicable
            generally to all employees holding the position or comparable
            position with the Company which the Participant held immediately
            prior to the Change in Control. The Company may satisfy its
            obligation to provide a continuation of health benefits by paying
            that portion of the Participant’s premiums required under COBRA that
            exceed the amount of premiums that the Participant would have been
            required to pay for continuing coverage had he or she continued in
            employment. If the Company is not reasonably able to continue
            health, life insurance and/or long-term disability benefits coverage
            under the Company’s benefit plans, the Company shall provide
            substantially equivalent coverage under other sources or will
            reimburse (without a tax gross-up) the Participant for premiums (in
            excess of the Participant’s premium cost described above) incurred
            by the Participant to obtain his or her own such coverage. If the
            Participant and/or the Participant’s dependents become eligible to
            receive any such coverage under another employer’s benefit plans
            during the applicable Severance Benefit Period, the Participant
            shall report such eligibility to the Company, and the Company’s
            obligations under this subsection shall be secondary to the coverage
            provided by such other employer’s plans. For the balance of any
            period in excess of the applicable Severance Benefit Period during
            which the Participant is entitled to continuation coverage under
            COBRA, the Participant shall be entitled to maintain coverage for
            himself or herself and the Participant’s eligible dependents at the
            Participant’s own expense.
     
     3. Effect of Breach of Restrictive Covenants Agreement. If the Board,
        acting in good faith, determines by a vote of not less than two-thirds
        of its entire membership, that any action or failure to act by a
        Participant constitutes a material breach of the Restrictive Covenants
        Agreement executed by such Participant, the Company may, in its sole
        discretion, terminate any further provision of severance payments and
        benefits under Section 6.2 and require the Participant to promptly repay
        to the Company any severance payments or benefits under Section 6.2
        provided to the Participant following the date of such material breach;
        provided, however, that should the Participant elect to terminate the
        Restrictive Covenants Agreement at any time, the Participant shall lose
        all rights to further severance payments hereunder, but shall have no
        obligation to repay to the Company any severance payments paid to
        Participant as of the date of termination of the Restrictive Covenants
        Agreement. The Company shall be entitled, at its sole discretion, to set
        off any amounts that the Participant is required to repay to the Company
        pursuant to this Section 6.3 against any amount owed to the Participant
        by the Company, including any amount owed to the Participant pursuant to
        Section 6.1.
     4. Indemnification; Insurance.
         a. In addition to any rights a Participant may have under any
            indemnification agreement previously entered into between the
            Company and such Participant (a “Prior Indemnity Agreement”), from
            and after the date of the Participant’s Termination Upon a Change in
            Control or Termination in the Absence of a Change in Control, the
            Company shall indemnify and hold harmless the Participant against
            any costs or expenses (including attorneys’ fees), judgments, fines,
            losses, claims, damages or liabilities incurred in connection with
            any claim, action, suit, proceeding or investigation, whether civil,
            criminal, administrative or investigative, by reason of the fact
            that the Participant is or was a director, officer, employee or
            agent of the Company Group, or is or was serving at the request of
            the Company Group as a director, officer, employee or agent of
            another corporation, partnership, joint venture, trust or other
            enterprise, whether asserted or claimed prior to, at or after the
            date of the Participant’s termination of employment, to the fullest
            extent permitted under applicable law, and the Company shall also
            advance fees and expenses (including attorneys’ fees) as incurred by
            the Participant to the fullest extent permitted under applicable
            law. In the event of a conflict between the provisions of a Prior
            Indemnity Agreement and the provisions of this Plan, the Participant
            may elect which provisions shall govern.
         b. For a period of six (6) years from and after the date of the
            Participant’s Termination Upon a Change in Control, the Company
            shall use its best efforts to maintain a policy of directors’ and
            officers’ liability insurance for the benefit of such Participant
            which provides him or her with coverage no less favorable than that
            provided for the Company’s continuing officers and directors.

 5.  Federal Excise Tax Under Section 4999 of the Code
     1. Excess Parachute Payment. In the event that any payment or benefit
        received or to be received by the Participant pursuant to this Plan or
        otherwise (collectively, the “Payments”) would subject the Participant
        to any excise tax pursuant to Section 4999 of the Code (the “Excise
        Tax”) due to the characterization of such Payments as an excess
        parachute payment under Section 280G of the Code, then, notwithstanding
        the other provisions of this Plan, the amount of such Payments will not
        exceed the amount which produces the greatest after-tax benefit to the
        Participant.
     2. Determination by Accountants. Upon the occurrence of any event (the
        “Event”) that would give rise to any Payments pursuant to this Plan, the
        Company shall promptly request a determination in writing by independent
        public accountants (the “Accountants”) selected by the Company and
        reasonably acceptable to the Participant of the amount and type of such
        Payments which would produce the greatest after-tax benefit to the
        Participant. For the purposes of such determination, the Accountants may
        rely on reasonable, good faith interpretations concerning the
        application of Sections 280G and 4999 of the Code. The Company and the
        Participant shall furnish to the Accountants such information and
        documents as the Accountants may reasonably request in order to make
        their required determination. The Company shall bear all fees and
        expenses charged by the Accountants in connection with their services
        contemplated by this Section.
 6.  Conflict in Benefits; Noncumulation of Benefits
     1. Effect of Plan. The terms of this Plan, when accepted by a Participant
        pursuant to an executed Participation Agreement, shall supersede all
        prior arrangements, whether written or oral, and understandings
        regarding the subject matter of this Plan and shall be the exclusive
        agreement for the determination of any payments and benefits due to the
        Participant upon the events described in Sections 4, 5, and 6.
     2. Noncumulation of Benefits. Except as expressly provided in a written
        agreement between a Participant and the Company entered into after the
        date of such Participant’s Participation Agreement and which expressly
        disclaims this Section 8.2 and is approved by the Board or the
        Committee, the total amount of payments and benefits that may be
        received by the Participant as a result of the events described in
        Sections 4, 5, and 6 pursuant to (a) the Plan, (b) any agreement between
        the Participant and the Company or (c) any other plan, practice or
        statutory obligation of the Company, shall not exceed the amount of
        payments and benefits provided by this Plan upon such events (plus any
        payments and benefits provided pursuant to a Prior Indemnity Agreement,
        as described in Section 6.3(a)), and the aggregate amounts payable under
        this Plan shall be reduced to the extent of any excess (but not below
        zero).
 7.  Exclusive Remedy
     The payments and benefits provided by Section 4 and Section 6 (plus any
     payments and benefits provided pursuant to a Prior Indemnity Agreement, as
     described in Section 6.3(a)), if applicable, shall constitute the
     Participant’s sole and exclusive remedy for any alleged injury or other
     damages arising out of the cessation of the employment relationship between
     the Participant and the Company in the event of the Participant’s
     Termination in the Absence of a Change in Control or the Participant’s
     Termination Upon a Change in Control, respectively. The Participant shall
     be entitled to no other compensation, benefits, or other payments from the
     Company as a result of (a) the Participant’s Termination in the Absence of
     a Change in Control with respect to which the payments and benefits
     described in Section 4, if applicable, have been provided to the
     Participant, or (b) the Participant’s Termination Upon a Change in Control
     with respect to which the payments and benefits described in Section 6
     (plus any payments and benefits provided pursuant to a Prior Indemnity
     Agreement), if applicable, have been provided to the Participant, except as
     expressly set forth in this Plan or, subject to the provisions of
     Section 8.2, in a duly executed employment agreement between Company and
     the Participant.
 8.  Proprietary and Confidential Information
     The Participant agrees to continue to abide by the terms and conditions of
     the confidentiality and/or proprietary rights agreement between the
     Participant and the Company or any other member of the Company Group.
 9.  No Contract of Employment
     Neither the establishment of the Plan, nor any amendment thereto, nor the
     payment or provision of any benefits shall be construed as giving any
     person the right to be retained by the Company, a Successor or any other
     member of the Company Group. Except as otherwise established in an
     employment agreement between the Company and a Participant, the employment
     relationship between the Participant and the Company is an “at-will”
     relationship. Accordingly, either the Participant or the Company may
     terminate the relationship at any time, with or without cause, and with or
     without notice except as otherwise provided by Section 15. In addition,
     nothing in this Plan shall in any manner obligate any Successor or other
     member of the Company Group to offer employment to any Participant or to
     continue the employment of any Participant which it does hire for any
     specific duration of time.
 10. Claims for Benefits
     1. ERISA Plan. This Plan is intended to be (a) an employee welfare plan as
        defined in Section 3(1) of Employee Retirement Income Security Act of
        1974 (“ERISA”) and (b) a “top-hat” plan maintained for the benefit of a
        select group of management or highly compensated employees of the
        Company Group.
     2. Application for Benefits. All applications for payments and/or benefits
        under the Plan (“Benefits”) shall be submitted to the Company’s
        Director, Human Resources (the “Claims Administrator”), with a copy to
        the Company’s Chief Financial Officer. Applications for Benefits must be
        in writing on forms acceptable to the Claims Administrator and must be
        signed by the Participant or beneficiary. The Claims Administrator
        reserves the right to require the Participant or beneficiary to furnish
        such other proof of the Participant’s expenses, including without
        limitation, receipts, canceled checks, bills, and invoices as may be
        required by the Claims Administrator.
     3. Appeal of Denial of Claim.
        a. If a claimant’s claim for Benefits is denied, the Claims
           Administrator shall provide notice to the claimant in writing of the
           denial within ninety (90) days after its submission. The notice shall
           be written in a manner calculated to be understood by the claimant
           and shall include:
            i.   The specific reason or reasons for the denial;
            ii.  Specific references to the Plan provisions on which the denial
                 is based;
            iii. A description of any additional material or information
                 necessary for the applicant to perfect the claim and an
                 explanation of why such material or information is necessary;
                 and
            iv.  An explanation of the Plan’s claims review procedures and a
                 statement of claimant’s right to bring a civil action under
                 ERISA Section 502(a) following an adverse benefit
                 determination.
        
        b. If special circumstances require an extension of time for processing
           the initial claim, a written notice of the extension and the reason
           therefor shall be furnished to the claimant before the end of the
           initial ninety (90) day period. In no event shall such extension
           exceed ninety (90) days.
        c. If a claim for Benefits is denied, the claimant, at the claimant’s
           sole expense, may appeal the denial to the Committee (the “Appeals
           Administrator”) within sixty (60) days of the receipt of written
           notice of the denial. In pursuing such appeal the applicant or his
           duly authorized representative:
            i.   may request in writing that the Appeals Administrator review
                 the denial;
            ii.  may review pertinent documents; and
            iii. may submit issues and comments in writing.
        
        d. The decision on review shall be made within sixty (60) days of
           receipt of the request for review, unless special circumstances
           require an extension of time for processing, in which case a decision
           shall be rendered as soon as possible, but not later than one hundred
           twenty (120) days after receipt of the request for review. If such an
           extension of time is required, written notice of the extension shall
           be furnished to the claimant before the end of the original sixty
           (60) day period. The decision on review shall be made in writing,
           shall be written in a manner calculated to be understood by the
           claimant, and, if the decision on review is a denial of the claim for
           Benefits, shall include:
            i.   The specific reason or reasons for the denial;
            ii.  Specific references to the Plan provisions on which the denial
                 is based;
            iii. A description of any additional material or information
                 necessary for the applicant to perfect the claim and an
                 explanation of why such material or information is necessary;
                 and
            iv.  An explanation of the Plan’s claims review procedures and a
                 statement of claimant’s right to bring a civil action under
                 ERISA Section  502(a) following an adverse benefit
                 determination.

 11. Dispute Resolution
     In the event of any dispute or claim relating to or arising out of this
     Plan that is not resolved in accordance with procedure described in
     Section 12, the Company and the Participant, each by executing a
     Participation Agreement, agree that all such disputes or claims shall be
     resolved by means of binding arbitration in Santa Clara County, California
     before a sole arbitrator, in accordance with the laws of the State of
     California for agreements made in that State or as otherwise required by
     ERISA. Any arbitration shall be administered by JAMS pursuant to its
     Comprehensive Arbitration Rules and Procedures. Judgment on the award may
     be entered in any court having jurisdiction. The prevailing party shall be
     entitled to recover from the losing party its attorneys’ fees and costs
     incurred in any action brought to enforce any right arising out of this
     Plan.
 12. Successors and Assigns
     1. Successors of the Company. The Company shall require any successor or
        assign (whether direct or indirect, by purchase, merger, consolidation
        or otherwise) to all or substantially all of the business and/or assets
        of the Company, expressly, absolutely and unconditionally to assume and
        agree to perform this Plan in the same manner and to the same extent
        that the Company would be required to perform it if no such succession
        or assignment had taken place.
     2. Acknowledgment by Company. If, after a Change in Control, the Company
        fails to reasonably confirm that it has performed the obligation
        described in Section 14.1 within twenty (20) days after written notice
        from the Participant, such failure shall be a material breach of this
        Plan and shall entitle the Participant to resign for Good Reason and to
        receive the benefits provided under this Plan in the event of
        Termination Upon a Change in Control.
     3. Heirs and Representatives of Participant. This Plan shall inure to the
        benefit of and be enforceable by the Participant’s personal or legal
        representatives, executors, administrators, successors, heirs,
        distributees, devises, legatees or other beneficiaries. If the
        Participant should die while any amount would still be payable to the
        Participant hereunder (other than amounts which, by their terms,
        terminate upon the death of the Participant) if the Participant had
        continued to live, then all such amounts, unless otherwise provided
        herein, shall be paid in accordance with the terms of this Plan to the
        executors, personal representatives or administrators of the
        Participant’s estate.
 13. Notices
     1. General. For purposes of this Plan, notices and all other communications
        provided for herein shall be in writing and shall be deemed to have been
        duly given when personally delivered or when mailed by United States
        certified mail, return receipt requested, or by overnight courier,
        postage prepaid, as follows
        1. if to the Company:
           Applied Signal Technology, Inc.
           400 West California Avenue
           Sunnyvale, CA 94086Attention: Chief Executive Officer
        2. if to the Participant, at the home address which the Participant most
           recently communicated to the Company in writing.
           Either party may provide the other with notices of change of address,
           which shall be effective upon receipt.
     2. Notice of Termination. Any termination by the Company of the
        Participant’s employment or any resignation of employment by the
        Participant shall be communicated by a notice of termination or
        resignation to the other party hereto given in accordance with
        Section 15.1. Such notice shall indicate the specific termination
        provision in this Plan relied upon, shall set forth in reasonable detail
        the facts and circumstances claimed to provide a basis for termination
        under the provision so indicated, and shall specify the termination
        date.
 14. Termination and Amendment of Plan
     The Plan and/or any Participation Agreement executed by a Participant may
     not be terminated with respect to such Participant without the written
     consent of the Participant and the approval of the Board or the Committee.
     The Plan and/or any Participation Agreement executed by a Participant may
     be modified, amended or superseded with respect to such Participant only by
     a supplemental written agreement between the Participant and the Company
     approved by the Board or the Committee.
 15. Miscellaneous Provisions
     1.  Unfunded Obligation. Any amounts payable to Participants pursuant to
         the Plan are unfunded obligations. The Company shall not be required to
         segregate any monies from its general funds, or to create any trusts,
         or establish any special accounts with respect to such obligations. The
         Company shall retain at all times beneficial ownership of any
         investments, including trust investments, which the Company may make to
         fulfill its payment obligations hereunder. Any investments or the
         creation or maintenance of any trust or any Participant account shall
         not create or constitute a trust or fiduciary relationship between the
         Board or the Company and a Participant, or otherwise create any vested
         or beneficial interest in any Participant or the Participant’s
         creditors in any assets of the Company.
     2.  No Duty to Mitigate; Obligations of Company. A Participant shall not be
         required to mitigate the amount of any payment or benefit contemplated
         by this Plan by seeking employment with a new employer or otherwise,
         nor shall any such payment or benefit (except for benefits to the
         extent described in Section 4.1(b)(2) or Section 6.2(b)) be reduced by
         any compensation or benefits that the Participant may receive from
         employment by another employer. Except as otherwise provided by this
         Plan, the obligations of the Company to make payments to the
         Participant and to make the arrangements provided for herein are
         absolute and unconditional and may not be reduced by any circumstances,
         including without limitation any set-off, counterclaim, recoupment,
         defense or other right which the Company may have against the
         Participant or any third party at any time.
     3.  No Representations. By executing a Participation Agreement, the
         Participant acknowledges that in becoming a Participant in the Plan,
         the Participant is not relying and has not relied on any promise,
         representation or statement made by or on behalf of the Company which
         is not set forth in this Plan.
     4.  Waiver. No waiver by the Participant or the Company of any breach of,
         or of any lack of compliance with, any condition or provision of this
         Plan by the other party shall be considered a waiver of any other
         condition or provision or of the same condition or provision at another
         time.
     5.  Choice of Law. The validity, interpretation, construction and
         performance of this Plan shall be governed by the substantive laws of
         the State of California, without regard to its conflict of law
         provisions.
     6.  Validity. The invalidity or unenforceability of any provision of this
         Plan shall not affect the validity or enforceability of any other
         provision of this Plan, which shall remain in full force and effect.
     7.  Benefits Not Assignable. Except as otherwise provided herein or by law,
         no right or interest of any Participant under the Plan shall be
         assignable or transferable, in whole or in part, either directly or by
         operation of law or otherwise, including, without limitation, by
         execution, levy, garnishment, attachment, pledge or in any other
         manner, and no attempted transfer or assignment thereof shall be
         effective. No right or interest of any Participant under the Plan shall
         be liable for, or subject to, any obligation or liability of such
         Participant.
     8.  Tax Withholding. All payments made pursuant to this Plan will be
         subject to withholding of applicable income and employment taxes.
     9.  Consultation with Legal and Financial Advisors. By executing a
         Participation Agreement, the Participant acknowledges that this Plan
         confers significant legal rights, and may also involve the waiver of
         rights under other agreements; that the Company has encouraged the
         Participant to consult with the Participant’s personal legal and
         financial advisors; and that the Participant has had adequate time to
         consult with the Participant’s advisors before executing the
         Participation Agreement.
     10. Further Assurances. From time to time, at the Company’s request and
         without further consideration, the Participant shall execute and
         deliver such additional documents and take all such further action as
         reasonably requested by the Company to be necessary or desirable to
         make effective, in the most expeditious manner possible, the terms of
         the Plan and the Participant’s Participation Agreement, Release and
         Restrictive Covenants Agreement, and to provide adequate assurance of
         the Participant’s due performance thereunder.
 16. Agreement
     By executing a Participation Agreement, the Participant acknowledges that
     the Participant has received a copy of this Plan and has read, understands
     and is familiar with the terms and provisions of this Plan. This Plan shall
     constitute an agreement between the Company and the Participant executing a
     Participation Agreement.
     
     
     
     IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that
     the foregoing Plan was duly adopted by the Committee on August 19, 2004.
     
     ___________________________________________________

EXHIBIT A

FORM OF
AGREEMENT TO PARTICIPATE IN THE
APPLIED SIGNAL TECHNOLOGY, INC.
EXECUTIVE RETENTION AND SEVERANCE PLAN

AGREEMENT TO PARTICIPATE IN THE
APPLIED SIGNAL TECHNOLOGY, INC.
EXECUTIVE RETENTION AND SEVERANCE PLAN

Adopted August 19, 2004

In consideration of the benefits provided by the Applied Signal Technology, Inc.
Executive Retention and Severance Plan (the “Plan”), the undersigned employee of
Applied Signal Technology, Inc. (the “Company”) and the Company agree that, as
of the date written below, the undersigned shall become a Participant in the
Plan and shall be fully bound by and subject to all of its provisions. All
references to a “Participant” in the Plan shall be deemed to refer to the
undersigned.

The undersigned employee acknowledges that the Plan confers significant legal
rights and may also constitute a waiver of rights under other agreements with
the Company; that the Company has encouraged the undersigned to consult with the
undersigned’s personal legal and financial advisors; and that the undersigned
has had adequate time to consult with the undersigned’s advisors before
executing this agreement.

The undersigned employee acknowledges that he or she has received a copy of the
Plan and has read, understands and is familiar with the terms and provisions of
the Plan. The undersigned employee further acknowledges that (1) by accepting
the arbitration provision set forth in Section 13 of the Plan, the undersigned
is waiving any right to a jury trial in the event of any dispute covered by such
provision and (2) except as otherwise established in an employment agreement
between the Company and the undersigned, the employment relationship between the
undersigned and the Company is an “at-will” relationship.

Executed on _________________________.

PARTICIPANT

APPLIED SIGNAL TECHNOLOGY, INC.

 

______________________________________

 

By: ____________________________________

Signature

 

_______________________________________

 

Title: ___________________________________

Name Printed

 

_______________________________________

 

 

Address

_______________________________________

EXHIBIT B

FORM OF
GENERAL RELEASE OF CLAIMS
[Age 40 and over]

GENERAL RELEASE OF CLAIMS
[Age 40 and over]

 

This Agreement is by and between [Employee Name] (“Employee”) and [Applied
Signal Technology, Inc. or successor that agrees to assume the Executive
Retention and Severance Plan following a Change in Control] (the “Company”).
This Agreement will become effective on the eighth (8th) day after it is signed
by Employee (the “Effective Date”), provided that the Company has signed this
Agreement and Employee has not revoked this Agreement (by written notice to
[Company Contact Name] at the Company) prior to that date.

RECITALS

 A. Employee was employed by the Company as of ___________, ____
 B. Employee and the Company entered into an Agreement to Participate in the
    Applied Signal Technology, Inc. Executive Retention and Severance Plan (such
    agreement and plan being referred to herein as the “Plan”) effective as of
    __________, ____ wherein Employee is entitled to receive certain benefits in
    the event of a Termination Upon a Change in Control (as defined by the
    Plan), provided Employee signs and does not revoke a Release (as defined by
    the Plan).
 C. [A Change in Control (as defined by the Plan) has occurred as a result of
    [briefly describe change in control]
 D. Employee’s employment is being terminated as a result of a [an Involuntary
    Termination][a Termination Upon a Change in Control]. Employee’s last day of
    work and termination are effective as of _______________, ____. Employee
    desires to receive the payments and benefits provided by the Plan by
    executing this Release.

NOW, THEREFORE, the parties agree as follows:

 1. Commencing on the Effective Date, the Company shall provide Employee with
    the applicable payments and benefits set forth in the Plan in accordance
    with the terms of the Plan. Employee acknowledges that the payments and
    benefits made pursuant to this paragraph are made in full satisfaction of
    the Company’s obligations under the Plan. Employee further acknowledges that
    Employee has been paid all wages and accrued, unused vacation that Employee
    earned during his or her employment with the Company.
 2. Employee and Employee’s successors release the Company, its respective
    subsidiaries, stockholders, investors, directors, officers, employees,
    agents, attorneys, insurers, legal successors and assigns of and from any
    and all claims, actions and causes of action, whether now known or unknown,
    which Employee now has, or at any other time had, or shall or may have
    against those released parties based upon or arising out of any matter,
    cause, fact, thing, act or omission whatsoever directly related to
    Employee’s employment by the Company or the termination of such employment
    and occurring or existing at any time up to and including the Effective
    Date, including, but not limited to, any claims of breach of written
    contract, wrongful termination, retaliation, fraud, defamation, infliction
    of emotional distress, or national origin, race, age, sex, sexual
    orientation, disability or other discrimination or harassment under the
    Civil Rights Act of 1964, the Age Discrimination In Employment Act of 1967,
    the Americans with Disabilities Act, the Fair Employment and Housing Act or
    any other applicable law. Notwithstanding the foregoing, this release shall
    not apply to any right of the Employee pursuant to Section 6.4 of the Plan
    or pursuant to a Prior Indemnity Agreement (as such term is defined by the
    Plan).
 3. Employee acknowledges that he or she has read Section 1542 of the Civil Code
    of the State of California, which states in full:
    A general release does not extend to claims which the creditor does not know
    or suspect to exist in his favor at the time of executing the release, which
    if known by him must have materially affected his settlement with the
    debtor.
    Employee waives any rights that Employee has or may have under Section 1542
    and comparable or similar provisions of the laws of other states in the
    United States to the full extent that he or she may lawfully waive such
    rights pertaining to this general release of claims, and affirms that
    Employee is releasing all known and unknown claims that he or she has or may
    have against the parties listed above.
 4. Employee and the Company acknowledge and agree that they shall continue to
    be bound by and comply with the terms and obligations under the following
    agreements: (i) any proprietary rights or confidentiality agreements between
    the Company and Employee, (ii) the Plan, (iii) any Prior Indemnity Agreement
    (as such term is defined by the Plan) to which Employee is a party, and (iv)
    any stock option, stock grant or stock purchase agreements between the
    Company and Employee and (v) the Restrictive Covenants Agreement between the
    Company and Employee.
 5. This Agreement shall be binding upon, and shall inure to the benefit of, the
    parties and their respective successors, assigns, heirs and personal
    representatives.
 6. The parties agree that any and all disputes that both (i) arise out of the
    Plan, the interpretation, validity or enforceability of the Plan or the
    alleged breach thereof and (ii) relate to the enforceability of this
    Agreement or the interpretation of the terms of this Agreement shall be
    subject to the provisions of Section 12 and Section 13 of the Plan.
 7. The parties agree that any and all disputes that (i) do not arise out of the
    Plan, the interpretation, validity or enforceability of the Plan or the
    alleged breach thereof and (ii) relate to the enforceability of this
    Agreement, the interpretation of the terms of this Agreement or any of the
    matters herein released or herein described shall be resolved by means of a
    court trial conducted by the superior or district court in Santa Clara
    County, California. The parties hereby irrevocably waive their respective
    rights to have any such disputes tried to a jury, and the parties hereby
    agree that such courts will have personal and subject matter jurisdiction
    over all such disputes. Notwithstanding the foregoing, in the event of any
    such dispute, the parties may agree to mediate or arbitrate the dispute on
    such terms and conditions as may be agreed in writing by the parties. The
    prevailing party shall be entitled to recover from the losing party its
    attorneys’ fees and costs incurred in any action brought to resolve any such
    dispute.
 8. This Agreement constitutes the entire agreement between the parties with
    respect to the subject matter hereof and supersedes all prior negotiations
    and agreements, whether written or oral, with the exception of any
    agreements described in paragraph 4 of this Agreement. This Agreement may
    not be modified or amended except by a document signed by an authorized
    officer of the Company and Employee. If any provision of this Agreement is
    deemed invalid, illegal or unenforceable, such provision shall be modified
    so as to make it valid, legal and enforceable, and the validity, legality
    and enforceability of the remaining provisions of this Agreement shall not
    in any way be affected.

EMPLOYEE UNDERSTANDS THAT EMPLOYEE SHOULD CONSULT WITH AN ATTORNEY PRIOR TO
SIGNING THIS AGREEMENT AND THAT EMPLOYEE IS GIVING UP ANY LEGAL CLAIMS EMPLOYEE
HAS AGAINST THE PARTIES RELEASED ABOVE BY SIGNING THIS AGREEMENT. EMPLOYEE
FURTHER UNDERSTANDS THAT EMPLOYEE MAY HAVE UP TO 45 DAYS TO CONSIDER THIS
AGREEMENT, THAT EMPLOYEE MAY REVOKE IT AT ANY TIME DURING THE 7 DAYS AFTER
EMPLOYEE SIGNS IT, AND THAT IT SHALL NOT BECOME EFFECTIVE UNTIL THAT 7-DAY
PERIOD HAS PASSED. EMPLOYEE ACKNOWLEDGES THAT EMPLOYEE IS SIGNING THIS AGREEMENT
KNOWINGLY, WILLINGLY AND VOLUNTARILY IN EXCHANGE FOR THE COMPENSATION AND
BENEFITS DESCRIBED IN PARAGRAPH 1.

 

Dated: __________________________________

_______________________________________
[Employee Name]

 

Dated: __________________________________

[Company]

By: ____________________________________

 

EXHIBIT C
FORM OF
GENERAL RELEASE OF CLAIMS
[Under age 40]

 

GENERAL RELEASE OF CLAIMS
[Under age 40]

This Agreement is by and between [Employee Name] (“Employee”) and [Applied
Signal Technology, Inc. or successor that agrees to assume the Executive
Retention and Severance Plan following a Change in Control] (the “Company”).
This Agreement is effective on the day it is signed by Employee (the “Effective
Date”).

RECITALS
 A. Employee was employed by the Company as of ____________, ____.
 B. Employee and the Company entered into an Agreement to Participate in the
    Applied Signal Technology, Inc. Executive Retention and Severance Plan (such
    agreement and plan being referred to herein as the “Plan”) effective as of
    ___________, ____ wherein Employee is entitled to receive certain benefits
    in the event of a Termination Upon a Change in Control (as defined by the
    Plan), provided Employee signs a Release (as defined by the Plan).
 C. A Change in Control (as defined by the Plan) has occurred as a result of
    [briefly describe change in control]
 D. Employee’s employment is being terminated as a result of a Termination Upon
    a Change in Control. Employee’s last day of work and termination are
    effective as of ______________, ____ (the “Termination Date”). Employee
    desires to receive the payments and benefits provided by the Plan by
    executing this Release.

NOW, THEREFORE, the parties agree as follows:

 1. Commencing on the Effective Date, the Company shall provide Employee with
    the applicable payments and benefits set forth in the Plan in accordance
    with the terms of the Plan. Employee acknowledges that the payments and
    benefits made pursuant to this paragraph are made in full satisfaction of
    the Company’s obligations under the Plan. Employee further acknowledges that
    Employee has been paid all wages and accrued, unused vacation that Employee
    earned during his or her employment with the Company.
 2. Employee and Employee’s successors release the Company, its respective
    subsidiaries, stockholders, investors, directors, officers, employees,
    agents, attorneys, insurers, legal successors and assigns of and from any
    and all claims, actions and causes of action, whether now known or unknown,
    which Employee now has, or at any other time had, or shall or may have
    against those released parties based upon or arising out of any matter,
    cause, fact, thing, act or omission whatsoever directly related to
    Employee’s employment by the Company or the termination of such employment
    and occurring or existing at any time up to and including the Termination
    Date, including, but not limited to, any claims of breach of written
    contract, wrongful termination, retaliation, fraud, defamation, infliction
    of emotional distress, or national origin, race, age, sex, sexual
    orientation, disability or other discrimination or harassment under the
    Civil Rights Act of 1964, the Age Discrimination In Employment Act of 1967,
    the Americans with Disabilities Act, the Fair Employment and Housing Act or
    any other applicable law. Notwithstanding the foregoing, this release shall
    not apply to any right of the Employee pursuant to Sections 5.4 of the Plan
    or pursuant to a Prior Indemnity Agreement (as such terms are defined by the
    Plan).
 3. Employee acknowledges that he or she has read Section 1542 of the Civil Code
    of the State of California, which states in full:
    A general release does not extend to claims which the creditor does not know
    or suspect to exist in his favor at the time of executing the release, which
    if known by him must have materially affected his settlement with the
    debtor.
    Employee waives any rights that Employee has or may have under Section 1542
    and comparable or similar provisions of the laws of other states in the
    United States to the full extent that he or she may lawfully waive such
    rights pertaining to this general release of claims, and affirms that
    Employee is releasing all known and unknown claims that he or she has or may
    have against the parties listed above.
 4. Employee and the Company acknowledge and agree that they shall continue to
    be bound by and comply with the terms and his obligations under the
    following agreements: (i) any proprietary rights or confidentiality
    agreements between the Company and Employee, (ii) the Plan, (iii) any Prior
    Indemnity Agreement (as such term is defined by the Plan) to which Employee
    is a party, and (iv) any stock option, stock grant or stock purchase
    agreements between the Company and Employee and (v) the Restrictive
    Covenants Agreement between the Company and Employee.
 5. This Agreement shall be binding upon, and shall inure to the benefit of, the
    parties and their respective successors, assigns, heirs and personal
    representatives.
 6. The parties agree that any and all disputes that both (i) arise out of the
    Plan, the interpretation, validity or enforceability of the Plan or the
    alleged breach thereof and (ii) relate to the enforceability of this
    Agreement or the interpretation of the terms of this Agreement shall be
    subject to Section 12 and Section 13 of the Plan.
 7. The parties agree that any and all disputes that (i) do not arise out of the
    Plan, the interpretation, validity or enforceability of the Plan or the
    alleged breach thereof and (ii) relate to the enforceability of this
    Agreement, the interpretation of the terms of this Agreement or any of the
    matters herein released or herein described shall be resolved by means of a
    court trial conducted by the superior or district court in Santa Clara
    County, California. The parties hereby irrevocably waive their respective
    rights to have any such disputes tried to a jury, and the parties hereby
    agree that such courts will have personal and subject matter jurisdiction
    over all such disputes. Notwithstanding the foregoing, in the event of any
    such dispute, the parties may agree to mediate or arbitrate the dispute on
    such terms and conditions as may be agreed in writing by the parties. The
    prevailing party shall be entitled to recover from the losing party its
    attorneys’ fees and costs incurred in any action brought to resolve any such
    dispute.
 8. This Agreement constitutes the entire agreement between the parties with
    respect to the subject matter hereof and supersedes all prior negotiations
    and agreements, whether written or oral, with the exception of any
    agreements described in paragraph 4 of this Agreement. This Agreement may
    not be modified or amended except by a document signed by an authorized
    officer of the Company and Employee. If any provision of this Agreement is
    deemed invalid, illegal or unenforceable, such provision shall be modified
    so as to make it valid, legal and enforceable, and the validity, legality
    and enforceability of the remaining provisions of this Agreement shall not
    in any way be affected.

EMPLOYEE UNDERSTANDS THAT EMPLOYEE SHOULD CONSULT WITH AN ATTORNEY PRIOR TO
SIGNING THIS AGREEMENT AND THAT EMPLOYEE IS GIVING UP ANY LEGAL CLAIMS EMPLOYEE
HAS AGAINST THE PARTIES RELEASED ABOVE BY SIGNING THIS AGREEMENT. EMPLOYEE
ACKNOWLEDGES THAT EMPLOYEE IS SIGNING THIS AGREEMENT KNOWINGLY, WILLINGLY AND
VOLUNTARILY IN EXCHANGE FOR THE COMPENSATION AND BENEFITS DESCRIBED IN
PARAGRAPH 1.

Dated: __________________________________

_______________________________________
[Employee Name]

 

Dated: __________________________________

[Company]

By: ____________________________________

EXHIBIT D

FORM OF
RESTRICTIVE COVENANTS AGREEMENT

 

RESTRICTIVE COVENANTS AGREEMENT

[Executive Officer]

THIS RESTRICTIVE COVENANTS AGREEMENT is made and entered into as of
____________, 200__, by and between ________________, an individual
(“Employee”), and [Applied Signal Technology, Inc., a California corporation]
[Successor company that agrees to assume the Executive Retention and Severance
Plan following a Change in Control] (the “Company”). For the purposes of this
Agreement, the “Company” shall be deemed to include [Applied Signal Technology,
Inc.] [Successor company that agrees to assume the Executive Retention and
Severance Plan following a Change in Control], any successor entity and their
majority owned direct and indirect subsidiaries that operate the Applied Signal
Business (as hereinafter defined) during the term of this Agreement.

RECITALS

 A. Applied Signal Technology, Inc., a California corporation (“Applied
    Signal”), is engaged throughout the United States of America and the world
    in the business of designing, developing, manufacturing and marketing
    advanced digital signal processing equipment to collect and process a wide
    range of telecommunications signals for signal reconnaissance applications
    (the “Applied Signal Business”).
 B. Employee has been employed by the Company as its _________________ since
    ___________, ____.
 C. Employee and the Company entered into an Agreement to Participate in the
    Applied Signal Technology, Inc. Executive Retention and Severance Plan (such
    agreement and plan being referred to herein as the “Plan”), effective as of
    ___________, ____, wherein Employee is entitled to receive certain severance
    payments and benefits in the event of [an Involuntary Termination or a
    Termination Upon a Change in Control] (both as defined by the Plan),
    provided Employee executes this Agreement.
 D. [ Pursuant to that certain Agreement and Plan of Reorganization (the
    “Reorganization Agreement”) dated as of ____________, ____ by and among
    [Acquiror Parent], [______________ Acquisition Corp.], a ____________
    corporation and wholly-owned subsidiary of [Acquiror Parent] (“Sub”), and
    Applied Signal, [Acquiror Parent] is acquiring Applied Signal through a
    merger of [Applied Signal/Sub] with and into [Sub/Applied Signal] (the
    “Merger”) pursuant to which [Applied Signal/Sub], as the surviving
    corporation, will continue to operate the Applied Signal Business as a
    wholly-owned subsidiary of [Acquiror Parent].]
 E. Employee’s employment is being terminated as a result of [an Involuntary
    Termination or a Termination Upon a Change in Control]. Employee’s last day
    of work and termination are effective as of ______________, ____ (the
    “Termination Date”). Employee desires to receive the payments and benefits
    provided by the Plan by executing this Agreement.
 F. In consideration of the payments and benefits to be provided to Employee by
    the Company, Employee, intending to be bound hereby, has executed this
    Agreement.

NOW, THEREFORE, the parties agree as follows:

 1.  Covenant Not to Compete.
      a. Employee and the Company agree that due to the nature of Employee’s
         association with the Company, Employee has confidential and proprietary
         information relating to the Applied Signal Business and operations of
         the Company. Employee acknowledges that such information is of extreme
         importance to the business of the Company and that disclosure of such
         confidential information to others, especially the Company’s
         Competitors (as defined below), or the unauthorized use of such
         information by others would cause substantial loss and harm to the
         Company.
      b. Employee and the Company further agree that the market for the Applied
         Signal Business is intensely competitive and that there are certain
         companies, as identified in Schedule 1 attached hereto (the
         “Competitors”), that directly compete with the Company in the Applied
         Signal Business.
      c. Employee agrees that, for a period of [one (1)/two (2)] years following
         the Termination Date (the “Noncompetition Period”), he will not, with
         or without compensation, directly or indirectly (including without
         limitation, through any Affiliate (as defined below) of Employee), own,
         manage, operate, control or otherwise engage or participate in, or be
         connected as an owner, partner, principal, creditor, salesman,
         guarantor, advisor, member of the board of directors of, employee of or
         consultant to, any of the Competitors. Employee agrees to notify the
         Company within 24 hours of each employment or consulting position or
         membership on a board of directors he accepts during the Noncompetition
         Period (including the name and address of the hiring party) and will,
         upon request by the Company, describe in reasonable detail the nature
         of his duties in each such position.
      d. Notwithstanding the foregoing, Employee may own securities in any of
         the Competitors that is a publicly held corporation, but only to the
         extent that Employee does not own, of record or beneficially, more than
         one percent (1%) of the outstanding voting securities of any such
         Competitor.
      e. “Affiliate” as used herein, means, with respect to any person or
         entity, any person or entity directly or indirectly controlling,
         controlled by or under direct or indirect common control with such
         other person or entity.
      f. Employee acknowledges and agrees that the restrictions contained in
         this paragraph are reasonable and necessary, as there is a significant
         risk that Employee’s provision of labor, services or advice or
         assistance to any Competitor could result in the inevitable disclosure
         of the Company’s proprietary information. Employee further acknowledges
         that the restrictions contained in this paragraph will not preclude him
         from engaging in any trade, business or profession for which he is
         qualified.

 2.  Nonsolicitation. Employee agrees that he will not during the Noncompetition
     Period, directly or indirectly:
      a. solicit, influence, entice or encourage any person who is an employee
         of or consultant to the Company to cease or curtail his or her
         relationship with the Company; or
      b. request, advise or induce any of the customers, suppliers,
         distributors, vendors or other business contacts of the Company with
         which Employee had contact while employed by the Company to withdraw,
         curtail, cancel or not increase their business with the Company.

 3.  Nondisruption. Employee agrees that he will not during the Noncompetition
     Period, directly or indirectly, interfere with, disrupt or attempt to
     disrupt any past, present or prospective relationship, contractual or
     otherwise, between the Company and any of its employees, consultants,
     customers, suppliers, distributors or vendors.
 4.  Nondisparagement. Employee agrees that he will not during the
     Noncompetition Period knowingly disparage the business reputation of the
     Company (or its management team) or take any actions that are harmful to
     the Company’s goodwill with its customers, suppliers, distributors,
     vendors, employees, consultants, the media or the public.
 5.  Confidentiality. Employee covenants that he will not, at any time, directly
     or indirectly, use for his own account, or disclose to any person, firm or
     corporation, other than authorized officers, directors and employees of the
     Company, Confidential Information (as hereinafter defined). As used herein,
     “Confidential Information” means information about the Company of any kind,
     nature or description, including, but not limited to, any proprietary
     knowledge, trade secrets, data, formulae, employees, and client and
     customer lists and all documents, papers, resumes, and records (including
     computer records), which is disclosed to or otherwise known to Employee as
     a direct or indirect consequence of his association with the Company.
     Employee acknowledges that such Confidential Information is specialized,
     unique in nature and of great value to the Company and that such
     information gives the Company a competitive advantage in its business.
     Employee further agrees to deliver to the Company, at the Company’s
     request, all documents, computer tapes and disks, records, lists, data,
     drawings, prints, notes and written or electronic information (and all
     copies thereof) furnished by the Company or created by Employee in
     connection with his association with the Company.
 6.  Equitable Relief. Employee acknowledges and agrees that the Company’s
     remedies at law for breach of any of the provisions of this Agreement would
     be inadequate and, in recognition of this fact, Employee agrees that, in
     the event of such breach, in addition to any remedies at law it may have,
     the Company, without posting any bond, shall be entitled to obtain
     equitable relief in the form of specific performance, a temporary
     restraining order, a temporary or permanent injunction or any other
     equitable remedy that may be available. Employee further acknowledges that
     should Employee violate any of the provisions of this Agreement, it will be
     difficult to determine the amount of damages resulting to the Company and
     that in addition to any other remedies it may have, the Company shall be
     entitled to temporary and permanent injunctive relief without the necessity
     of proving damages.
 7.  Termination by Employee of Covenant Not to Compete and Nonsoliciation.
     Employee may terminate the Covenant Not to Compete, and Nonsolicitation set
     forth in Sections 1 and 2 above, at any time by written notice to the
     Company. Upon such termination, all rights of Employee to continued
     severance payments and benefits under the Plan shall cease, and the Company
     shall terminate the provision of all such payments and benefits. All
     severance payments and benefits paid or provided to Employee under the Plan
     prior to such termination shall remain the property of Employee and
     Employee shall have to obligation to repay or reimburse the Company for
     such severance payments or benefits paid or provided prior to such date.
 8.  Termination of Certain Payments and Benefits Upon Breach. In addition to
     the remedies provided by paragraph 6 of this Agreement, Employee agrees
     that if the Board of Directors of the Company, acting in good faith,
     determines by a vote of not less than two-thirds of its entire membership,
     that any action or failure to act by Employee constitutes a material breach
     of any of the covenants set forth in paragraph 1, 2, 3, 4 or 5 of this
     Agreement, then the Company may, in its sole discretion, terminate any
     further provision of the severance payments and benefits under
     Section 4.1(b) or Section 6.2 of the Plan, as applicable, and require
     Employee to repay to the Company any such severance payments or benefits
     provided to Employee following the date of such material breach; provided,
     however, that should Employee elect to terminate the Covenant Not to
     Compete or Nonsolicitation at any time, Employee shall lose all rights to
     further severance payments under the Plan, but shall have no obligation to
     repay to the Company any severance payments paid to Employee as of the date
     of such termination. The Company shall be entitled, at its sole discretion,
     to set off any amounts that Employee is required to repay to the Company
     pursuant to this paragraph against any amount owed to Employee by the
     Company, including any amount owed to Employee pursuant to Section 4.1(a)
     or Section 6.1 of the Plan, as applicable.
 9.  Acknowledgement. Each of Employee and the Company acknowledges and agrees
     that the covenants and agreements contained in this Agreement have been
     negotiated in good faith by the parties, are reasonable and are not more
     restrictive or broader than necessary to protect the interests of the
     parties thereto, and would not achieve their intended purpose if they were
     on different terms or for periods of time shorter than the periods of time
     provided herein or applied in more restrictive geographical areas than are
     provided herein.
 10. Separate Covenants. The covenants contained in this Agreement shall be
     construed as a series of separate covenants, one for each of the counties
     in each of the states of the United States of America, one for each
     province of Canada, and one for each country outside the United States and
     Canada.
 11. Severability. The parties agree that construction of this Agreement shall
     be in favor of its reasonable nature, legality and enforceability, and that
     any construction causing unenforceability shall yield to a construction
     permitting enforceability. It is agreed that the noncompetition,
     nonsolicitation, nondisruption, nondisparagement and confidentiality
     covenants and provisions of this Agreement are severable, and that if any
     single covenant or provision or multiple covenants or provisions should be
     found unenforceable, the entire Agreement and remaining covenants and
     provisions shall not fail but shall be construed as enforceable without any
     severed covenant or provision in accordance with the tenor of this
     Agreement. The parties specifically agree that no covenant or provision of
     this Agreement shall be invalidated because of overbreadth insofar as the
     parties acknowledge the scope of the covenants and provisions contained
     herein to be reasonable and necessary for the protection of the Company and
     not unduly restrictive upon Employee. However, should a court or any other
     trier of fact or law determine not to enforce any covenant or provision of
     this Agreement as written due to overbreadth, then the parties agree that
     said covenant or provision shall be enforced to the extent reasonable, with
     the court or such trier to make any necessary revisions to said covenant or
     provision to permit its enforceability.
 12. Not an Employment Agreement. This Agreement is not, and nothing in this
     Agreement shall be construed as, an agreement to provide employment to
     Employee. The provisions of Paragraphs 1, 2, 3, 4 and 5 of this Agreement
     shall be operative regardless of the reasons for any termination of
     Employee’s employment and regardless of the performance or nonperformance
     by any party under any other section of this Agreement.
 13. Governing Law. This Agreement is made under and shall be governed by,
     construed in accordance with and enforced under the internal laws of the
     State of California.
 14. Entire Agreement. This Agreement, together with the Plan, constitutes and
     contains the entire agreement and understanding concerning the subject
     matter addressed herein between the parties, and supersedes and replaces
     all prior negotiations and all agreements proposed or otherwise, whether
     written or oral, concerning the subject matter hereof, and the parties
     hereto have made no agreements, representations or warranties relating to
     the subject matter of this Agreement that are not set forth herein or in
     the Plan.
 15. Notices. Any notice or other communication under this Agreement shall be in
     writing, signed by the party making the same, and shall be delivered
     personally or sent by certified or registered mail or overnight courier,
     postage prepaid, addressed as follows:
     
     
     If to Employee: ________________________
     
     ________________________
     
     ________________________
     
     ________________________
     
     If to Company: Applied Signal Technology, Inc.
     400 West California Avenue
     Sunnyvale, CA 94086
     Attention: Chief Executive Officer
     
     or to such other address as may hereafter be designated by either party
     hereto. All such notices shall be deemed given on the date personally
     delivered, mailed or deposited with an overnight courier.

 16. Dispute Resolution. The parties agree that any and all disputes that (i) do
     not arise out of the Plan, the interpretation, validity or enforceability
     of the Plan or the alleged breach thereof and (ii) relate to the
     enforceability of this Agreement or the interpretation of the terms of this
     Agreement (including the determination of the scope or applicability of
     this agreement to arbitrate) shall be resolved by means of binding
     arbitration in Santa Clara County, California before a sole arbitrator, in
     accordance with the laws of the State of California for agreements made in
     that State. Any arbitration shall be administered by JAMS pursuant to its
     Comprehensive Arbitration Rules and Procedures. Judgment on the award may
     be entered in any court having jurisdiction. The prevailing party shall be
     entitled to recover from the losing party its attorneys’ fees and costs
     incurred in any action brought to resolve any such dispute.
 17. Amendments; No Waiver.
     a. No amendment or modification of this Agreement shall be deemed effective
        unless made in writing and signed by the parties hereto.
     b. No term or condition of this Agreement shall be deemed to have been
        waived, nor shall there be any estoppel to enforce any provision of this
        Agreement, except by a statement in writing signed by the party against
        whom enforcement of the waiver or estoppel is sought. Any written waiver
        shall operate only as to the specific term or condition waived and shall
        not constitute a waiver of such term or condition for the future or as
        to any act other than that specifically waived.
 18. Assignment. This Agreement may be assigned by the Company, without the
     consent of Employee, to any affiliate of the Company or to any nonaffiliate
     of the Company that shall succeed to the business and assets of the
     Company. This Agreement is personal to Employee, and Employee may not
     assign any rights or delegate any responsibilities hereunder
 19. Further Assurances. From time to time, at the Company’s request and without
     further consideration, Employee shall execute and deliver such additional
     documents and take all such further action as reasonably requested by the
     Company to be necessary or desirable to make effective, in the most
     expeditious manner possible, the terms of this Agreement, and to provide
     adequate assurance of Employee’s due performance hereunder.
 20. Headings. The headings of paragraphs in this Agreement are solely for
     convenience of reference and shall not control the meaning or
     interpretation of any provision of this Agreement.
 21. Construction. The language of this Agreement and of each and every
     paragraph, term and provision of this Agreement shall, in all cases, for
     any and all purposes, and in any and all circumstances whatsoever be
     construed as a whole, according to its fair meaning, not strictly for or
     against Employee or the Company and with no regard whatsoever to the
     identity or status of any person or persons who drafted all or any portion
     of this Agreement.
 22. Counterparts. This Agreement may be executed in counterparts, each of which
     shall be an original, with the same effect as if the signatures thereto and
     hereto were upon the same instrument.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.

EMPLOYEE

_______________________________________

APPLIED SIGNAL TECHNOLOGY, INC.

By: ____________________________________

Title: ___________________________________

Schedule 1

To Restrictive Covenants Agreement

For purposes of Paragraph 1 of the Restrictive Covenants Agreement, the
following companies are deemed to be Competitors:

1.

2.

3.