Exhibit 10.1

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of February 12,
2010 (the “Effective Date”) by and between SILICON VALLEY BANK, a California
corporation with its principal place of business at 3003 Tasman Drive, Santa
Clara, California 95054 with a loan production office located at One Newton
Executive Park, Suite 200, 2221 Washington Street, Newton, Massachusetts 02462
(“Bank”), and MERCURY COMPUTER SYSTEMS, INC., a Massachusetts corporation with
offices located at 201 Riverneck Road, Chelmsford, Massachusetts 01824
(“Borrower”), provides the terms on which Bank shall lend to Borrower and
Borrower shall repay Bank. The parties agree as follows:

1 ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this Agreement shall be construed following
GAAP. Calculations and determinations must be made following GAAP. Capitalized
terms not otherwise defined in this Agreement shall have the meanings set forth
in Section 13. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meaning provided by the Code to the extent such terms
are defined therein.

2 LOAN AND TERMS OF PAYMENT

2.1 Promise to Pay. Borrower hereby unconditionally promises to pay Bank the
outstanding principal amount of all Credit Extensions and accrued and unpaid
interest thereon as and when due in accordance with this Agreement.

2.1.1 Revolving Advances.

(a) Availability. Subject to the terms and conditions of this Agreement, Bank
shall make Advances not exceeding the Availability Amount. Amounts borrowed
under the Revolving Line may be repaid and, prior to the Revolving Line Maturity
Date, reborrowed, subject to the applicable terms and conditions precedent
herein.

(b) Termination; Repayment. The Revolving Line terminates on the Revolving Line
Maturity Date, when the principal amount of all Advances, the unpaid interest
thereon, and all other Obligations relating to the Revolving Line shall be
immediately due and payable.

2.1.2 Letters of Credit Sublimit.

(a) As part of the Revolving Line, Bank shall issue or have issued Letters of
Credit denominated in Dollars or a Foreign Currency for Borrower’s account. The
aggregate Dollar Equivalent amount utilized for the issuance of Letters of
Credit shall at all times reduce the amount otherwise available for Advances
under the Revolving Line. The aggregate Dollar Equivalent amount available to be
used for the issuance of Letters of Credit may not exceed (a) while a Borrowing
Base Period is in effect, (i) the lesser of (A) the Revolving Line or (B) the
amount available under the Borrowing Base minus (ii) the sum of all outstanding
principal amounts of any Advances (including any amounts used for Cash
Management Services) and the Dollar Equivalent of the face amount of any
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve) and minus (iii) the aggregate amount of
all FX Reserves and (b) while a Borrowing Base Period is not in effect, (i) the
Revolving Line minus (ii) the sum of all outstanding principal amounts of any
Advances (including any amounts used for Cash Management Services) and the
Dollar Equivalent of the face amount of any outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit and any Letter of Credit
Reserve) and minus (iii) the aggregate amount of all FX Reserves.

(b) If, on the Revolving Line Maturity Date (or the effective date of any
termination of this Agreement), there are any outstanding Letters of Credit,
then on such date Borrower shall provide to Bank cash collateral in an amount
equal to 103% (if the letter of credit is denominated in Dollars) or 110% ( if
the letter of credit is denominated in a currency other than Dollars) of the
Dollar Equivalent of the face amount of all such Letters of Credit plus all
interest, fees, and costs due or to become due in connection therewith (as
estimated by Bank in its good faith business judgment), to secure all of the
Obligations relating to such Letters of Credit. All Letters of Credit shall be
in form and substance acceptable to Bank in its sole discretion and shall be
subject to the

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terms and conditions of Bank’s standard Application and Letter of Credit
Agreement (the “Letter of Credit Application”). Borrower agrees to execute any
further documentation in connection with the Letters of Credit as Bank may
reasonably request. Borrower further agrees to be bound by the regulations and
interpretations of the issuer of any Letters of Credit guarantied by Bank and
opened for Borrower’s account or by Bank’s interpretations of any Letter of
Credit issued by Bank for Borrower’s account, and Borrower understands and
agrees that Bank shall not be liable for any error, negligence, or mistake,
whether of omission or commission, in following Borrower’s instructions or those
contained in the Letters of Credit or any modifications, amendments, or
supplements thereto.

(c) The obligation of Borrower to immediately reimburse Bank for drawings made
under Letters of Credit shall be absolute, unconditional, and irrevocable, and
shall be performed strictly in accordance with the terms of this Agreement, such
Letters of Credit, and the Letter of Credit Application.

(d) Borrower may request that Bank issue a Letter of Credit payable in a Foreign
Currency. If a demand for payment is made under any such Letter of Credit, Bank
shall treat such demand as an Advance to Borrower of the Dollar Equivalent of
the amount thereof (plus fees and charges in connection therewith such as wire,
cable, SWIFT or similar charges).

(e) To guard against fluctuations in currency exchange rates, upon the issuance
of any Letter of Credit payable in a Foreign Currency, Bank shall create a
reserve (the “Letter of Credit Reserve”) under the Revolving Line in an amount
equal to ten percent (10%) of the face amount of such Letter of Credit. The
amount of the Letter of Credit Reserve may be adjusted by Bank from time to time
to account for fluctuations in the exchange rate. The availability of funds
under the Revolving Line shall be reduced by the amount of such Letter of Credit
Reserve for as long as such Letter of Credit remains outstanding.

2.1.3 Foreign Exchange Sublimit. As part of the Revolving Line, Borrower may
enter into foreign exchange contracts with Bank under which Borrower commits to
purchase from or sell to Bank a specific amount of Foreign Currency (each, a “FX
Forward Contract”) on a specified date (the “Settlement Date”). FX Forward
Contracts shall have a Settlement Date of at least one (1) FX Business Day after
the contract date and shall be subject to a reserve of ten percent (10%) of each
outstanding FX Forward Contract (the “FX Reserve”). The aggregate amount of FX
Forward Contracts at any one time may not exceed (a) while a Borrowing Base
Period is in effect, (i) the lesser of (A) the Revolving Line or (B) the amount
available under the Borrowing Base and minus (ii) the sum of all outstanding
principal amounts of any Advances (including any amounts used for Cash
Management Services) and the Dollar Equivalent of the face amount of any
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve) and (b) while a Borrowing Base Period
is not in effect, (i) the Revolving Line and minus (ii) the sum of all
outstanding principal amounts of any Advances (including any amounts used for
Cash Management Services) and the Dollar Equivalent of the face amount of any
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve). The amount otherwise available for
Credit Extensions under the Revolving Line shall be reduced by an amount equal
to the aggregate amount of all FX Reserves. Any amounts needed to fully
reimburse Bank for any amounts not paid by Borrower in connection with FX
Forward Contracts will be treated as Advances under the Revolving Line and will
accrue interest at the interest rate applicable to Advances.

2.1.4 Cash Management Services Sublimit. Borrower may use the Revolving Line for
Bank’s cash management services which may include merchant services, direct
deposit of payroll, business credit card, and check cashing services identified
in Bank’s various cash management services agreements (collectively, the “Cash
Management Services”) in an aggregate amount not to exceed (a) while a Borrowing
Base Period is in effect, (i) the lesser of (A) the Revolving Line or (B) the
amount available under the Borrowing Base minus (ii) the sum of all outstanding
principal amounts of any Advances and the Dollar Equivalent of the face amount
of any outstanding Letters of Credit (including drawn but unreimbursed Letters
of Credit and any Letter of Credit Reserve) and minus (iii) the aggregate amount
of all FX Reserves and (b) while a Borrowing Base Period is not in effect,
(i) the Revolving Line minus (ii) the sum of all outstanding principal amounts
of any Advances and the Dollar Equivalent of the face amount of any outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit and any
Letter of Credit Reserve) and minus (iii) the aggregate amount of all FX
Reserves. Any amounts Bank pays on behalf of Borrower for any Cash Management
Services will be treated as Advances under the Revolving Line and will accrue
interest at the interest rate applicable to Advances.

 

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  2.1.5 Acquisition Loans.

(a) Availability. During the Draw Period, Bank shall make up to three
acquisition loans (each an “Acquisition Loan”) available to Borrower in an
aggregate amount up to the Acquisition Loan Amount subject to the satisfaction
of the terms and conditions of this Agreement.

(b) Interest-Only Payments. During the period commencing on the first Payment
Date of the month following the month in which the Funding Date in respect of an
Acquisition Loan occurs through and including the Payment Date on August 1,
2010, Borrower shall make monthly payments of interest on each Payment Date, in
arrears, in respect of each outstanding Acquisition Loan.

(c) Principal Repayment. Commencing on the Amortization Date, and continuing on
the Payment Date of each month thereafter to and including the Acquisition Loan
Maturity Date, for each Acquisition Loan, Borrower shall make consecutive equal
monthly payments of principal and interest as calculated by Bank based upon:
(1) the amount of the Acquisition Loan advanced to Borrower by Bank, (2) the
interest rate for the Acquisition Loans as set forth in Section 2.4(a)(ii) and
(3) a payment schedule of monthly payments to and including the Acquisition Loan
Maturity Date. Each Acquisition Loan may only be prepaid in accordance with
Sections 2.1.5(d) and 2.1.5(e).

(d) Mandatory Prepayment Upon an Acceleration. If an Acquisition Loan is
accelerated following the occurrence of an Event of Default, Borrower shall
immediately pay to Bank an amount equal to the sum of: (i) all outstanding
principal plus accrued interest, plus (ii) all other sums, that shall have
become due and payable, including interest at the Default Rate with respect to
any past due amounts.

(e) Permitted Prepayment of Loans. Borrower shall have the option to prepay all,
but not less than all, of each of the Acquisition Loans advanced by Bank under
this Agreement, provided Borrower (i) provides written notice to Bank of its
election to prepay the applicable Acquisition Loan(s) at least five (5) Business
Days prior to such prepayment, and (ii) pays, on the date of such prepayment
(A) all outstanding principal of the Acquisition Loan(s) being prepaid plus
accrued interest thereon, plus (B) all other sums, that shall have become due
and payable, including interest at the Default Rate with respect to any past due
amounts.

(f) All outstanding principal and accrued interest with respect to each
Acquisition Loan is due and payable in full on the Acquisition Loan Maturity
Date. Once repaid, the Acquisition Loan may not be reborrowed.

2.2 Overadvances. If, at any time, the sum of (a) the outstanding principal
amount of any Advances (including any amounts used for Cash Management
Services), plus (b) the face amount of any outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit and any Letter of Credit
Reserve), plus (c) the aggregate amount of all FX Reserves exceeds (i) while a
Borrowing Base Period is in effect, (A) the lesser of (1) the Revolving Line or
(2) the amount available under the Borrowing Base or (ii) while a Borrowing Base
Period is not in effect, the Revolving Line, Borrower shall immediately pay to
Bank in cash such excess.

2.3 General Provisions Relating to the Credit Extensions. Each Advance and
Acquisition Loan shall, at Borrower’s option in accordance with the terms of
this Agreement, be either in the form of a Prime Rate Credit Extension or a
LIBOR Credit Extension; provided that in no event shall Borrower maintain at any
time LIBOR Credit Extensions having more than four (4) different Interest
Periods. Borrower shall pay interest accrued on the Credit Extensions at the
rates and in the manner set forth in Section 2.4(a).

2.4 Payment of Interest on the Credit Extensions.

(a) Interest Rate.

(i) Advances. Each Advance shall bear interest on the outstanding principal
amount thereof from the date when made, continued or converted until paid in
full at a rate per annum equal to (i) the Prime Rate plus the applicable Prime
Rate Margin or (ii) the LIBOR Rate plus the applicable LIBOR Rate Margin.
Pursuant to the terms hereof, interest on each Advance shall be paid in arrears
on each Payment Date. Interest shall also be paid on the date of any prepayment
of any Advance pursuant to this Agreement for the portion of any Advance so
prepaid and upon payment (including prepayment) in full thereof. All accrued but
unpaid interest on the Advances shall be due and payable on the Revolving Line
Maturity Date.

 

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(ii) Acquisition Loans. Each Acquisition Loan shall bear interest on the
outstanding principal amount thereof from the date when made, continued or
converted until paid in full at a rate per annum equal to (i) the Prime Rate
plus the applicable Prime Rate Margin or (ii) the LIBOR Rate plus the applicable
LIBOR Rate Margin. Pursuant to the terms of Sections 2.1.5 (b) and (c), interest
on each Acquisition Loan shall be paid in arrears on each Payment Date. Interest
shall also be paid on the date of any prepayment of any Acquisition Loan
pursuant to this Agreement for the portion of any Acquisition Loan so prepaid
and upon payment (including prepayment) in full thereof. All accrued but unpaid
interest on the Acquisition Loan shall be due and payable on the Acquisition
Loan Maturity Date.

(b) Performance Pricing. The Prime Rate Margin and the LIBOR Rate Margin shall
be determined as follows: for any fiscal quarter, as of the first day of each
such fiscal quarter: (i) if the Leverage Ratio for the immediately preceding
four (4) fiscal quarters is less than 1.00:1.00, then the Prime Rate Margin for
such fiscal quarter shall be -0.25% and the LIBOR Rate Margin for such fiscal
quarter shall be 2.75%, and (ii) if the Leverage Ratio for the immediately
preceding four (4) fiscal quarters is equal to or greater than 1.00:1.00, then
the Prime Rate Margin for such fiscal quarter shall be 0.25% and the LIBOR Rate
Margin for such fiscal quarter shall be 3.25%. The Prime Rate Margin and the
LIBOR Rate Margin shall be adjusted quarterly and shall be applied on and after
the first day of each such fiscal quarter.

(c) Default Rate. Immediately upon the occurrence and during the continuance of
an Event of Default, the Obligations shall bear interest at a rate per annum
which is four percentage points (4.00%) above the rate effective immediately
before the Event of Default (the “Default Rate”). Payment or acceptance of the
increased interest rate provided in this Section 2.4(c) is not a permitted
alternative to timely payment and shall not constitute a waiver of any Event of
Default or otherwise prejudice or limit any rights or remedies of Bank.

(d) Prime Rate Credit Extensions. Each change in the interest rate of the Prime
Rate Credit Extensions based on changes in the Prime Rate shall be effective on
the effective date of such change and to the extent of such change. Bank shall
use its best efforts to give Borrower prompt notice of any such change in the
Prime Rate; provided, however, that any failure by Bank to provide Borrower with
notice hereunder shall not affect Bank’s right to make changes in the interest
rate of the Prime Rate Credit Extensions based on changes in the Prime Rate.

(e) LIBOR Credit Extensions. The interest rate applicable to each LIBOR Credit
Extension shall be determined in accordance with Section 3.6(a) hereunder.
Subject to Sections 3.6 and 3.7, such rate shall apply during the entire
Interest Period applicable to such LIBOR Credit Extension, and interest
calculated thereon shall be payable on the Payment Date applicable to such LIBOR
Credit Extension.

(f) Computation; 360-Day Year. In computing interest, the date of the making of
any Credit Extension shall be included and the date of payment shall be
excluded; provided, however, that if any Credit Extension is repaid on the same
day on which it is made, such day shall be included in computing interest on
such Credit Extension. Interest shall be computed on the basis of a 360-day year
for the actual number of days elapsed.

(g) Debit of Accounts. Bank may debit any of Borrower’s deposit accounts,
including the Designated Deposit Account, for principal and interest payments or
any other amounts Borrower owes Bank when due. These debits shall not constitute
a set-off.

2.5 Fees. Borrower shall pay to Bank:

(a) Fee Letter. The loan fees that are set forth in that certain fee letter by
and between Bank and Borrower dated February 12, 2010. Bank acknowledges that
such loan fees have been paid by Borrower prior to the Effective Date; and

(b) [Reserved]; and

(c) Letter of Credit Fee. Bank’s customary fees and expenses for the issuance or
renewal of Letters of Credit, including, without limitation, a letter of credit
fee of one and one-half percent (1.50%) per annum

 

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of the Dollar Equivalent of the face amount of each Letter of Credit issued,
upon the issuance of such Letter of Credit, each anniversary of the issuance
during the term of such Letter of Credit, and upon the renewal of such Letter of
Credit by Bank; and

(d) Unused Facility Fee. A fee (the “Unused Facility Fee”), payable quarterly,
in arrears, on a calendar year basis, in an amount equal to three/tenths of one
percent (0.30%) per annum of the average unused portion of the Revolving Line
and the unused portion of the Acquisition Loan Amount, as determined by Bank.
The unused portion of the Revolving Line, for the purposes of this calculation,
shall include amounts reserved for products provided in connection with Cash
Management Services and FX Forward Contracts and Letter of Credit Reserves. The
stated amount of any outstanding Letter of Credit for which Bank is receiving a
Letter of Credit fee shall not be considered an unused portion of the Revolving
Line while such Letter of Credit is outstanding. Borrower shall not be entitled
to any credit, rebate or repayment of any Unused Facility Fee previously earned
by Bank pursuant to this Section 2.5(d) notwithstanding any termination of the
Agreement or the suspension or termination of Bank’s obligation to make loans
and advances hereunder; and

(e) Bank Expenses. All Bank Expenses (including reasonable attorneys’ fees and
expenses for documentation and negotiation of this Agreement) incurred through
and after the Effective Date, when due.

2.6 Payments; Application of Payments.

(a) All payments (including prepayments) to be made by Borrower under any Loan
Document shall be made in immediately available funds in Dollars, without setoff
or counterclaim, before 12:00 p.m. Eastern time on the date when due. Payments
of principal and/or interest received after 12:00 p.m. Eastern time are
considered received at the opening of business on the next Business Day. When a
payment is due on a day that is not a Business Day, the payment shall be due the
next Business Day, and additional fees or interest, as applicable, shall
continue to accrue until paid.

(b) Provided no Event of Default has occurred and is continuing, Bank shall
apply the whole or any part of collected funds against the Revolving Line or
credit such collected funds to a depository account of Borrower with Bank (or an
account maintained by an Affiliate of Bank) as directed by Borrower. If Borrower
does not provide such direction, or if an Event of Default has occurred and is
continuing, the order and method of such application to be in the sole
discretion of Bank.

3 CONDITIONS OF LOANS

3.1 Conditions Precedent to Initial Credit Extension. Bank’s obligation to make
the initial Credit Extension is subject to the condition precedent that Bank
shall have received, in form and substance satisfactory to Bank, such documents,
and completion of such other matters, as Bank may reasonably deem necessary or
appropriate, including, without limitation:

(a) duly executed original signatures to the Loan Documents;

(b) duly executed original signatures to the Control Agreement[s];

(c) Borrower’s Operating Documents and a good standing certificate of Borrower
certified by the Secretary of State of the Commonwealth of Massachusetts as of a
date no earlier than thirty (30) days prior to the Effective Date;

(d) Secretary’s Certificate with completed Borrowing Resolutions for Borrower;

(e) [Reserved];

(f) evidence that (i) the Liens securing Indebtedness owed by Borrower to any
party other than Bank will be terminated and (ii) the documents and/or filings
evidencing the perfection of such Liens, including without limitation any
financing statements and/or control agreements, have or will, concurrently with
the initial Credit Extension, be terminated;

 

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(g) certified copies, dated as of a recent date, of financing statement
searches, as Bank shall request, accompanied by written evidence (including any
UCC termination statements) that the Liens indicated in any such financing
statements either constitute Permitted Liens or have been or, in connection with
the initial Credit Extension, will be terminated or released;

(h) the Perfection Certificate of Borrower and Guarantor, together with the duly
executed original signatures thereto;

(i) a landlord’s consent in favor of Bank for Borrower’s offices located in each
of Chelmsford, Massachusetts, Huntsville, Alabama, and Arlington, Virginia, by
the landlords thereof, together with the duly executed original signatures
thereto;

(j) a legal opinion of Borrower’s counsel dated as of the Effective Date
together with the duly executed original signature thereto;

(k) the duly executed original signatures to the Guaranty, together with a
Secretary’s Certificate and duly executed original signatures to the completed
Borrowing Resolutions for Guarantor;

(l) evidence satisfactory to Bank that the insurance policies required by
Section 6.5 hereof are in full force and effect, together with appropriate
evidence showing lender loss payable and/or additional insured clauses or
endorsements in favor of Bank; and

(m) payment of the fees and Bank Expenses then due as specified in Section 2.5
hereof.

3.2 Conditions Precedent to all Credit Extensions. Bank’s obligations to make
each Credit Extension, including the initial Credit Extension, is subject to the
following conditions precedent:

(a) timely receipt of an executed Notice of Borrowing;

(b) the representations and warranties in this Agreement shall be true,
accurate, and complete in all material respects on the date of the Notice of
Borrowing and on the Funding Date of each Credit Extension; provided, however,
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof; and provided, further that those representations and warranties
expressly referring to a specific date shall be true, accurate and complete in
all material respects as of such date, and no Event of Default shall have
occurred and be continuing or result from the Credit Extension. Each Credit
Extension is Borrower’s representation and warranty on that date that the
representations and warranties in this Agreement remain true, accurate, and
complete in all material respects; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date; and

(c) in Bank’s sole reasonable discretion, there has not been a Material Adverse
Change, or any material adverse deviation by Borrower from the most recent
financial statements of Borrower presented to and accepted by Bank.

3.3 Covenant to Deliver. Borrower agrees to deliver to Bank each item required
to be delivered to Bank under this Agreement as a condition precedent to any
Credit Extension. Borrower expressly agrees that a Credit Extension made prior
to the receipt by Bank of any such item shall not constitute a waiver by Bank of
Borrower’s obligation to deliver such item, and the making of any Credit
Extension in the absence of a required item shall be in Bank’s sole discretion.

3.4 Procedures for Borrowing.

(a) Subject to the prior satisfaction of all other applicable conditions to the
making of an Credit Extension set forth in this Agreement, each Credit Extension
shall be made upon Borrower’s irrevocable written notice delivered to Bank in
the form of a Notice of Borrowing, each executed by a Responsible Officer of
Borrower or his or her designee or without instructions if the Credit Extensions
are necessary to meet Obligations which have become due. Bank shall credit
Credit Extensions to the Designated Deposit Account. Bank may rely on

 

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any telephone notice given by a person whom Bank reasonably believes is a
Responsible Officer or designee. Borrower will indemnify Bank for any loss Bank
suffers due to such reliance. Such Notice of Borrowing must be received by Bank
prior to 11:00 a.m. Eastern time (i) on the same day as the requested Funding
Date, in the case of Prime Rate Credit Extensions, and (ii) at least two
(2) Business Days prior to the requested Funding Date, in the case of LIBOR
Credit Extensions, specifying:

(1) the amount of the Credit Extension, which, if a LIBOR Credit Extension is
requested, shall be in an aggregate minimum principal amount of $500,000 or in
any integral multiple of $500,000 in excess thereof;

(2) the requested Funding Date;

(3) whether the Credit Extension is to be comprised of LIBOR Credit Extensions
and/or Prime Rate Credit Extensions; and

(4) the duration of the Interest Period applicable to any such LIBOR Credit
Extensions included in such notice; provided that if the Notice of Borrowing
shall fail to specify the duration of the Interest Period for any Credit
Extension comprised of LIBOR Credit Extensions, such Interest Period shall be
one (1) month.

(b) The proceeds of all such Credit Extensions will then be made available to
Borrower on the Funding Date by Bank by transfer to the Designated Deposit
Account and, subsequently, by wire transfer to such other account as Borrower
may instruct in the Notice of Borrowing. No Credit Extensions shall be deemed
made to Borrower, and no interest shall accrue on any such Credit Extension,
until the related funds have been deposited in the Designated Deposit Account.

3.5 Conversion and Continuation Elections.

(a) So long as (i) no Event of Default or Default exists; (ii) Borrower shall
not have sent any notice of termination of this Agreement; and (iii) Borrower
shall have complied with such customary procedures as Bank has established from
time to time for Borrower’s requests for LIBOR Credit Extensions, Borrower may,
upon irrevocable written notice to Bank:

(1) elect to convert on any Business Day, Prime Rate Credit Extensions in an
amount equal to $500,000 or any integral multiple of $500,000 in excess thereof
into LIBOR Credit Extensions;

(2) elect to continue on any Payment Date any LIBOR Credit Extensions maturing
on such Payment Date (or any part thereof in an amount equal to $500,000 or any
integral multiple of $500,000 in excess thereof); provided, that if the
aggregate amount of LIBOR Credit Extensions shall have been reduced, by payment,
prepayment, or conversion of part thereof, to be less than $500,000, such LIBOR
Credit Extensions shall automatically convert into Prime Rate Credit Extensions,
and on and after such date the right of Borrower to continue such Credit
Extensions as, and convert such Credit Extensions into, LIBOR Credit Extensions
shall terminate; or

(3) elect to convert on any Payment Date any LIBOR Credit Extensions maturing on
such Payment Date (or any part thereof in an amount equal to $500,000 or any
integral multiple of $500,000 in excess thereof) into Prime Rate Credit
Extensions.

(b) Borrower shall deliver a Notice of Conversion/Continuation to be received by
Bank prior to 11:00 a.m. Eastern time at least (i) three (3) Business Days in
advance of the Conversion Date or Continuation Date, if any Credit Extensions
are to be converted into or continued as LIBOR Credit Extensions; and (ii) one
(1) Business Day in advance of the Conversion Date, if any Credit Extensions are
to be converted into Prime Rate Credit Extensions, in each case specifying the:

(1) proposed Conversion Date or Continuation Date;

 

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(2) aggregate amount of the Credit Extensions to be converted or continued
which, if any Credit Extensions are to be converted into or continued as LIBOR
Credit Extensions, shall be in an aggregate minimum principal amount of $500,000
or in any integral multiple of $500,000 in excess thereof;

(3) nature of the proposed conversion or continuation; and

(4) duration of the requested Interest Period.

(c) If upon the expiration of any Interest Period applicable to any LIBOR Credit
Extensions, Borrower shall have timely failed to select a new Interest Period to
be applicable to such LIBOR Credit Extensions, Borrower shall be deemed to have
elected to convert such LIBOR Credit Extensions into Prime Rate Credit
Extensions.

(d) Any LIBOR Credit Extensions shall, at Bank’s option, convert into Prime Rate
Credit Extensions in the event that (i) an Event of Default or Default shall
exist, or (ii) the aggregate principal amount of the Prime Rate Credit
Extensions which have been previously converted to LIBOR Credit Extensions, or
the aggregate principal amount of existing LIBOR Credit Extensions continued, as
the case may be, at the beginning of an Interest Period shall at any time during
such Interest Period exceed the Availability Amount. Borrower agrees to pay
Bank, upon demand by Bank (or Bank may, at its option, charge the Designated
Deposit Account or any other account Borrower maintains with Bank) any amounts
required to compensate Bank for any loss (including loss of anticipated
profits), cost, or expense incurred by Bank, as a result of the conversion of
LIBOR Credit Extensions to Prime Rate Credit Extensions pursuant to any of the
foregoing.

(e) Notwithstanding anything to the contrary contained herein, Bank shall not be
required to purchase United States Dollar deposits in the London interbank
market or other applicable LIBOR market to fund any LIBOR Credit Extensions, but
the provisions hereof shall be deemed to apply as if Bank had purchased such
deposits to fund the LIBOR Credit Extensions.

3.6 Special Provisions Governing LIBOR Credit Extensions. Notwithstanding any
other provision of this Agreement to the contrary, the following provisions
shall govern with respect to LIBOR Credit Extensions as to the matters covered:

(a) Determination of Applicable Interest Rate. As soon as practicable on each
Interest Rate Determination Date, Bank shall determine (which determination
shall, absent manifest error in calculation, be final, conclusive and binding
upon all parties) the interest rate that shall apply to the LIBOR Credit
Extensions for which an interest rate is then being determined for the
applicable Interest Period and shall promptly give notice thereof (in writing or
by telephone confirmed in writing) to Borrower.

(b) Inability to Determine Applicable Interest Rate. In the event that Bank
shall have determined in good faith (which determination shall, absent manifest
error, be final and conclusive and binding upon all parties hereto), on any
Interest Rate Determination Date with respect to any LIBOR Credit Extension,
that by reason of circumstances affecting the London interbank market adequate
and fair means do not exist for ascertaining the interest rate applicable to
such Credit Extension on the basis provided for in the definition of LIBOR, Bank
shall on such date give notice (by facsimile or by telephone confirmed in
writing) to Borrower of such determination, whereupon (i) no Credit Extensions
may be made as, or converted to, LIBOR Credit Extensions until such time as Bank
notifies Borrower that the circumstances giving rise to such notice no longer
exist, and (ii) any Notice of Borrowing or Notice of Conversion/Continuation
given by Borrower with respect to Credit Extensions in respect of which such
determination was made shall be deemed to be rescinded by Borrower.

(c) Compensation for Breakage or Non-Commencement of Interest Periods. Borrower
shall compensate Bank, upon written request by Bank (which request shall set
forth the manner and method of computing such compensation), for all reasonable
losses, expenses and liabilities, if any (including any interest paid by Bank to
lenders of funds borrowed by it to make or carry its LIBOR Credit Extensions and
any loss, expense or liability incurred by Bank in connection with the
liquidation or re-employment of such funds) such that Bank may incur: (i) if for
any reason (other than a default by Bank or due to any failure of Bank to fund
LIBOR Credit Extensions due to impracticability or illegality under
Sections 3.7(d) and 3.7(e)) a borrowing or a conversion to or continuation of
any LIBOR Credit Extension does not occur on a date specified in a Notice of
Borrowing or a Notice of Conversion/Continuation, as the case may be, or (ii) if
any principal payment or any conversion of any of its LIBOR Credit Extensions
occurs on a date prior to the last day of an Interest Period applicable to that
Credit Extension.

 

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(d) Assumptions Concerning Funding of LIBOR Credit Extensions. Calculation of
all amounts payable to Bank under this Section 3.6 and under Section 3.4 shall
be made as though Bank had actually funded each of its relevant LIBOR Credit
Extensions through the purchase of a Eurodollar deposit bearing interest at the
rate obtained pursuant to the definition of LIBOR Rate in an amount equal to the
amount of such LIBOR Credit Extension and having a maturity comparable to the
relevant Interest Period; provided, however, that Bank may fund each of its
LIBOR Credit Extensions in any manner it sees fit and the foregoing assumptions
shall be utilized only for the purposes of calculating amounts payable under
this Section 3.6 and under Section 3.4.

(e) LIBOR Credit Extensions After Default. After the occurrence and during the
continuance of an Event of Default, (i) Borrower may not elect to have any
Credit Extension be made or continued as, or converted to, a LIBOR Credit
Extension after the expiration of any Interest Period then in effect for such
Credit Extension and (ii) subject to the provisions of Section 3.6(c), any
Notice of Conversion/Continuation given by Borrower with respect to a requested
conversion/continuation that has not yet occurred shall be deemed to be
rescinded by Borrower and be deemed a request to convert or continue Credit
Extensions referred to therein as Prime Rate Credit Extensions.

3.7 Additional Requirements/Provisions Regarding LIBOR Credit Extensions.

(a) If for any reason (including voluntary or mandatory prepayment or
acceleration), Bank receives all or part of the principal amount of a LIBOR
Credit Extension prior to the last day of the Interest Period for such Credit
Extension, Borrower shall immediately notify Borrower’s account officer at Bank
and, on demand by Bank, pay Bank the amount (if any) by which (i) the additional
interest which would have been payable on the amount so received had it not been
received until the last day of such Interest Period exceeds (ii) the interest
which would have been recoverable by Bank by placing the amount so received on
deposit in the certificate of deposit markets, the offshore currency markets, or
United States Treasury investment products, as the case may be, for a period
starting on the date on which it was so received and ending on the last day of
such Interest Period at the interest rate determined by Bank in its reasonable
discretion. Bank’s determination as to such amount shall be conclusive absent
manifest error.

(b) Borrower shall pay Bank, upon demand by Bank, from time to time such amounts
as Bank may reasonably determine to be necessary to compensate it for any costs
incurred by Bank that Bank determines are attributable to its making or
maintaining of any amount receivable by Bank hereunder in respect of any Credit
Extensions relating thereto (such increases in costs and reductions in amounts
receivable being herein called “Additional Costs”), in each case resulting from
any Regulatory Change which:

(1) changes the basis of taxation of any amounts payable to Bank under this
Agreement in respect of any Credit Extensions (other than changes which affect
taxes measured by or imposed on the overall net income of Bank);

(2) imposes or modifies any reserve, special deposit or similar requirements
relating to any Credit Extensions based upon a LIBOR Rate; or

(3) imposes any other material condition affecting this Agreement (or any of
such extensions of credit or liabilities).

Bank will notify Borrower of any event occurring after the Effective Date which
will entitle Bank to compensation pursuant to this Section 3.7 as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation. Bank will furnish Borrower with a statement setting forth the
basis and amount of each request by Bank for compensation under this
Section 3.7. Determinations and allocations by Bank for purposes of this
Section 3.7 of the effect of any Regulatory Change on its costs of maintaining
its obligations to make Credit Extensions, of making or maintaining Credit
Extensions, or on amounts receivable by it in respect of Credit Extensions, and
of the additional amounts required to compensate Bank in respect of any
Additional Costs, shall be conclusive absent manifest error.

 

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(c) If Bank shall reasonably determine that the adoption or implementation of
any applicable law, rule, regulation, or treaty regarding capital adequacy, or
any change therein, or any change in the interpretation or administration
thereof by any governmental authority, central bank, or comparable agency
charged with the interpretation or administration thereof, or compliance by Bank
(or its applicable lending office) with any respect or directive regarding
capital adequacy (whether or not having the force of law) of any such authority,
central bank, or comparable agency, has or would have the effect of reducing the
rate of return on capital of Bank or any person or entity controlling Bank (a
“Parent”) as a consequence of its obligations hereunder to a level below that
which Bank (or its Parent) could have achieved but for such adoption, change, or
compliance (taking into consideration policies with respect to capital adequacy)
by an amount deemed by Bank to be material, then from time to time, within
fifteen (15) days after demand by Bank, Borrower shall pay to Bank such
additional amount or amounts as will compensate Bank for such reduction. A
statement of Bank claiming compensation under this Section 3.7(c) and setting
forth the additional amount or amounts to be paid to it hereunder shall be
conclusive absent manifest error.

(d) If, at any time, Bank, in its commercially reasonable discretion, determines
that (i) the amount of LIBOR Credit Extensions for periods equal to the
corresponding Interest Periods are not available to Bank in the offshore
currency interbank markets, or (ii) LIBOR does not accurately reflect the cost
to Bank of lending the LIBOR Credit Extensions, then Bank shall promptly give
notice thereof to Borrower. Upon the giving of such notice, Bank’s obligation to
make the LIBOR Credit Extensions shall terminate; provided, however, Credit
Extensions shall not terminate if Bank and Borrower agree in writing to a
different interest rate applicable to LIBOR Credit Extensions.

(e) If it shall become unlawful for Bank to continue to fund or maintain any
LIBOR Credit Extensions, or to perform its obligations hereunder in respect of
LIBOR Credit Extensions, upon demand by Bank, Borrower shall prepay the Credit
Extensions in full with accrued interest thereon and all other amounts payable
by Borrower hereunder (including, without limitation, any amount payable in
connection with such prepayment pursuant to Section 3.7(a)) or Borrower shall
convert such Credit Extensions to Prime Rate Credit Extensions. Notwithstanding
the foregoing, to the extent a determination by Bank as described above relates
to a LIBOR Credit Extension then being requested by Borrower pursuant to a
Notice of Borrowing or a Notice of Conversion/Continuation, Borrower shall have
the option, subject to the provisions of Section 3.6(c), to (i) rescind such
Notice of Borrowing or Notice of Conversion/Continuation by giving notice (by
facsimile or by telephone confirmed in writing) to Bank of such rescission on
the date on which Bank gives notice of its determination as described above, or
(ii) modify such Notice of Borrowing or Notice of Conversion/Continuation to
obtain a Prime Rate Credit Extension or to have outstanding Credit Extensions
converted into or continued as Prime Rate Credit Extensions by giving notice (by
facsimile or by telephone confirmed in writing) to Bank of such modification on
the date on which Bank gives notice of its determination as described above.

4 CREATION OF SECURITY INTEREST

4.1 Grant of Security Interest. Borrower hereby grants Bank, to secure the
payment and performance in full of all of the Obligations, a continuing security
interest in, and pledges to Bank, the Collateral, wherever located, whether now
owned or hereafter acquired or arising, and all proceeds and products thereof.

4.2 Priority of Security Interest. Borrower represents, warrants, and covenants
that the security interest granted herein is and shall at all times continue to
be a first priority perfected security interest in the Collateral (subject only
to Permitted Liens that may have superior priority to Bank’s Lien under this
Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall
promptly notify Bank in a writing signed by Borrower of the general details
thereof and grant to Bank in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance reasonably satisfactory to Bank.

If this Agreement is terminated, Bank’s Lien in the Collateral shall continue
until the Obligations (other than inchoate indemnity obligations) are repaid in
full in cash. Upon payment in full in cash of the Obligations and at such time
as Bank’s obligation to make Credit Extensions has terminated, Bank shall, at
Borrower’s sole cost and expense, release its Liens in the Collateral and all
rights therein shall revert to Borrower and Guarantor, as applicable.

4.3 Authorization to File Financing Statements. Borrower hereby authorizes Bank
to file financing statements, without notice to Borrower, with all appropriate
jurisdictions to perfect or protect Bank’s interest or

 

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rights hereunder, including a notice that any disposition of the Collateral, by
either Borrower or any other Person, shall be deemed to violate the rights of
Bank under the Code. Such financing statements may indicate the Collateral as
“all assets of the Debtor” with the exceptions referenced on Exhibt A hereto or
words of similar effect, or as being of an equal or lesser scope, or with
greater detail, all in Bank’s discretion.

5 REPRESENTATIONS AND WARRANTIES

Borrower represents and warrants as follows:

5.1 Due Organization and Authorization; Power and Authority. Borrower and each
of its Subsidiaries is duly existing and in good standing as a Registered
Organization in its respective jurisdiction of formation and is qualified and
licensed to do business and is in good standing in any jurisdiction in which the
conduct of its business or its ownership of property requires that it be
qualified except where the failure to do so could not reasonably be expected to
have a material adverse effect on Borrower’s business. In connection with this
Agreement, Borrower has delivered to Bank a completed certificate substantially
in the form attached hereto as Exhibit F signed by Borrower and each Guarantor
entitled “Perfection Certificate”. Borrower represents and warrants to Bank that
(a) Borrower’s and covering the matters set forth therein in respect of Borrower
and each Guarantor’s exact legal name is that indicated on the Perfection
Certificate and, in the case of the Borrower, on the signature page hereof;
(b) Borrower and each Guarantor is an organization of the type and is organized
in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection
Certificate accurately sets forth Borrower’s and each Guarantor’s organizational
identification number or accurately states that Borrower or such Guarantor has
none; (d) the Perfection Certificate accurately sets forth Borrower’s and each
Guarantor’s place of business, or, if more than one, each chief executive office
as well as Borrower’s and each Guarantor’s mailing address (if different than
its chief executive office); (e) Borrower, each Guarantor (and each of their
predecessors) has not, in the past five (5) years, changed its jurisdiction of
formation, organizational structure or type, or any organizational number
assigned by its jurisdiction; and (f) all other information set forth on the
Perfection Certificate pertaining to Borrower and each Guarantor is accurate and
complete. If Borrower or any Guarantor is not now a Registered Organization but
later becomes one, Borrower or such Guarantor, as the case may be, shall
promptly notify Bank of such occurrence and provide Bank with Borrower’s or such
Guarantor’s organizational identification number.

The execution, delivery and performance by Borrower and each Guarantor of the
Loan Documents to which it is a party have been duly authorized, and do not
(i) conflict with any of Borrower’s or Guarantor’s organizational documents,
(ii) contravene, conflict with, constitute a default under or violate any
material Requirement of Law, (iii) contravene, conflict or violate any
applicable order, writ, judgment, injunction, decree, determination or award of
any Governmental Authority by which Borrower or any of its Subsidiaries or any
of their property or assets may be bound or affected, (iv) require any action
by, filing, registration, or qualification with, or Governmental Approval from,
any Governmental Authority (except such Governmental Approvals which have
already been obtained and are in full force and effect) or (v) constitute an
event of default under any material agreement by which Borrower is bound.
Borrower is not in default under any agreement to which it is a party or by
which it is bound in which the default could reasonably be expected to have a
material adverse effect on Borrower’s business.

5.2 Collateral. Borrower has good title to, has rights in, and the power to
transfer each item of Collateral upon which it purports to grant a Lien
hereunder, free and clear of any and all Liens except Permitted Liens. Borrower
and each Guarantor have no Deposit Accounts other than the Deposit Accounts with
Bank and Deposit Accounts described in the Perfection Certificate delivered to
Bank in connection herewith, or of which Borrower has given Bank notice and
taken such actions as are necessary to give Bank a perfected security interest
therein. The Accounts are bona fide, existing obligations of the Account
Debtors.

The Collateral is not in the possession of any third party bailee (such as a
warehouse) except as otherwise provided in the Perfection Certificate. None of
the components of the Collateral shall be maintained at locations other than as
provided in the Perfection Certificate or as permitted pursuant to Section 7.2.

Each of Borrower and Guarantor is the sole owner of the Intellectual Property
which it owns or purports to own except for (a) non-exclusive licenses granted
to its customers in the ordinary course of business, (b) over-the-counter
software that is commercially available to the public, and (c) material
Intellectual Property licensed to Borrower and noted on the Perfection
Certificate. Each Patent which it owns or purports to own and which is material
to Borrower’s business is valid and enforceable, and no part of the Intellectual
Property which Borrower

 

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owns or purports to own and which is material to Borrower’s business has been
judged invalid or unenforceable, in whole or in part. To the best of Borrower’s
knowledge, no claim has been made that any part of the Intellectual Property
violates the rights of any third party except to the extent such claim would not
reasonably be expected to have a material adverse effect on Borrower’s business.

Except as noted on the Perfection Certificate, neither Borrower nor Guarantor is
a party to, or is bound by, any Restricted License.

5.3 Accounts Receivable. For any Eligible Account in any Borrowing Base
Certificate, all statements made and all unpaid balances appearing in all
invoices, instruments and other documents evidencing such Eligible Accounts are
true and correct in all material respects and all such invoices, instruments and
other documents, and all of Borrower’s Books are genuine and in all respects
what they purport to be. If an Event of Default has occurred and is continuing,
Bank may notify any Account Debtor owing Borrower money of Bank’s security
interest in such funds and verify the amount of such Eligible Account. All sales
and other transactions underlying or giving rise to each Eligible Account comply
in all material respects with all applicable laws and governmental rules and
regulations. Borrower has no knowledge of any actual or imminent Insolvency
Proceeding of any Account Debtor whose accounts are Eligible Accounts in any
Borrowing Base Certificate. To the best of Borrower’s knowledge, all signatures
and endorsements on all documents, instruments, and agreements relating to all
Eligible Accounts are genuine, and all such documents, instruments and
agreements are legally enforceable in accordance with their terms.

5.4 Litigation. There are no actions or proceedings pending or, to the knowledge
of the Responsible Officers, threatened in writing by or against Borrower or any
of its Subsidiaries involving more than, individually or in the aggregate, Five
Hundred Thousand Dollars ($500,000).

5.5 Financial Statements; Financial Condition. All consolidated and
consolidating financial statements for Borrower and any of its Subsidiaries
delivered to Bank fairly present in all material respects Borrower’s
consolidated financial condition and Borrower’s consolidated results of
operations. There has not been any material deterioration in Borrower’s
consolidated financial condition since the date of the most recent financial
statements of Borrower submitted to Bank.

5.6 Solvency. The fair salable value of Borrower’s assets (including goodwill
minus disposition costs) exceeds the fair value of its liabilities; Borrower is
not left with unreasonably small capital after the transactions in this
Agreement; and Borrower is able to pay its debts (including trade debts) as they
mature.

5.7 Regulatory Compliance. Borrower is not an “investment company” or a company
“controlled” by an “investment company” under the Investment Company Act of
1940, as amended. Borrower is not engaged as one of its important activities in
extending credit for margin stock (under Regulations X, T and U of the Federal
Reserve Board of Governors). Borrower has complied in all material respects with
the Federal Fair Labor Standards Act. Neither Borrower nor any of its
Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or
a “subsidiary company” of a “holding company” as each term is defined and used
in the Public Utility Holding Company Act of 2005. Borrower has not violated any
laws, ordinances or rules, the violation of which could reasonably be expected
to have a material adverse effect on its business. None of Borrower’s or any of
its Subsidiaries’ properties or assets has been used by Borrower or any
Subsidiary or, to Borrower’s knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous substance other than
legally. Borrower and each of its Subsidiaries have obtained all consents,
approvals and authorizations of, made all declarations or filings with, and
given all notices to, all Government Authorities that are necessary to continue
their respective businesses as currently conducted.

5.8 Subsidiaries; Investments. Borrower does not own any stock, partnership
interest or other equity securities except for Permitted Investments.

5.9 Tax Returns and Payments; Pension Contributions. Borrower and its
Subsidiaries have timely filed all required tax returns and reports, and
Borrower and its Subsidiaries have timely paid all foreign, federal, state and
local taxes, assessments, deposits and contributions owed by Borrower. Borrower
may defer payment of any contested taxes, provided that Borrower (a) in good
faith contests its obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (b) notifies Bank in writing
of the commencement of, and any material development in, any proceedings
relating to any material taxes, and (c) posts bonds or takes any

 

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other steps required to prevent the governmental authority levying such
contested taxes from obtaining a Lien upon any of the Collateral that is other
than a “Permitted Lien”. Borrower is unaware of any claims or adjustments
proposed for any of Borrower’s prior tax years which could result in additional
taxes becoming due and payable by Borrower. Borrower has paid all amounts
necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not withdrawn from
participation in, and has not permitted partial or complete termination of, or
permitted the occurrence of any other event with respect to, any such plan which
could reasonably be expected to result in any liability of Borrower, including
any liability to the Pension Benefit Guaranty Corporation or its successors or
any other governmental agency.

5.10 Use of Proceeds. Borrower shall use the proceeds of the Credit Extensions
solely as working capital, for acquisitions, and to fund its general business
requirements and not for personal, family, household or agricultural purposes.

5.11 Full Disclosure. No written representation, warranty or other statement of
Borrower in any certificate or written statement given to Bank, as of the date
such representation, warranty, or other statement was made, taken together with
all such written certificates and written statements given to Bank, contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statements contained in the certificates or statements not
misleading (it being recognized by Bank that the projections and forecasts
provided by Borrower in good faith and based upon reasonable assumptions are not
viewed as facts and that actual results during the period or periods covered by
such projections and forecasts may differ materially from the projected or
forecasted results).

5.12 Definition of “Knowledge.” For purposes of the Loan Documents, whenever a
representation or warranty is made to Borrower’s knowledge or awareness, to the
“best of” Borrower’s knowledge, or with a similar qualification, knowledge or
awareness means the actual knowledge, after reasonable investigation, of the
Responsible Officers.

6 AFFIRMATIVE COVENANTS

Borrower shall do all of the following:

6.1 Government Compliance.

(a) Maintain its and all its Subsidiaries’ (other than the Inactive
Subsidiaries) legal existence and good standing in their respective
jurisdictions of formation and maintain qualification in each jurisdiction in
which the failure to so qualify would reasonably be expected to have a material
adverse effect on Borrower’s business or operations. Borrower shall comply, and
have each Subsidiary comply, with all laws, ordinances and regulations to which
it is subject, noncompliance with which could have a material adverse effect on
Borrower’s business.

(b) Obtain all of the Governmental Approvals necessary for the performance by
Borrower of its obligations under the Loan Documents to which it is a party and
the grant of a security interest to Bank in all of its property. Borrower shall
promptly provide copies of any such obtained Governmental Approvals to Bank.

6.2 Financial Statements, Reports, Certificates. Deliver to Bank:

(a) A/R Agings. As soon as available, and in any event within forty-five
(45) days after the end of each quarter, accounts receivable agings, aged by
invoice date;

(b) Borrowing Base Reports. At any time that a Borrowing Base Period is in
effect and there are any outstanding Advances or Obligations in respect of
Letters of Credit, FX Forward contracts or Cash Management Services which equal
or exceed $4,000,000, as soon as available, and in any event within thirty
(30) days after the end of each month, a Borrowing Base Certificate signed by a
Responsible Officer together with (A) monthly accounts receivable agings, aged
by invoice date, (B) monthly accounts payable agings, aged by invoice date, and
outstanding or held check registers, if any, and (C) monthly reconciliations of
accounts receivable agings (aged by invoice date), Borrowing Base Certificate,
deferred revenue report and general ledger;

 

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(c) Monthly Compliance Certificate. Within thirty (30) days after the last day
of each month, a duly completed Compliance Certificate signed by a Responsible
Officer, certifying that as of the end of such month, Borrower was in full
compliance with all of the terms and conditions of this Agreement, and setting
forth calculations showing compliance with the financial covenants set forth in
this Agreement and such other information as Bank shall reasonably request;

(d) Quarterly Financial Statements. As soon as available, and in any event
within forty-five (45) days after the end of each fiscal quarter of Borrower and
its Subsidiaries (including, without limitation, each fiscal quarter ending
June 30 of each fiscal year), consolidated and consolidating quarterly unaudited
financial statements of the Borrower and its Subsidiaries (including the income
statement, balance sheet, and cash flow statement), together with comparative
figures to (i) Borrower’s budget for such period, (ii) the same period in
Borrower’s previous fiscal year and (iii) the previous quarter (the financial
statements for the fiscal quarter ending June 30 of each fiscal year and the
consolidating financial statements for each fiscal quarter shall be internally
prepared by Borrower);

(e) Annual Audited Financial Statements. As soon as available, but no later than
ninety (90) days after the last day of each fiscal year of Borrower and its
Subsidiaries, audited consolidated financial statements prepared under GAAP,
consistently applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm acceptable to
Bank in its reasonable discretion;

(f) Annual Projections. Within forty-five (45) days after the end of each fiscal
year of Borrower, annual operating budgets (including income statements, balance
sheets and cash flow statements, by quarter) for the upcoming fiscal year of
Borrower, as approved by Borrower’s board of directors;

(g) Other Statements. Within five (5) Business Days of delivery, copies of all
statements, reports and notices made available to Borrower’s security holders or
to any holders of Subordinated Debt;

(h) SEC Filings. Within ten (10) days of filing, copies of all periodic and
other reports, proxy statements and other materials filed by Borrower with the
SEC, any Governmental Authority succeeding to any or all of the functions of the
SEC or with any national securities exchange, or distributed to its
shareholders, as the case may be. Documents required to be delivered pursuant to
the terms hereof (to the extent any such documents are included in materials
otherwise filed with the SEC) may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date on which Borrower
posts such documents, or provides a link thereto, on Borrower’s website on the
Internet at Borrower’s website address;

(i) Legal Action Notice. Within ten (10) days of such event, a report of any
legal actions pending or threatened in writing against Borrower or any of its
Subsidiaries that could result in damages or costs to Borrower or any of its
Subsidiaries of, individually or in the aggregate, Five Hundred Thousand Dollars
($500,000) or more;

(j) Intellectual Property Notice. Prompt written notice of (i) any material
change in the composition of the Intellectual Property of Borrower or any
Guarantor, (ii) the registration of any copyright, including any subsequent
ownership right of Borrower or any Guarantor in or to any copyright, patent or
trademark not shown in the IP Security Agreement, and (iii) Borrower’s knowledge
of an event that could reasonably be expected to materially and adversely affect
the value of the Intellectual Property of Borrower or any Guarantor; and

(k) Other Financial Information. Budgets, sales projections, operating plans and
other financial information reasonably requested by Bank.

6.3 Inventory; Returns. Keep all Inventory in good and marketable condition,
free from material defects. Returns and allowances between Borrower and its
Account Debtors shall follow Borrower’s customary practices as they exist at the
Effective Date. Borrower must notify Bank of all returns, recoveries, disputes
and claims that involve more than Five Hundred Thousand Dollars ($500,000)
within ten (10) days of such event.

6.4 Taxes; Pensions. Timely file, and cause each of its Subsidiaries (other than
the Inactive Subsidiaries with respect to non-material taxes) to timely file,
all required tax returns and reports and timely pay, and require each of its
Subsidiaries (other than the Inactive Subsidiaries with respect to non-material
taxes) to timely pay, all foreign, federal, state and local taxes, assessments,
deposits and contributions owed by Borrower and each

 

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of its Subsidiaries (other than the Inactive Subsidiaries with respect to
non-material taxes), except for deferred payment of any taxes contested pursuant
to the terms of Section 5.9 hereof, and shall deliver to Bank, on demand,
appropriate certificates attesting to such payments, and pay all amounts
necessary to fund all present pension, profit sharing and deferred compensation
plans in accordance with their terms.

6.5 Insurance. Keep its business and the Collateral insured for risks and in
amounts standard for companies in Borrower’s industry and location and as Bank
may reasonably request. Insurance policies shall be in a form, with companies,
and in amounts that are reasonably satisfactory to Bank. All property policies
shall have a lender’s loss payable endorsement showing Bank as lender loss payee
and waive subrogation against Bank and shall provide that the insurer must give
Bank at least twenty (20) days notice before canceling, amending, or declining
to renew its policy. All liability policies shall show, or have endorsements
showing, Bank as an additional insured, and all such policies (or the loss
payable and additional insured endorsements) shall provide that the insurer
shall endeavor to give Bank at least twenty (20) days notice before canceling,
amending, or declining to renew its policy. At Bank’s request, Borrower shall
deliver certified copies of policies and evidence of all premium payments.
Proceeds payable under any policy shall, at Bank’s option, be payable to Bank on
account of the Obligations. If Borrower fails to obtain insurance as required
under this Section 6.5 or to pay any amount or furnish any required proof of
payment to third persons and Bank, Bank may make all or part of such payment or
obtain such insurance policies required in this Section 6.5, and take any action
under the policies Bank deems prudent.

6.6 Operating Accounts.

(a) Maintain all of its and all of the Guarantor’s primary operating and other
deposit accounts with Bank, provided that Borrower and Guarantor may maintain
accounts at Bank of America until February 28, 2010. Maintain all of its and all
of the Guarantor’s primary securities accounts (other than the securities
account in which the Pledged ARS are held, provided that the assets maintained
in such securities account consist solely of the Pledged ARS) with Bank which
securities accounts shall contain a majority of the cash and other investments
of Borrower and its Subsidiaries. Borrower shall establish a lockbox account
with Bank on or prior to April 15, 2010, into which the proceeds of Borrower’s
accounts receivable shall be deposited.

(b) Provide Bank five (5) days prior written notice before establishing any
Collateral Account at or with any bank or financial institution other than Bank
or Bank’s Affiliates. For each Collateral Account that Borrower at any time
maintains, Borrower shall cause the applicable bank or financial institution
(other than Bank) at or with which any Collateral Account is maintained to
execute and deliver a Control Agreement or other appropriate instrument with
respect to such Collateral Account to perfect Bank’s Lien in such Collateral
Account in accordance with the terms hereunder which Control Agreement may not
be terminated without the prior written consent of Bank. The provisions of the
previous sentence shall not apply to deposit accounts exclusively used for
payroll, payroll taxes and other employee wage and benefit payments to or for
the benefit of Borrower’s employees and identified to Bank by Borrower as such.

6.7 Financial Covenants. Achieve with respect to Borrower and its Subsidiaries
on a consolidated basis:

(a) Adjusted Quick Ratio. At all times a ratio of Quick Assets to Current
Liabilities minus the current portion of Deferred Revenue and minus Borrower’s
Indebtedness under the ARS Credit Facility of at least 1.50 to 1.0, which ratio
shall be tested monthly.

(b) Minimum Cash Flow. At any time a Borrowing Base Period is in effect, Minimum
Cash Flow of at least $15,000,000, which will be tested quarterly on a trailing
four quarter basis.

6.8 Protection and Registration of Intellectual Property Rights.

(a) (i) Protect, defend and maintain the validity and enforceability of its
Intellectual Property; (ii) advise Bank in writing of material infringements of
its Intellectual Property within five (5) days of Borrower’s knowledge of such
infringement; and (iii) not allow any Intellectual Property material to
Borrower’s business to be abandoned, forfeited or dedicated to the public
without Bank’s written consent.

(b) If Borrower (i) obtains any Patent, registered Trademark, registered
Copyright, registered mask work, or any pending application for any of the
foregoing, whether as owner, licensee or otherwise, or (ii)

 

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applies for any Patent or the registration of any Trademark, then Borrower shall
provide written notice thereof to Bank within five (5) days of such application
or issuance and shall execute such intellectual property security agreements and
other documents and take such other actions as Bank shall request in its good
faith business judgment to perfect and maintain a first priority perfected
security interest in favor of Bank in such property. If Borrower decides to
register any Copyrights or mask works in the United States Copyright Office,
Borrower shall: (x) provide Bank with at least fifteen (15) days prior written
notice of Borrower’s intent to register such Copyrights or mask works together
with a copy of the application it intends to file with the United States
Copyright Office (excluding exhibits thereto); (y) execute an intellectual
property security agreement and such other documents and take such other actions
as Bank may request in its good faith business judgment to perfect and maintain
a first priority perfected security interest in favor of Bank in the Copyrights
or mask works intended to be registered with the United States Copyright Office;
and (z) record such intellectual property security agreement with the United
States Copyright Office contemporaneously with filing the Copyright or mask work
application(s) with the United States Copyright Office. Borrower shall promptly
provide to Bank copies of all applications that it files for Patents or for the
registration of Trademarks, Copyrights or mask works, together with evidence of
the recording of the intellectual property security agreement necessary for Bank
to perfect and maintain a first priority perfected security interest in such
property.

(c) Provide written notice to Bank within thirty (30) days of entering or
becoming bound by any Restricted License (other than over-the-counter software
that is commercially available to the public). Borrower shall take such steps as
Bank requests to obtain the consent of, or waiver by, any person whose consent
or waiver is necessary for (i) any Restricted License to be deemed “Collateral”
and for Bank to have a security interest in it that might otherwise be
restricted or prohibited by law or by the terms of any such Restricted License,
whether now existing or entered into in the future, and (ii) Bank to have the
ability in the event of a liquidation of any Collateral to dispose of such
Collateral in accordance with Bank’s rights and remedies under this Agreement
and the other Loan Documents.

6.9 Litigation Cooperation. From the date hereof and continuing through the
termination of this Agreement, make available to Bank, without expense to Bank,
Borrower and its officers, employees and agents and Borrower’s books and
records, to the extent that Bank may deem them reasonably necessary to prosecute
or defend any third-party suit or proceeding instituted by or against Bank with
respect to any Collateral or relating to Borrower.

6.10 Access to Collateral; Books and Records. Allow Bank, or its agents, at
reasonable times, on two (2) Business Day’s notice (provided no notice is
required if an Event of Default has occurred and is continuing), to inspect the
Collateral and audit and copy Borrower’s Books, provided that no collateral
exams shall be conducted at any time a Borrowing Base Period is not in effect
and the Borrower is in compliance with the financial covenants set forth in
Section 6.7 hereof (unless an Event of Default has occurred and is continuing,
in which case Bank may conduct such inspections or audits at any time ). Such
inspections or audits shall be conducted within thirty (30) days of the start of
any Borrowing Base Period if there are (i) any outstanding Advances or
Acquisition Loans or (ii) outstanding Obligations in respect of Letters of
Credit, FX Forward contracts or Cash Management Services which in excess of
$4,000,000. The foregoing inspections and audits shall be at Borrower’s expense,
and the charge therefor shall be $850 per person per day (or such higher amount
as shall represent Bank’s then-current standard charge for the same), plus
reasonable out-of-pocket expenses. In the event Borrower and Bank schedule an
audit more than ten (10) days in advance, and Borrower cancels or seeks to
reschedule the audit with less than ten (10) days written notice to Bank, then
(without limiting any of Bank’s rights or remedies), Borrower shall pay Bank a
fee of $1,000 plus any out-of-pocket expenses incurred by Bank to compensate
Bank for the anticipated costs and expenses of the cancellation or rescheduling.

6.11 Existing Subsidiaries. The UK Subsidiary, the Japanese Subsidiary and the
Inactive Subsidiaries, will not, as of the Effective Date, be required by Bank
to provide a guaranty of the Borrower’s obligations under the Loan Documents. In
the event, however, that either (i) the UK Subsidiary at any time (A) has
aggregate total assets in excess of $5,000,000 or (B) has aggregate cash and
cash equivalents in excess of $3,000,000, or (ii) the Japanese Subsidiary (A) at
any time during the period commencing on the Effective Date and ending on the
date that is ninety (90) days thereafter has aggregate total assets in excess of
$8,000,000 or has aggregate cash and cash equivalents in excess of $6,000,000 or
(B) at any time after the date that is ninety days after the Effective Date, has
aggregate total assets in excess of $5,000,000 or has aggregate cash and cash
equivalents in excess of $3,000,000, Borrower shall cause the respective entity
to provide to Bank (1) a 100% guaranty of the Borrower’s obligations under the
Loan Documents, (2) if requested by Bank, such appropriate security agreements,
financing statements and/or control

 

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agreements, all in form and substance reasonably satisfactory to Bank sufficient
to grant Bank a first priority Lien (subject to Permitted Liens) in and to the
assets of such entity, and (3) all other documentation in form and substance
satisfactory to Bank, including one or more opinions of counsel satisfactory to
Bank, which in Bank’s opinion is appropriate with respect to the execution and
delivery of the applicable documentation referred to above. Borrower shall not
permit the UK Subsidiary or the Japanese Subsidiary to incur any Indebtedness
(other than ordinary course trade debt) or to subject their respective assets to
any lien (other than liens in favor of Bank). Borrower may make additional
Investments in the UK Subsidiary and the Japanese Subsidiary in an amount not to
exceed $500,000 per year. Borrower shall cause each Inactive Subsidiary (i) to
be dissolved within ninety (90) days of the Effective Date or (ii) to remain
inactive with no material assets or business activities. Borrower shall not
permit any Inactive Subsidiary to incur any Indebtedness or to subject their
respective assets to any lien (other than liens in favor of Bank).

6.12 Formation or Acquisition of Subsidiaries. At the time that Borrower or any
Guarantor forms any direct or indirect Subsidiary or acquires any direct or
indirect Subsidiary after the Effective Date, Borrower and such Guarantor shall
(a) cause such new Subsidiary to provide to Bank a joinder to the Loan Agreement
to cause such Subsidiary to become a co-borrower hereunder, together with such
appropriate financing statements and/or Control Agreements, all in form and
substance reasonably satisfactory to Bank (including being sufficient to grant
Bank a first priority Lien (subject to Permitted Liens) in and to the assets of
such newly formed or acquired Subsidiary), (b) provide to Bank appropriate
certificates and powers and financing statements, pledging all of the direct or
beneficial ownership interest in such new Subsidiary, in form and substance
satisfactory to Bank, and (c) provide to Bank all other documentation in form
and substance reasonably satisfactory to Bank, including one or more opinions of
counsel satisfactory to Bank, which in its opinion is appropriate with respect
to the execution and delivery of the applicable documentation referred to above.
Any document, agreement, or instrument executed or issued pursuant to this
Section 6.12 shall be a Loan Document.

6.13 Further Assurances. Execute any further instruments and take further action
as Bank reasonably requests to perfect or continue Bank’s Lien in the Collateral
or to effect the purposes of this Agreement.

6.14 Exercise of ARS Rights and Repayment of ARS Credit Facility. Within thirty
(30) days after June 30, 2010, (i) Borrower shall exercise its “put” rights
under the ARS Rights, (ii) UBS AG shall repurchase from Borrower the Pledged ARS
at a purchase price equal to the par amount of such Pledged ARS plus interest,
and (ii) Borrower shall repay in full all of Borrower’s Indebtedness under the
ARS Credit Facility. Borrower shall not amend the ARS Credit facility without
the prior written consent of Bank.

7 NEGATIVE COVENANTS

Borrower shall not do any of the following without Bank’s prior written consent:

7.1 Dispositions. Convey, sell, lease, transfer, assign, or otherwise dispose of
(collectively, “Transfer”), or permit any of its Subsidiaries (other than the
Inactive Subsidiaries) to Transfer, all or any part of its business or property,
except for Transfers (a) of Inventory in the ordinary course of business; (b) of
worn-out or obsolete Equipment; (c) in connection with Permitted Liens and
Permitted Investments; (d) of non-exclusive licenses for the use of the property
of Borrower or its Subsidiaries in the ordinary course of business and (e) up to
$100,000 of non-ordinary course Transfers.

7.2 Changes in Business, Management, Ownership, or Business Locations.
(a) Engage in or permit any of its Subsidiaries to engage in any business other
than the businesses currently engaged in by Borrower and such Subsidiary, as
applicable, or reasonably related thereto; (b) liquidate or dissolve (other than
the Inactive Subsidiaries); or (c) (i) any Key Person ceases to hold such Key
Person’s office with Borrower and a replacement satisfactory to Borrower’s Board
of Directors is not made within 180 days after his or her departure from
Borrower; or (ii) enter into any transaction or series of related transactions
in which the stockholders of Borrower who were not stockholders immediately
prior to the first such transaction own more than 40% of the voting stock of
Borrower immediately after giving effect to such transaction or related series
of such transactions (other than by the sale of Borrower’s equity securities in
a public offering or to venture capital investors so long as Borrower identifies
to Bank the venture capital investors prior to the closing of the transaction
and provides to Bank a description of the material terms of the transaction).

 

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Borrower shall not, without at least twenty (20) days prior written notice to
Bank: (1) add any new offices or business locations, including warehouses
(unless such new offices or business locations contain less than Three Hundred
Fifty Thousand Dollars ($350,000) in Borrower’s assets or property) or deliver
any portion of the Collateral valued, individually or in the aggregate, in
excess of Three Hundred Fifty Thousand Dollars ($350,000) to a bailee at a
location other than to a bailee and at a location already disclosed in the
Perfection Certificate, (2) change its jurisdiction of organization, (3) change
its organizational structure or type, (4) change its legal name, or (5) change
any organizational number (if any) assigned by its jurisdiction of organization.
If Borrower intends to deliver any portion of the Collateral valued,
individually or in the aggregate, in excess of Three Hundred Fifty Thousand
Dollars ($350,000) to a bailee, and Bank and such bailee are not already parties
to a bailee agreement governing both the Collateral and the location to which
Borrower intends to deliver the Collateral, then Borrower will first receive the
written consent of Bank, and such bailee shall execute and deliver a bailee
agreement in form and substance satisfactory to Bank in its sole discretion.

7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
Subsidiaries to merge or consolidate, with any other Person, or acquire, or
permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person except where (a) total consideration
including cash and the value of any non-cash consideration (including any
earn-out), for all such transactions does not in the aggregate exceed Thirty
Million Dollars ($30,000,000), and the total cash consideration for all such
transactions does not in the aggregate exceed Twenty Million Dollars
($20,000,000); (b) no Event of Default has occurred and is continuing or would
exist after giving effect to the transactions; (c) the party to the transaction
other than the Borrower or Borrower’s Subsidiary is in the same line of business
as Borrower; (d) prior to the consummation of any such transaction, Bank shall
have received evidence satisfactory to Bank that before and after giving effect
to such transaction, Borrower will be in compliance with all of its covenants
under the Loan Documents, including the financial covenants set forth in
Section 6.7 hereof; (e) prior to the consummation of any such transaction, Bank
shall have received evidence satisfactory to Bank that such transaction will be
accretive to Borrower’s EBITDA; and (f) Borrower is the surviving legal entity.
A Subsidiary may merge or consolidate into another Subsidiary or into Borrower;
provided that with respect to mergers of a Subsidiary into the Borrower, the
Borrower will remain in existence after such merger.

7.4 Indebtedness. Create, incur, assume, or be liable for any Indebtedness, or
permit any Subsidiary to do so, other than Permitted Indebtedness.

7.5 Encumbrance. Create, incur, allow, or suffer any Lien on any of the
Collateral, or assign or convey any right to receive income, including the sale
of any Accounts, or permit any of its Subsidiaries to do so, except for
Permitted Liens, permit any Collateral not to be subject to the first priority
security interest granted herein, or enter into any agreement, document,
instrument or other arrangement (except with or in favor of Bank) with any
Person which directly or indirectly prohibits or has the effect of prohibiting
Borrower or any Subsidiary from assigning, mortgaging, pledging, granting a
security interest in or upon, or encumbering any of Borrower’s or any
Subsidiary’s Intellectual Property, except as is otherwise permitted in
Section 7.1 hereof and the definition of “Permitted Lien” herein.

7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except
pursuant to the terms of Section 6.6(b) hereof.

7.7 Distributions; Investments. (a) Pay any dividends or make any distribution
or payment or redeem, retire or purchase any capital stock provided that
(i) Borrower may convert any of its convertible securities into other securities
pursuant to the terms of such convertible securities or otherwise in exchange
thereof, (ii) Borrower may pay dividends solely in common stock; (iii) Borrower
may repurchase the stock of former employees or consultants pursuant to stock
repurchase agreements so long as an Event of Default does not exist at the time
of such repurchase and would not exist after giving effect to such repurchase,
provided such repurchase does not exceed in the aggregate of Fifty Thousand
Dollars ($50,000) per fiscal year and (iv) Borrower may purchase restricted
stock from employees in an amount sufficient for such employees to pay their tax
withholding obligation related to the vesting of such restricted stock, provided
that before and after giving effect to any such repurchase, no Event of Default
has occurred and is continuing; or (b) directly or indirectly make any
Investment other than Permitted Investments, or permit any of its Subsidiaries
to do so.

7.8 Transactions with Affiliates. Directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of Borrower, except for
transactions that are in the ordinary course of Borrower’s business, upon fair
and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm’s length transaction with a non-affiliated Person.

 

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7.9 Subordinated Debt. (a) Make or permit any payment on any Subordinated Debt,
except under the terms of the subordination, intercreditor, or other similar
agreement to which such Subordinated Debt is subject, or (b) amend any provision
in any document relating to the Subordinated Debt which would increase the
amount thereof or adversely affect the subordination thereof to Obligations owed
to Bank.

7.10 Compliance. Become an “investment company” or a company controlled by an
“investment company”, under the Investment Company Act of 1940, as amended, or
undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to have a material
adverse effect on Borrower’s business, or permit any of its Subsidiaries to do
so; withdraw or permit any Subsidiary to withdraw from participation in, permit
partial or complete termination of, or permit the occurrence of any other event
with respect to, any present pension, profit sharing and deferred compensation
plan which could reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.

8 EVENTS OF DEFAULT

Any one of the following shall constitute an event of default (an “Event of
Default”) under this Agreement:

8.1 Payment Default. Borrower fails to (a) make any payment of principal or
interest on any Credit Extension on its due date, or (b) pay any other
Obligations within five (5) Business Days after such Obligations are due and
payable (which five (5) Business Day cure period shall not apply to payments due
on the Revolving Line Maturity Date or the Acquisition Loan Maturity Date).
During the cure period, the failure to make or pay any payment specified under
clause (a) or (b) hereunder is not an Event of Default (but no Credit Extension
will be made during the cure period);

8.2 Covenant Default.

(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.4,
6.5, 6.6, 6.7 or 6.10 or violates any covenant in Section 7; or

(b) Borrower fails or neglects to perform, keep, or observe any other term,
provision, condition, covenant or agreement contained in this Agreement or any
Loan Documents, and as to any default (other than those specified in this
Section 8) under such other term, provision, condition, covenant or agreement
that can be cured, has failed to cure the default within twenty (20) days after
the occurrence thereof; provided, however, that if the default cannot by its
nature be cured within the twenty (20) day period or cannot after diligent
attempts by Borrower be cured within such twenty (20) day period, and such
default is likely to be cured within a reasonable time, then Borrower shall have
an additional period (which shall not in any case exceed thirty (30) days) to
attempt to cure such default, and within such reasonable time period the failure
to cure the default shall not be deemed an Event of Default (but no Credit
Extensions shall be made during such cure period). Cure periods provided under
this section shall not apply, among other things, to financial covenants or any
other covenants set forth in clause (a) above;

8.3 Material Adverse Change. A Material Adverse Change occurs;

8.4 Attachment; Levy; Restraint on Business.

(a) (i) The service of process seeking to attach, by trustee or similar process,
any funds of Borrower or of any entity under the control of Borrower (including
a Subsidiary) on deposit or otherwise maintained with Bank or any Bank
Affiliate, or (ii) a notice of lien or levy is filed against any of Borrower’s
assets having a value of $25,000 or greater by any government agency, and the
same under subclauses (i) and (ii) hereof are not, within ten (10) days after
the occurrence thereof, discharged or stayed (whether through the posting of a
bond or otherwise); provided, however, no Credit Extensions shall be made during
any ten (10) day cure period; or

 

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(b) (i) any material portion of Borrower’s assets is attached, seized, levied
on, or comes into possession of a trustee or receiver, or (ii) any court order
enjoins, restrains, or prevents Borrower from conducting any material part of
its business;

8.5 Insolvency (a) Borrower is unable to pay its debts (including trade debts)
as they become due or otherwise becomes insolvent or Borrower fails to be
solvent as described under Section 5.6 hereof; (b) Borrower begins an Insolvency
Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within forty-five (45) days (but no Credit Extensions shall
be made while of any of the conditions described in clause (a) exist and/or
until any Insolvency Proceeding is dismissed);

8.6 Other Agreements. There is, under any agreement to which Borrower or any
Guarantor is a party with a third party or parties, (a) any default resulting in
a right by such third party or parties, whether or not exercised, to accelerate
the maturity of any Indebtedness in an amount individually or in the aggregate
in excess of Five Hundred Thousand Dollars ($500,000); or (b) any default by
Borrower or Guarantor, the result of which could have a material adverse effect
on Borrower’s or any Guarantor’s business.

8.7 Judgments. One or more final judgments, orders, or decrees for the payment
of money in an amount, individually or in the aggregate, of at least Three
Hundred Fifty Thousand Dollars ($350,000) (not covered by independent
third-party insurance as to which liability has been accepted by such insurance
carrier) shall be rendered against Borrower and the same are not, within thirty
(30) days after the entry thereof, discharged or execution thereof stayed or
bonded pending appeal, or such judgments are not discharged prior to the
expiration of any such stay (provided that no Credit Extensions will be made
prior to the discharge, stay, or bonding of such judgment, order, or decree);

8.8 Misrepresentations. Borrower or any Person acting for Borrower makes any
representation, warranty, or other statement now or later in this Agreement, any
Loan Document or in any writing delivered to Bank or to induce Bank to enter
this Agreement or any Loan Document, and such representation, warranty, or other
statement is incorrect in any material respect when made;

8.9 Subordinated Debt. Any document, instrument, or agreement evidencing any
Subordinated Debt shall for any reason be revoked or invalidated or otherwise
cease to be in full force and effect, any Person shall be in breach thereof or
contest in any manner the validity or enforceability thereof or deny that it has
any further liability or obligation thereunder, or the Obligations shall for any
reason be subordinated or shall not have the priority contemplated by this
Agreement or the related Subordination or Intercreditor Agreement;

8.10 Guaranty. (a) Any guaranty of any Obligations terminates or ceases for any
reason to be in full force and effect; (b) any Guarantor does not perform any
obligation or covenant under any guaranty of the Obligations; (c) any
circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or 8.8 occurs with
respect to any Guarantor, or the liquidation, winding up, or termination of
existence of any Guarantor; or (e) (i) a material impairment in the perfection
or priority of Bank’s Lien in the collateral provided by Guarantor or in the
value of such collateral or (ii) a material adverse change in the general
affairs, management, results of operation, condition (financial or otherwise) or
the prospect of repayment of the Obligations occurs with respect to any
Guarantor; or

8.11 Governmental Approvals. [Reserved].

8.12 ARS Credit Facility. There is any default under the ARS Credit Facility or
Borrower’s obligations under the ARS Credit Facility become due and payable,
whether upon demand or otherwise, for any reason.

9 BANK’S RIGHTS AND REMEDIES

9.1 Rights and Remedies. While an Event of Default occurs and continues Bank
may, without notice or demand, do any or all of the following:

(a) declare all Obligations immediately due and payable (but if an Event of
Default described in Section 8.5 occurs all Obligations are immediately due and
payable without any action by Bank);

 

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(b) stop advancing money or extending credit for Borrower’s benefit under this
Agreement or under any other agreement between Borrower and Bank;

(c) demand that Borrower (i) deposit cash with Bank in an amount equal to 105%
(with respect to domestic Letters of Credit) or 110% (with respect to foreign
Letters of Credit) of the Dollar Equivalent of the aggregate face amount of all
Letters of Credit remaining undrawn (plus all interest, fees, and costs due or
to become due in connection therewith (as estimated by Bank in its good faith
business judgment)), to secure all of the Obligations relating to such Letters
of Credit, as collateral security for the repayment of any future drawings under
such Letters of Credit, and Borrower shall forthwith deposit and pay such
amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid
or payable over the remaining term of any Letters of Credit;

(d) terminate any FX Forward Contracts;

(e) settle or adjust disputes and claims directly with Account Debtors for
amounts on terms and in any order that Bank considers advisable, notify any
Person owing Borrower money of Bank’s security interest in such funds, and
verify the amount of such account;

(f) make any payments and do any acts it considers necessary or reasonable to
protect the Collateral and/or its security interest in the Collateral. Borrower
shall assemble the Collateral if Bank requests and make it available as Bank
designates. Bank may enter premises where the Collateral is located, take and
maintain possession of any part of the Collateral, and pay, purchase, contest,
or compromise any Lien which appears to be prior or superior to its security
interest and pay all expenses incurred. Borrower grants Bank a license to enter
and occupy any of its premises, without charge, to exercise any of Bank’s rights
or remedies;

(g) apply to the Obligations any (i) balances and deposits of Borrower it holds,
or (ii) any amount held by Bank owing to or for the credit or the account of
Borrower;

(h) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale,
advertise for sale, and sell the Collateral. Bank is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, Patents, Copyrights, mask works, rights of use of any name,
trade secrets, trade names, Trademarks, and advertising matter, or any similar
property as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank’s
exercise of its rights under this Section, Borrower’s rights under all licenses
and all franchise agreements inure to Bank’s benefit;

(i) place a “hold” on any account maintained with Bank and/or deliver a notice
of exclusive control, any entitlement order, or other directions or instructions
pursuant to any Control Agreement or similar agreements providing control of any
Collateral;

(j) demand and receive possession of Borrower’s Books; and

(k) exercise all rights and remedies available to Bank under the Loan Documents
or at law or equity, including all remedies provided under the Code (including
disposal of the Collateral pursuant to the terms thereof).

9.2 Power of Attorney. Borrower hereby irrevocably appoints Bank as its lawful
attorney-in-fact, exercisable upon the occurrence and during the continuance of
an Event of Default, to: (a) endorse Borrower’s name on any checks or other
forms of payment or security; (b) sign Borrower’s name on any invoice or bill of
lading for any Account or drafts against Account Debtors; (c) settle and adjust
disputes and claims about the Accounts directly with Account Debtors, for
amounts and on terms Bank determines reasonable; (d) make, settle, and adjust
all claims under Borrower’s insurance policies; (e) pay, contest or settle any
Lien, charge, encumbrance, security interest, and adverse claim in or to the
Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; and (f) transfer the Collateral into the name
of Bank or a third party as the Code permits. Borrower hereby appoints Bank as
its lawful attorney-in-fact to sign Borrower’s name on any documents necessary
to perfect or continue the perfection of Bank’s security interest in the
Collateral regardless of whether an Event of Default has occurred until all
Obligations have been satisfied in full and Bank is under no further obligation

 

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to make Credit Extensions hereunder. Bank’s foregoing appointment as Borrower’s
attorney in fact, and all of Bank’s rights and powers, coupled with an interest,
are irrevocable until all Obligations have been fully repaid and performed and
Bank’s obligation to provide Credit Extensions terminates.

9.3 Protective Payments. If Borrower fails to obtain the insurance called for by
Section 6.5 or fails to pay any premium thereon or fails to pay any other amount
which Borrower is obligated to pay under this Agreement or any other Loan
Document, Bank may obtain such insurance or make such payment, and all amounts
so paid by Bank are Bank Expenses and immediately due and payable, bearing
interest at the then highest rate applicable to the Obligations, and secured by
the Collateral. Bank will make reasonable efforts to provide Borrower with
notice of Bank obtaining such insurance at the time it is obtained or within a
reasonable time thereafter. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank’s waiver of any Event of Default.

9.4 Application of Payments and Proceeds Upon Default. If an Event of Default
has occurred and is continuing, Bank may apply any funds in its possession,
whether from Borrower account balances, payments, proceeds realized as the
result of any collection of Accounts or other disposition of the Collateral, or
otherwise, to the Obligations in such order as Bank shall determine in its sole
discretion. Any surplus shall be paid to Borrower or to other Persons legally
entitled thereto; Borrower shall remain liable to Bank for any deficiency. If
Bank, in its good faith business judgment, directly or indirectly enters into a
deferred payment or other credit transaction with any purchaser at any sale of
Collateral, Bank shall have the option, exercisable at any time, of either
reducing the Obligations by the principal amount of the purchase price or
deferring the reduction of the Obligations until the actual receipt by Bank of
cash therefor.

9.5 Bank’s Liability for Collateral. So long as Bank complies with reasonable
banking practices regarding the safekeeping of the Collateral in the possession
or under the control of Bank, Bank shall not be liable or responsible for:
(a) the safekeeping of the Collateral; (b) any loss or damage to the Collateral;
(c) any diminution in the value of the Collateral; or (d) any act or default of
any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of
loss, damage or destruction of the Collateral.

9.6 No Waiver; Remedies Cumulative. Bank’s failure, at any time or times, to
require strict performance by Borrower of any provision of this Agreement or any
other Loan Document shall not waive, affect, or diminish any right of Bank
thereafter to demand strict performance and compliance herewith or therewith. No
waiver hereunder shall be effective unless signed by the party granting the
waiver and then is only effective for the specific instance and purpose for
which it is given. Bank’s rights and remedies under this Agreement and the other
Loan Documents are cumulative. Bank has all rights and remedies provided under
the Code, by law, or in equity. Bank’s exercise of one right or remedy is not an
election and shall not preclude Bank from exercising any other remedy under this
Agreement or other remedy available at law or in equity, and Bank’s waiver of
any Event of Default is not a continuing waiver. Bank’s delay in exercising any
remedy is not a waiver, election, or acquiescence.

9.7 Demand Waiver. Borrower waives demand, notice of default or dishonor, notice
of payment and nonpayment, notice of any default, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.

10 NOTICES

All notices, consents, requests, approvals, demands, or other communication by
any party to this Agreement or any other Loan Document must be in writing and
shall be deemed to have been validly served, given, or delivered: (a) upon the
earlier of actual receipt and three (3) Business Days after deposit in the U.S.
mail, first class, registered or certified mail return receipt requested, with
proper postage prepaid; (b) upon transmission, when sent by electronic mail or
facsimile transmission; (c) one (1) Business Day after deposit with a reputable
overnight courier with all charges prepaid; or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address, facsimile number, or email address indicated
below. Bank or Borrower may change its mailing or electronic mail address or
facsimile number by giving the other party written notice thereof in accordance
with the terms of this Section 10.

 

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If to Borrower:    Mercury Computer Systems, Inc.    201 Riverneck Road   
Chelmsford, Massachusetts 01803    Attn: Chief Financial Officer    Fax: (978)
256-0013    Email: rhult@mc.com With a copy to:    Mercury Computer Systems,
Inc.    201 Riverneck Road    Chelmsford, Massachusetts 01803    Attn: General
Counsel    Fax: (978) 256-0013    Email: avanadzin@mc.com If to Bank:    Silicon
Valley Bank    One Newton Executive Park, Suite 200    2221 Washington Street,
Newton, MA 02462    Attn: Ms. Lara Chilton    Fax: (617) (617) 969-5973   
Email: lchilton@SVB.com with a copy to:    Riemer & Braunstein LLP    Three
Center Plaza    Boston, Massachusetts 02108    Attn: David A. Ephraim, Esquire
   Fax: (617) 880-3456    Email: DEphraim@riemerlaw.com

11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

Massachusetts law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Massachusetts; provided, however, that nothing
in this Agreement shall be deemed to operate to preclude Bank from bringing suit
or taking other legal action in any other jurisdiction to realize on the
Collateral or any other security for the Obligations, or to enforce a judgment
or other court order in favor of Bank. Borrower expressly submits and consents
in advance to the jurisdiction of the State and Federal Courts in Massachusetts
in any action or suit commenced in any such court, and Borrower hereby waives
any objection that it may have based upon lack of personal jurisdiction,
improper venue, or forum non conveniens and hereby consents to the granting of
such legal or equitable relief as is deemed appropriate by such court.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH HEREINABOVE, BANK SHALL
SPECIFICALLY HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER
OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH BANK DEEMS
NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE
ENFORCE BANK’S RIGHTS AGAINST BORROWER OR ITS PROPERTY.

TO THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR
RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED
UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,
INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A
MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY
HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

12 GENERAL PROVISIONS

12.1 Successors and Assigns. This Agreement binds and is for the benefit of the
successors and permitted assigns of each party. Borrower may not assign this
Agreement or any rights or obligations under it without Bank’s prior written
consent (which may be granted or withheld in Bank’s discretion). Bank has the
right,

 

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without the consent of or notice to Borrower, to sell, transfer, assign,
negotiate, or grant participation in all or any part of, or any interest in,
Bank’s obligations, rights, and benefits under this Agreement and the other Loan
Documents.

12.2 Indemnification. Borrower agrees to indemnify, defend and hold Bank and its
directors, officers, employees, agents, attorneys, or any other Person
affiliated with or representing Bank (each, an “Indemnified Person”) harmless
against: (a) all obligations, demands, claims, and liabilities (collectively,
“Claims”) claimed or asserted by any other party in connection with the
transactions contemplated by the Loan Documents; and (b) all losses or expenses
(including Bank Expenses) in any way suffered, incurred, or paid by such
Indemnified Person as a result of, following from, consequential to, or arising
from transactions contemplated by the Loan Documents between Bank and Borrower
(including reasonable attorneys’ fees and expenses), except for Claims and/or
losses directly caused by such Indemnified Person’s gross negligence or willful
misconduct.

12.3 Time of Essence. Time is of the essence for the performance of all
Obligations in this Agreement.

12.4 Severability of Provisions. Each provision of this Agreement is severable
from every other provision in determining the enforceability of any provision.

12.5 Correction of Loan Documents. Bank may fill in any blanks in the Loan
Documents consistent with the agreement of the parties.

12.6 Amendments in Writing; Waiver; Integration. No purported amendment or
modification of any Loan Document, or waiver, discharge or termination of any
obligation under any Loan Document, shall be enforceable or admissible unless,
and only to the extent, expressly set forth in a writing signed by the party
against which enforcement or admission is sought. Without limiting the
generality of the foregoing, no oral promise or statement, nor any action,
inaction, delay, failure to require performance or course of conduct shall
operate as, or evidence, an amendment, supplement or waiver or have any other
effect on any Loan Document. Any waiver granted shall be limited to the specific
circumstance expressly described in it, and shall not apply to any subsequent or
other circumstance, whether similar or dissimilar, or give rise to, or evidence,
any obligation or commitment to grant any further waiver. The Loan Documents
represent the entire agreement about this subject matter and supersede prior
negotiations or agreements.

12.7 Counterparts. This Agreement may be executed in any number of counterparts
and by different parties on separate counterparts, each of which, when executed
and delivered, is an original, and all taken together, constitute one Agreement.

12.8 Survival. All covenants, representations and warranties made in this
Agreement continue in full force until this Agreement has terminated pursuant to
its terms and all Obligations (other than inchoate indemnity obligations and any
other obligations which, by their terms, are to survive the termination of this
Agreement) have been paid in full and satisfied. The obligation of Borrower in
Section 12.2 to indemnify Bank shall survive until the statute of limitations
with respect to such claim or cause of action shall have run.

12.9 Confidentiality. In handling any confidential information, Bank shall
exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (a) to Bank’s
Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, Bank shall use
commercially reasonable efforts to obtain such prospective transferee’s or
purchaser’s agreement to the terms of this provision); (c) as required by law,
regulation, subpoena, or other order; (d) to Bank’s regulators or as otherwise
required in connection with Bank’s examination or audit; (e) as Bank considers
appropriate in exercising remedies under the Loan Documents; and (f) to
third-party service providers of Bank so long as such service providers have
executed a confidentiality agreement with Bank with terms no less restrictive
than those contained herein. Confidential information does not include
information that is either: (i) in the public domain or in Bank’s possession
when disclosed to Bank, or becomes part of the public domain after disclosure to
Bank (other than by the failure by Bank to maintain such information in
confidence pursuant to this Section 12.9); or (ii) disclosed to Bank by a third
party if Bank does not know that the third party is prohibited from disclosing
the information.

 

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Bank may use confidential information for the development of databases,
reporting purposes, and market analysis so long as such confidential information
is aggregated and anonymized prior to distribution unless otherwise expressly
permitted by Borrower. The provisions of the immediately preceding sentence
shall survive the termination of this Agreement.

12.10 Attorneys’ Fees, Costs and Expenses. In any action or proceeding between
Borrower and Bank arising out of or relating to the Loan Documents, Bank shall
be entitled to recover its reasonable attorneys’ fees and other costs and
expenses incurred, in addition to any other relief to which it may be entitled.

12.11 Right of Set Off. Borrower hereby grants to Bank, a lien, security
interest and right of set off as security for all Obligations to Bank, whether
now existing or hereafter arising upon and against all deposits, credits,
collateral and property, now or hereafter in the possession, custody,
safekeeping or control of Bank or any entity under the control of Bank
(including a Bank subsidiary) or in transit to any of them. At any time after
the occurrence and during the continuance of an Event of Default, without demand
or notice, Bank may set off the same or any part thereof and apply the same to
any liability or obligation of Borrower even though unmatured and regardless of
the adequacy of any other collateral securing the Obligations. ANY AND ALL
RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY
OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF
SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE
HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

12.12 Electronic Execution of Documents. The words “execution,” “signed,”
“signature” and words of like import in any Loan Document shall be deemed to
include electronic signatures or the keeping of records in electronic form, each
of which shall be of the same legal effect, validity and enforceability as a
manually executed signature or the use of a paper-based recordkeeping systems,
as the case may be, to the extent and as provided for in any applicable law,
including, without limitation, any state law based on the Uniform Electronic
Transactions Act.

12.13 Captions. The headings used in this Agreement are for convenience only and
shall not affect the interpretation of this Agreement.

12.14 Construction of Agreement. The parties mutually acknowledge that they and
their attorneys have participated in the preparation and negotiation of this
Agreement. In cases of uncertainty this Agreement shall be construed without
regard to which of the parties caused the uncertainty to exist.

12.15 Relationship. The relationship of the parties to this Agreement is
determined solely by the provisions of this Agreement. The parties do not intend
to create any agency, partnership, joint venture, trust, fiduciary or other
relationship with duties or incidents different from those of parties to an
arm’s-length contract.

12.16 Third Parties. Nothing in this Agreement, whether express or implied, is
intended to: (a) confer any benefits, rights or remedies under or by reason of
this Agreement on any persons other than the express parties to it and their
respective permitted successors and assigns; (b) relieve or discharge the
obligation or liability of any person not an express party to this Agreement; or
(c) give any person not an express party to this Agreement any right of
subrogation or action against any party to this Agreement.

13 DEFINITIONS

13.1 Definitions. As used in the Loan Documents, the word “shall” is mandatory,
the word “may” is permissive, the word “or” is not exclusive, the words
“includes” and “including” are not limiting, the singular includes the plural,
and numbers denoting amounts that are set off in brackets are negative. As used
in this Agreement, the following capitalized terms have the following meanings:

“Account” is any “account” as defined in the Code with such additions to such
term as may hereafter be made, and includes, without limitation, all accounts
receivable and other sums owing to Borrower.

“Account Debtor” is any “account debtor” as defined in the Code with such
additions to such term as may hereafter be made.

“Acquisition Loan” is a loan made by Bank pursuant to the terms of Section 2.1.5
hereof.

 

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“Acquisition Loan Amount” is an Acquisition Loan or Acquisition Loans in an
amount equal to Twenty Million Dollars ($20,000,000).

“Acquisition Loan Maturity Date” is February 11, 2014.

“Additional Permitted Investments” means (a) repurchase obligations of Bank or
of any commercial bank organized under the laws of the United States or any
state thereof having combined capital and surplus of not less than $250,000,000,
having a term of not more than thirty (30) days, with respect to securities
issued or fully guaranteed or insured by the United States government;
(b) securities with maturities of one year or less from the date of acquisition
issued or fully guaranteed by any state, commonwealth or territory of the United
States, by any political subdivision or taxing authority of any such state,
commonwealth or territory or by any foreign government, the securities of which
state, commonwealth, territory, political subdivision, taxing authority or
foreign government (as the case may be) are rated at least A by S&P or A by
Moody’s; (c) securities with maturities of six months or less from the date of
acquisition backed by standby letters of credit issued by Bank or any commercial
bank satisfying the requirements of clause (a) of this definition and money
market funds that (i) comply with the criteria set forth in SEC Rule 2a-7 under
the Investment Company Act of 1940, as amended, (ii) are rated AAA by S&P and
Aaa by Moody’s and (iii) have portfolio assets of at least $5,000,000,000.

“Advance” or “Advances” means an advance (or advances) under the Revolving Line.

“Affiliate” is, with respect to any Person, each other Person that owns or
controls directly or indirectly the Person, any Person that controls or is
controlled by or is under common control with the Person, and each of that
Person’s senior executive officers, directors, partners and, for any Person that
is a limited liability company, that Person’s managers and members.

“Agreement” is defined in the preamble hereof.

“Amortization Date” means the Payment Date occurring on September 1, 2010.

“ARS Credit Facility” means the credit facility provided to Borrower by UBS Bank
USA and UBS Financial Services Inc. pursuant to a Credit Line Agreement and
which is secured by a Lien on Borrower’s Pledged ARS.

“ARS Rights” means the right of Borrower to sell the Pledged ARS to UBS AG at a
purchase price equal to the par amount thereof plus interest during a two year
period commencing on the Put Exercise Date as defined in the Prospectus relating
thereto dated October 7, 2008.

“Availability Amount” is (a) while a Borrowing Base Period is in effect, (i) the
lesser of (A) the Revolving Line or (B) the amount available under the Borrowing
Base minus, (ii) the Dollar Equivalent amount of all outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit) plus an amount equal
to the Letter of Credit Reserve, minus (iii) the aggregate amount of all FX
Reserves, minus (iv) any amounts used for Cash Management Services, and minus
(v) the outstanding principal balance of any Advances and (b) while a Borrowing
Base Period is not in effect, (i) the Revolving Line minus (ii) the Dollar
Equivalent amount of all outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit) plus an amount equal to the Letter of Credit
Reserve, minus (iii) the aggregate amount of all FX Reserves, minus (iv) any
amounts used for Cash Management Services, and minus (v) the outstanding
principal balance of any Advances.

“Bank” is defined in the preamble hereof.

“Bank Expenses” are all audit fees and expenses, costs, and expenses (including
reasonable attorneys’ fees and expenses) for preparing, amending, negotiating,
administering, defending and enforcing the Loan Documents (including, without
limitation, those incurred in connection with appeals or Insolvency Proceedings)
or otherwise incurred with respect to Borrower or any Guarantor.

“Borrower” is defined in the preamble hereof.

 

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“Borrower’s Books” are all Borrower’s books and records including ledgers,
federal and state tax returns, records regarding Borrower’s assets or
liabilities, the Collateral, business operations or financial condition, and all
computer programs or storage or any equipment containing such information.

“Borrowing Base” is 80% of Eligible Accounts, as determined by Bank from
Borrower’s most recent Borrowing Base Certificate; provided, however, that Bank,
upon notice to Borrower, may decrease the foregoing percentage in its good faith
business judgment based on events, conditions, contingencies, or risks which, as
determined by Bank, may adversely affect Collateral.

“Borrowing Base Certificate” is that certain certificate in the form attached
hereto as Exhibit D.

“Borrowing Base Period” is, on and after the Effective Date, any period
(a) beginning on the day on which Borrower has unrestricted cash and Cash
Equivalents at Bank in an amount less than the sum of (i) Ten Million Dollars
($10,000,000) and (ii) the outstanding balance of all Credit Extensions, as
determined by Bank in its sole discretion (the “Borrowing Balance”); and
(b) ending on the date on which Borrower has maintained unrestricted cash and
Cash Equivalents at Bank equal to or greater than Ten Million Dollars
($10,000,000) in excess of the Borrowing Balance for thirty (30) consecutive
days, as determined by Bank in its sole discretion. A Borrowing Base Period
shall also be in effect at any time an Event of Default has occurred and is
continuing.

“Borrowing Resolutions” are, with respect to any Person, those resolutions
adopted by such Person’s Board of Directors and delivered by such Person to Bank
approving the Loan Documents to which such Person is a party and the
transactions contemplated thereby, together with a certificate executed by its
Secretary on behalf of such Person certifying that (a) such Person has the
authority to execute, deliver, and perform its obligations under each of the
Loan Documents to which it is a party, (b) that attached as Exhibit A to such
certificate is a true, correct, and complete copy of the resolutions then in
full force and effect authorizing and ratifying the execution, delivery, and
performance by such Person of the Loan Documents to which it is a party, (c) the
name(s) of the Person(s) authorized to execute the Loan Documents on behalf of
such Person, together with a sample of the true signature(s) of such Person(s),
and (d) that Bank may conclusively rely on such certificate unless and until
such Person shall have delivered to Bank a further certificate canceling or
amending such prior certificate.

“Business Day” is any day that is not a Saturday, Sunday or a day on which
banking institutions in the Commonwealth of Massachusetts are authorized or
required by law or other governmental action to close, except that if any
determination of a “Business Day” shall relate to a LIBOR Credit Extension, the
term “Business Day” shall also mean a day on which dealings are carried on in
the London interbank market, and if any determination of a “Business Day” shall
relate to an FX Forward Contract, the term “Business Day” shall mean a day on
which dealings are carried on in the country of settlement of the foreign
(non-Dollar) currency.

“Cash Equivalents” means (a) marketable direct obligations issued or
unconditionally guaranteed by the United States or any agency or any State
thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after its
creation and having the highest rating from either Standard & Poor’s Ratings
Group or Moody’s Investors Service, Inc.; (c) Bank’s certificates of deposit
issued maturing no more than one (1) year after issue; and (d) money market
funds at least ninety-five percent (95%) of the assets of which constitute Cash
Equivalents of the kinds described in clauses (a) through (c) of this
definition.

“Cash Management Services” is defined in Section 2.1.4.

“Claims” is defined in Section 12.2.

“Code” is the Uniform Commercial Code, as the same may, from time to time, be
enacted and in effect in the Commonwealth of Massachusetts; provided, that, to
the extent that the Code is used to define any term herein or in any Loan
Document and such term is defined differently in different Articles or Divisions
of the Code, the definition of such term contained in Article or Division 9
shall govern; provided further, that in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection, or priority of, or
remedies with respect to, Bank’s Lien on any Collateral is governed by the
Uniform Commercial Code in effect in a jurisdiction other than the Commonwealth
of Massachusetts, the term “Code” shall mean the Uniform Commercial Code as
enacted and in effect in such other jurisdiction solely for purposes of the
provisions thereof relating to such attachment, perfection, priority, or
remedies and for purposes of definitions relating to such provisions.

“Collateral” is any and all properties, rights and assets of Borrower described
on Exhibit A.

 

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“Collateral Account” is any Deposit Account, Securities Account, or Commodity
Account.

“Commodity Account” is any “commodity account” as defined in the Code with such
additions to such term as may hereafter be made.

“Communication” is defined in Section 10.

“Compliance Certificate” is that certain certificate in the form attached hereto
as Exhibit E.

“Contingent Obligation” is, for any Person, any direct or indirect liability,
contingent or not, of that Person for (a) any indebtedness, lease, dividend,
letter of credit or other obligation of another such as an obligation, in each
case, directly or indirectly guaranteed, endorsed, co-made, discounted or sold
with recourse by that Person, or for which that Person is directly or indirectly
liable; (b) any obligations for undrawn letters of credit for the account of
that Person; and (c) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but “Contingent
Obligation” does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under any guarantee or other support arrangement.

“Continuation Date” is any date on which the Borrower elects to continue a LIBOR
Credit Extension into another Interest Period.

“Control Agreement” is any control agreement entered into among the depository
institution at which Borrower maintains a Deposit Account or the securities
intermediary or commodity intermediary at which Borrower maintains a Securities
Account or a Commodity Account, Borrower, and Bank pursuant to which Bank
obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.

“Conversion Date” means any date on which Borrower elects to convert a Prime
Rate Credit Extension to a LIBOR Credit Extension or a LIBOR Credit Extension to
a Prime Rate Credit Extension.

“Copyrights” are any and all copyright rights, copyright applications, copyright
registrations and like protections in each work or authorship and derivative
work thereof, whether published or unpublished and whether or not the same also
constitutes a trade secret.

“Credit Extension” is any Advance, Letter of Credit, Acquisition Loan, FX
Forward Contract, amount utilized for Cash Management Services, or any other
extension of credit by Bank for Borrower’s benefit.

“Current Liabilities” are the consolidated current liabilities of Borrower and
its Subsidiaries as determined under GAAP, plus, without duplication, all funded
debt of Borrower to Bank and the aggregate amount of Borrower’s Total
Liabilities that mature within one (1) year.

“Default Rate” is defined in Section 2.4(c).

“Deferred Revenue” is all amounts received or invoiced in advance of performance
under contracts and not yet recognized as revenue.

“Deposit Account” is any “deposit account” as defined in the Code with such
additions to such term as may hereafter be made.

“Designated Deposit Account” is Borrower’s deposit account, account number
3300690365, maintained with Bank.

“Dollars,” “dollars” or use of the sign “$” means only lawful money of the
United States and not any other currency, regardless of whether that currency
uses the “$” sign to denote its currency or may be readily converted into lawful
money of the United States.

 

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“Dollar Equivalent” is, at any time, (a) with respect to any amount denominated
in Dollars, such amount, and (b) with respect to any amount denominated in a
Foreign Currency, the equivalent amount therefor in Dollars as determined by
Bank at such time on the basis of the then-prevailing rate of exchange in San
Francisco, California, for sales of the Foreign Currency for transfer to the
country issuing such Foreign Currency.

“Domestic Subsidiary” means a Subsidiary organized under the laws of the United
States or any state or territory thereof or the District of Columbia.

“Draw Period” is the period of time from the Effective Date through the earlier
to occur of (a) February 11, 2012 or (b) an Event of Default.

“EBITDA” shall mean Borrower’s consolidated (a) Net Income, plus (b) Interest
Expense, plus (c) to the extent deducted in the calculation of Net Income,
depreciation expense and amortization expense, plus (d) income tax expense, plus
(e) non-cash stock compensation, plus (f) other one-time non-cash expenses
approved by Bank on a case-by-case basis in its sole discretion.

“Effective Date” is defined in the preamble hereof.

“Eligible Accounts” means Accounts which arise in the ordinary course of
Borrower’s business that meet all Borrower’s representations and warranties in
Section 5.3. Bank reserves the right at any time and from time to time after the
Effective Date, upon notice to Borrower, to adjust any of the criteria set forth
below and to establish new criteria in its good faith business judgment. Unless
Bank otherwise agrees in writing, Eligible Accounts shall not include:

(a) Accounts that the Account Debtor has not paid within ninety (90) days of
invoice date regardless of invoice payment period terms;

(b) Accounts owing from an Account Debtor, fifty percent (50%) or more of whose
Accounts have not been paid within ninety (90) days of invoice date;

(c) Accounts owing from an Account Debtor which does not have its principal
place of business in the United States or Canada, provided that such Accounts
may be approved on a case-by-case basis in the sole discretion of Bank;

(d) Accounts billed and/or payable outside of the United States, provided that
such Accounts may be approved on a case-by-case basis in the sole discretion of
Bank;

(e) Accounts owing from an Account Debtor to the extent that Borrower is
indebted or obligated in any manner to the Account Debtor (as creditor, lessor,
supplier or otherwise - sometimes called “contra” accounts, accounts payable,
customer deposits or credit accounts), with the exception of customary credits,
adjustments and/or discounts given to an Account Debtor by Borrower in the
ordinary course of its business;

(f) Accounts for which the Account Debtor is Borrower’s Affiliate, officer,
employee, or agent;

(g) Accounts with credit balances over ninety (90) days from invoice date;

(h) Accounts owing from an Account Debtor, including Affiliates, whose total
obligations to Borrower exceed twenty-five percent (25%) of all Accounts, for
the amounts that exceed that percentage, unless Bank approves in writing;

(i) Accounts owing from an Account Debtor which is a United States government
entity or any department, agency, or instrumentality thereof unless Borrower has
assigned its payment rights to Bank and the assignment has been acknowledged
under the Federal Assignment of Claims Act of 1940, as amended;

(j) Accounts for demonstration or promotional equipment, or in which goods are
consigned, or sold on a “sale guaranteed”, “sale or return”, “sale on approval”,
or other terms if Account Debtor’s payment may be conditional;

 

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(k) Accounts owing from an Account Debtor that has not been invoiced or where
goods or services have not yet been rendered to the Account Debtor (sometimes
called memo billings or pre-billings);

(l) Accounts subject to contractual arrangements between Borrower and an Account
Debtor where payments shall be scheduled or due according to completion or
fulfillment requirements where the Account Debtor has a right of offset for
damages suffered as a result of Borrower’s failure to perform in accordance with
the contract (sometimes called contracts accounts receivable, progress billings,
milestone billings, or fulfillment contracts);

(m) Accounts owing from an Account Debtor the amount of which may be subject to
withholding based on the Account Debtor’s satisfaction of Borrower’s complete
performance (but only to the extent of the amount withheld; sometimes called
retainage billings);

(n) Accounts subject to trust provisions, subrogation rights of a bonding
company, or a statutory trust;

(o) Accounts owing from an Account Debtor that has been invoiced for goods that
have not been shipped to the Account Debtor unless Bank, Borrower, and the
Account Debtor have entered into an agreement acceptable to Bank in its sole
discretion wherein the Account Debtor acknowledges that (i) it has title to and
has ownership of the goods wherever located, (ii) a bona fide sale of the goods
has occurred, and (iii) it owes payment for such goods in accordance with
invoices from Borrower (sometimes called “bill and hold” accounts);

(p) [Reserved];

(q) Accounts that represent non-trade receivables or that are derived by means
other than in the ordinary course of Borrower’s business;

(r) Accounts for which Borrower has permitted Account Debtor’s payment to extend
beyond 90 days;

(s) Accounts subject to chargebacks or others payment deductions taken by an
Account Debtor (but only to the extent the chargeback is determined invalid and
subsequently collected by Borrower);

(t) Accounts in which the Account Debtor disputes liability or makes any claim
(but only up to the disputed or claimed amount), or if the Account Debtor is
subject to an Insolvency Proceeding, or becomes insolvent, or goes out of
business; and

(u) Accounts owing from an Account Debtor with respect to which Borrower has
received deferred revenue (but only to the extent of such deferred revenue);

(v) Accounts for which Bank in its good faith business judgment determines
collection to be doubtful.

“Equipment” is all “equipment” as defined in the Code with such additions to
such term as may hereafter be made, and includes without limitation all
machinery, fixtures, goods, vehicles (including motor vehicles and trailers),
and any interest in any of the foregoing.

“ERISA” is the Employee Retirement Income Security Act of 1974, and its
regulations.

“Event of Default” is defined in Section 8.

“Exchange Act” is the Securities Exchange Act of 1934, as amended.

“Foreign Currency” means lawful money of a country other than the United States.

“Foreign Subsidiary” means any Subsidiary which is not a Domestic Subsidiary.

“Funding Date” is any date on which a Credit Extension is made to or for the
account of Borrower which shall be a Business Day.

 

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“FX Business Day” is any day when (a) Bank’s Foreign Exchange Department is
conducting its normal business and (b) the Foreign Currency being purchased or
sold by Borrower is available to Bank from the entity from which Bank shall buy
or sell such Foreign Currency.

“FX Forward Contract” is defined in Section 2.1.3.

“FX Reserve” is defined in Section 2.1.3.

“GAAP” is generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person as
may be approved by a significant segment of the accounting profession, which are
applicable to the circumstances as of the date of determination.

“General Intangibles” is all “general intangibles” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation, all Intellectual Property, claims, income
and other tax refunds, security and other deposits, payment intangibles,
contract rights, options to purchase or sell real or personal property, rights
in all litigation presently or hereafter pending (whether in contract, tort or
otherwise), insurance policies (including without limitation key man, property
damage, and business interruption insurance), payments of insurance and rights
to payment of any kind.

“Governmental Approval” is any consent, authorization, approval, order, license,
franchise, permit, certificate, accreditation, registration, filing or notice,
of, issued by, from or to, or other act by or in respect of, any Governmental
Authority.

“Governmental Authority” is any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.

“Guarantor” is any present or future guarantor of the Obligations, including
Mercury Federal Systems, Inc.

“Inactive Subsidiary” means each of the following Subsidiaries of Borrower:
(i)191 Riverneck, LLC, a Delaware limited liability company, (ii)199 Riverneck,
LLC, a Delaware limited liability company, (iii) Riverneck Road, LLC, a Delaware
limited liability company, (iv)Advanced Radio Corporation, a Virginia
corporation, (v) SolMap Pharmaceuticals, Inc., a Delaware corporation,
(vi) Template Graphics Software, Inc., a California corporation, (vii)Mercury
Computer Securities Corporation, a Massachusetts corporation, (viii)Myraid
Logic, Inc., a Maryland corporation, and (ix)Mercury Computer Systems N.V., a
Netherlands corporation.

“Indebtedness” is (a) indebtedness for borrowed money or the deferred price of
property or services, such as reimbursement and other obligations for surety
bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations, and
(d) Contingent Obligations.

“Indemnified Person” is defined in Section 12.2.

“Insolvency Proceeding” is any proceeding by or against any Person under the
United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

“Intellectual Property” means all of Borrower’s or Guarantor’s right, title, and
interest in and to the following:

(a) its Copyrights, Trademarks and Patents;

(b) any and all trade secrets and trade secret rights, including, without
limitation, any rights to unpatented inventions, know-how, operating manuals;

 

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(c) any and all source code;

(d) any and all design rights which may be available to a Borrower;

(e) any and all claims for damages by way of past, present and future
infringement of any of the foregoing, with the right, but not the obligation, to
sue for and collect such damages for said use or infringement of the
Intellectual Property rights identified above; and

(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks
or Patents.

“Interest Expense” means for any fiscal period, interest expense (whether cash
or non-cash) determined in accordance with GAAP for the relevant period ending
on such date, including, in any event, interest expense with respect to any
Credit Extension and other Indebtedness of Borrower and its Subsidiaries,
including, without limitation or duplication, all commissions, discounts, or
related amortization and other fees and charges with respect to letters of
credit and bankers’ acceptance financing and the net costs associated with
interest rate swap, cap, and similar arrangements, and the interest portion of
any deferred payment obligation (including leases of all types).

“Interest Period” means, as to any LIBOR Credit Extension, the period commencing
on the date of such LIBOR Credit Extension, or on the conversion/continuation
date on which the LIBOR Credit Extension is converted into or continued as a
LIBOR Credit Extension, and ending on the date that is one (1), two (2), or
three (3) months thereafter, in each case as Borrower may elect in the
applicable Notice of Borrowing or Notice of Conversion/Continuation; provided,
however, that (a) no Interest Period with respect to any LIBOR Credit Extension
shall end later than the Maturity Date, (b) the last day of an Interest Period
shall be determined in accordance with the practices of the LIBOR interbank
market as from time to time in effect, (c) if any Interest Period would
otherwise end on a day that is not a Business Day, that Interest Period shall be
extended to the following Business Day unless, in the case of a LIBOR Credit
Extension, the result of such extension would be to carry such Interest Period
into another calendar month, in which event such Interest Period shall end on
the preceding Business Day, (d) any Interest Period pertaining to a LIBOR Credit
Extension that begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month at the
end of such Interest Period) shall end on the last Business Day of the calendar
month at the end of such Interest Period, and (e) interest shall accrue from and
include the first Business Day of an Interest Period but exclude the last
Business Day of such Interest Period.

“Interest Rate Determination Date” means each date for calculating the LIBOR for
purposes of determining the interest rate in respect of an Interest Period. The
Interest Rate Determination Date shall be the second Business Day prior to the
first day of the related Interest Period for a LIBOR Credit Extension.

“Inventory” is all “inventory” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products, including without
limitation such inventory as is temporarily out of Borrower’s custody or
possession or in transit and including any returned goods and any documents of
title representing any of the above.

“Investment” is any beneficial ownership interest in any Person (including
stock, partnership interest or other securities), and any loan, advance or
capital contribution to any Person.

“IP Agreement” is that certain Intellectual Property Security Agreement executed
and delivered by Borrower to Bank dated as of February 12, 2010.

“Japanese Subsidiary” means Nihon Mercury Computer Systems K.K., a company
organized under the laws of Japan and a wholly-owned subsidiary of Borrower.

“Key Person” is either of Borrower’s Chief Executive Officer and Chief Financial
Officer who are, as of the Effective Date, Mark Aslett and Robert E. Hult,
respectively.

“Letter of Credit” means a standby letter of credit issued by Bank or another
institution based upon an application, guarantee, indemnity or similar agreement
on the part of Bank as set forth in Section 2.1.2.

 

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“Letter of Credit Application” is defined in Section 2.1.2(b).

“Letter of Credit Reserve” has the meaning set forth in Section 2.1.2(e).

“Leverage Ratio” means, at any date of measurement, the ratio of Total Funded
Debt on such date to TFQ EBITDA on such date.

“LIBOR” means, for any Interest Rate Determination Date with respect to an
Interest Period for any Credit Extension to be made, continued as or converted
into a LIBOR Credit Extension, the rate of interest per annum determined by Bank
to be the per annum rate of interest at which deposits in United States Dollars
are offered to Bank in the London interbank market (rounded upward, if
necessary, to the nearest 1/100th of one percent (0.01%)) in which Bank
customarily participates at 11:00 a.m. (local time in such interbank market) two
(2) Business Days prior to the first day of such Interest Period for a period
approximately equal to such Interest Period and in an amount approximately equal
to the amount of such Credit Extension.

“LIBOR Credit Extension” means an Advance or Acquisition Loan that bears
interest based on the sum of the LIBOR Rate plus the LIBOR Rate Margin.

“LIBOR Rate” means, for each Interest Period in respect of LIBOR Credit
Extensions comprising part of the same Credit Extensions, an interest rate per
annum (rounded upward to the nearest 1/100th of one percent (0.01%)) equal to
LIBOR for such Interest Period divided by one (1) minus the Reserve Requirement
for such Interest Period.

“LIBOR Rate Margin” shall be determined and applied as described in
Section 2.4(b).

“Lien” is a claim, lien, mortgage, deed of trust, levy, charge, pledge, security
interest or other encumbrance of any kind, whether voluntarily incurred or
arising by operation of law or otherwise against any property.

“Loan Documents” are, collectively, this Agreement, the Perfection Certificate,
the IP Agreements, the Security Agreements, any subordination agreement, any
note, or notes or guaranties executed by Borrower or any Guarantor, and any
other present or future agreement between Borrower any Guarantor and/or for the
benefit of Bank in connection with this Agreement, all as amended, restated, or
otherwise modified.

“Material Adverse Change” is (a) a material impairment in the perfection or
priority of Bank’s Lien in the Collateral or in the value of such Collateral;
(b) a material adverse change in the business, operations, or condition
(financial or otherwise) of Borrower; or (c) a material impairment of the
prospect of repayment of any portion of the Obligations.

“Minimum Cash Flow” is for any period of determination, Borrower’s TFQ EBITDA,
minus Borrower’s capital expenditures during such period, minus taxes paid by
Borrower in cash during such period.

“Net Income” means, as calculated on a consolidated basis for Borrower and its
Subsidiaries for any period as at any date of determination, the net profit (or
loss), after provision for taxes, of Borrower and its Subsidiaries for such
period taken as a single accounting period.

“Notice of Borrowing” means a notice given by Borrower to Bank in accordance
with Section 3.2(a), substantially in the form of Exhibit B, with appropriate
insertions.

“Notice of Conversion/Continuation” means a notice given by Borrower to Bank in
accordance with Section 3.5(b), substantially in the form of Exhibit C, with
appropriate insertions.

“Obligations” are Borrower’s obligations to pay when due any debts, principal,
interest, Bank Expenses and other amounts Borrower owes Bank now or later,
whether under this Agreement, the other Loan Documents, or otherwise, including,
without limitation, all obligations relating to letters of credit (including
reimbursement obligations for drawn and undrawn letters of credit), cash
management services, and foreign exchange contracts, if any, and including
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and to perform Borrower’s duties under
the Loan Documents.

 

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“Operating Documents” are, for any Person, such Person’s formation documents, as
certified with the Secretary of State of such Person’s state of formation on a
date that is no earlier than 30 days prior to the Effective Date, and, (a) if
such Person is a corporation, its bylaws in current form, (b) if such Person is
a limited liability company, its limited liability company agreement (or similar
agreement), and (c) if such Person is a partnership, its partnership agreement
(or similar agreement), each of the foregoing with all current amendments or
modifications thereto.

“Patents” means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.

“Payment Date” is the first day of each calendar month.

“Perfection Certificate” is defined in Section 5.1.

“Permitted Indebtedness” is:

(a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan
Documents;

(b) Indebtedness existing on the Effective Date and shown on the Perfection
Certificate;

(c) Subordinated Debt;

(d) unsecured Indebtedness to trade creditors incurred in the ordinary course of
business;

(e) Indebtedness incurred as a result of endorsing negotiable instruments
received in the ordinary course of business;

(f) Indebtedness secured by Liens permitted under clauses (a) and (c) of the
definition of “Permitted Liens” hereunder;

(g) Indebtedness of Borrower under the ARS Credit Facility provided that the
aggregate principal amount thereof does not exceed $34,000,000 at any time; and

(i) extensions, refinancings, modifications, amendments and restatements of any
items of Permitted Indebtedness (a) through (f) above, provided that the
principal amount thereof is not increased or the terms thereof are not modified
to impose more burdensome terms upon Borrower or its Subsidiary, as the case may
be.

“Permitted Investments” are:

(a) Investments (including, without limitation, Subsidiaries) existing on the
Effective Date and shown on the Perfection Certificate; and 498,339 shares of
Series A Convertible Preferred Stock of Forma Therapeutics, Inc. received by
Borrower in connection with the sale of assets of Borrower’s SolMap
Pharmaceuticals, Inc. Subsidiary;

(b) Investments consisting of Cash Equivalents or, subject to Section 6.6(b),
Additional Permitted Investments;

(c) Investments consisting of the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
Borrower’s business;

(d) Investments consisting of deposit accounts in which Bank has a perfected
security interest;

(e) Investments accepted in connection with Transfers permitted by Section 7.1;

(f) Investments (i) by Borrower in Mercury Federal Systems, Inc. made in the
ordinary course of business; (ii) by Borrower in the Inactive Subsidiaries
provided that Borrower shall not make any additional Investments in the Inactive
Subsidiaries on or after the Effective Date; and (iii) by Borrower in the UK
Subsidiary and the Japanese Subsidiary in accordance with Section 6.11 hereof;

 

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(g) Investments in the Pledged ARS and the ARS Rights subject to the covenants
contained in Section 6.14 hereof;

(h) Investments consisting of (i) travel advances and employee relocation loans
and other employee loans and advances in the ordinary course of business, and
(ii) loans to employees, officers or directors relating to the purchase of
equity securities of Borrower or its Subsidiaries pursuant to employee stock
purchase plans or agreements approved by Borrower’s Board of Directors; and

(h) Investments (including debt obligations) received in connection with the
bankruptcy or reorganization of customers or suppliers and in settlement of
delinquent obligations of, and other disputes with, customers or suppliers
arising in the ordinary course of business.

“Permitted Liens” are:

(a) Liens existing on the Effective Date and shown on the Perfection Certificate
or arising under this Agreement and the other Loan Documents;

(b) Liens for taxes, fees, assessments or other government charges or levies,
either (i) not due and payable or (ii) being contested in good faith and for
which Borrower maintains adequate reserves on its Books, provided that no notice
of any such Lien has been filed or recorded under the Internal Revenue Code of
1986, as amended, and the Treasury Regulations adopted thereunder;

(c) Capital leases or purchase money Liens (i) on Equipment acquired or held by
Borrower incurred for financing the acquisition of the Equipment securing no
more than Five Hundred Thousand Dollars ($500,000) in the aggregate amount
outstanding, or (ii) existing on Equipment when acquired, if the Lien is
confined to the property and improvements and the proceeds of the Equipment;

(d) Liens of carriers, warehousemen, suppliers, or other Persons that are
possessory in nature arising in the ordinary course of business so long as such
Liens attach only to Inventory, securing liabilities in the aggregate amount not
to exceed Twenty-five Thousand Dollars ($25,000) and which are not delinquent or
remain payable without penalty or which are being contested in good faith and by
appropriate proceedings which proceedings have the effect of preventing the
forfeiture or sale of the property subject thereto;

(e) Liens to secure payment of workers’ compensation, employment insurance,
old-age pensions, social security and other like obligations incurred in the
ordinary course of business (other than Liens imposed by ERISA);

(f) Liens incurred in the extension, renewal or refinancing of the indebtedness
secured by Liens described in (a) through (c), but any extension, renewal or
replacement Lien must be limited to the property encumbered by the existing Lien
and the principal amount of the indebtedness may not increase;

(g) leases or subleases of real property granted in the ordinary course of
Borrower’s business (or, if referring to another Person, in the ordinary course
of such Person’s business), and leases, subleases, non-exclusive licenses or
sublicenses of personal property (other than Intellectual Property) granted in
the ordinary course of Borrower’s business (or, if referring to another Person,
in the ordinary course of such Person’s business), if the leases, subleases,
licenses and sublicenses do not prohibit granting Bank a security interest
therein;

(h) non-exclusive license of Intellectual Property granted to third parties in
the ordinary course of business;

(i) Liens arising from attachments or judgments, orders, or decrees in
circumstances not constituting an Event of Default under Sections 8.4 and 8.7;
and

(j) Liens securing the ARS Credit Facility provided such Liens are confined to
the Pledged ARS and the proceeds thereof.

 

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“Person” is any individual, sole proprietorship, partnership, limited liability
company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

“Pledged ARS” are the auction rate securities owned by Borrower identified on
Schedule A hereto, which are pledged by Borrower to UBS Securities to secure the
ABS Credit Facility.

“Prime Rate” is the greater of (i) four percent (4.00%) and (ii) Bank’s most
recently announced “prime rate,” even if it is not Bank’s lowest rate.

“Prime Rate Credit Extension” means an Advance or Acquisition Loan that bears
interest based on the Prime Rate plus the Prime Rate Margin.

“Prime Rate Margin” shall be determined and applied as described in
Section 2.4(b).

“Quick Assets” is, on any date, Borrower’s consolidated, unrestricted cash, Cash
Equivalents, net billed accounts receivable and investments (other than the
Pledged ARS and the ARS Rights) with maturities of fewer than 12 months
determined according to GAAP.

“Registered Organization” is any “registered organization” as defined in the
Code with such additions to such term as may hereafter be made.

“Requirement of Law” is as to any Person, the organizational or governing
documents of such Person, and any law (statutory or common), treaty, rule or
regulation or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.

“Reserve Requirement” means, for any Interest Period, the average maximum rate
at which reserves (including any marginal, supplemental, or emergency reserves)
are required to be maintained during such Interest Period under Regulation D
against “Eurocurrency liabilities” (as such term is used in Regulation D) by
member banks of the Federal Reserve System. Without limiting the effect of the
foregoing, the Reserve Requirement shall reflect any other reserves required to
be maintained by Bank by reason of any Regulatory Change against (a) any
category of liabilities which includes deposits by reference to which the LIBOR
Rate is to be determined as provided in the definition of LIBOR or (b) any
category of extensions of credit or other assets which include Credit
Extensions.

“Responsible Officer” is any of the Chief Executive Officer, President, Chief
Financial Officer, Treasurer, Controller and Assistant Controller of Borrower.

“Restricted License” is any material license or other agreement with respect to
which Borrower is the licensee (a) that prohibits or otherwise restricts
Borrower from granting a security interest in Borrower’s interest in such
license or agreement or any other property, or (b) for which a default under or
termination of could interfere with the Bank’s right to sell any Collateral.

“Revolving Line” is an Advance or Advances in an amount equal to Fifteen Million
Dollars ($15,000,000).

“Revolving Line Maturity Date” is February 11, 2012

“SEC” shall mean the Securities and Exchange Commission, any successor thereto,
and any analogous Governmental Authority.

“Securities Account” is any “securities account” as defined in the Code with
such additions to such term as may hereafter be made.

“Security Agreement” and “Security Agreements” means each Security Agreement
executed and delivered by each applicable Guarantor to Bank.

 

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“Settlement Date” is defined in Section 2.1.3.

“Subordinated Debt” is indebtedness incurred by Borrower subordinated to all of
Borrower’s now or hereafter indebtedness to Bank (pursuant to a subordination,
intercreditor, or other similar agreement in form and substance satisfactory to
Bank entered into between Bank and the other creditor), on terms acceptable to
Bank.

“Subsidiary” is, as to any Person, a corporation, partnership, limited liability
company or other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more intermediaries,
or both, by such Person. Unless the context otherwise requires, each reference
to a Subsidiary herein shall be a reference to a Subsidiary of Borrower or
Guarantor.

“TFQ EBITDA” means, as of any date of measurement, Borrower’s consolidated
EBITDA for the prior 4 consecutive fiscal quarters ending on such date of
measurement.

“Total Funded Debt” means, at any date of measurement, the outstanding aggregate
principal amount of Borrower’s consolidated funded debt (including capital
leases) excluding the ARS Credit Facility.

“Total Liabilities” is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower’s consolidated balance sheet.

“Trademarks” means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower connected with
and symbolized by such trademarks.

“Transfer” is defined in Section 7.1.

“UK Subsidiary” means Mercury Computer Systems Limited, a company with limited
liability organized under the laws of England and Wales and a wholly-owned
subsidiary of Borrower.

“Unused Facility Fee” is defined in Section 2.5(d).

[Signature page follows.]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as a sealed instrument under the laws of the Commonwealth of Massachusetts as of
the Effective Date.

BORROWER:

 

MERCURY COMPUTER SYSTEMS, INC. By  

/s/ Robert E. Hult

Name:   Robert E. Hult Title:   Senior Vice President, Chief Financial Officer,
and Treasurer

BANK:

SILICON VALLEY BANK

 

By  

/s/ Larisa B. Chilton

Name:   Larisa B. Chilton Title:   Vice President

 

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EXHIBIT A – COLLATERAL DESCRIPTION

The Collateral consists of all of Borrower’s right, title and interest in and to
the following personal property:

All goods, Accounts (including health-care receivables), Equipment, Inventory,
contract rights or rights to payment of money, leases, license agreements,
franchise agreements, General Intangibles, commercial tort claims, documents,
instruments (including any promissory notes), chattel paper (whether tangible or
electronic), cash, deposit accounts, fixtures, letters of credit rights (whether
or not the letter of credit is evidenced by a writing), securities, and all
other investment property, supporting obligations, and financial assets, whether
now owned or hereafter acquired, wherever located; and

all Borrower’s Books relating to the foregoing, and any and all claims, rights
and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

Notwithstanding the foregoing, the Collateral does not include: (a) more than
65% of the presently existing and hereafter arising issued and outstanding
shares of capital stock owned by Borrower of any Foreign Subsidiary which shares
entitle the holder thereof to vote for directors or any other matter, (b) the
Pledged ARS or (c) the outstanding shares of capital stock of the Inactive
Subsidiaries.

 

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EXHIBIT B

FORM OF NOTICE OF BORROWING

MERCURY COMPUTER SYSTEMS, INC.

Date:                     

 

TO:    SILICON VALLEY BANK    One Newton Executive Park, Suite 200   

2221 Washington Street, Newton, MA 02462

Attention: Ms. Lara Chilton

RE:    Loan and Security Agreement dated as of February 12, 2010 (as amended,
modified, supplemented or restated from time to time, the “Loan Agreement”), by
and between Mercury Computer Systems, Inc. (“Borrower”) and Silicon Valley Bank
(the “Bank”)

Ladies and Gentlemen:

The undersigned refers to the Loan Agreement, the terms defined therein and used
herein as so defined, and hereby gives you notice irrevocably, pursuant to
Section 3.4(a) of the Loan Agreement, of the borrowing of an Advance and/or
Acquisition Loan.

1. The Funding Date, which shall be a Business Day, of the requested borrowing
is             .

2. The aggregate amount of the requested borrowing is $            .

3. The requested Credit Extension shall consist of $            of [Advances]
[Acquisition Loans].

4. The requested Credit Extension shall consist of $            of Prime Rate
Credit Extensions and $            of LIBOR Credit Extensions.

5. The duration of the Interest Period for the LIBOR Credit Extension included
in the requested Credit Extension shall be             month(s).

The undersigned hereby certifies that the following statements are true on the
date hereof, and will be true on the date of the proposed Credit Extension
before and after giving effect thereto, and to the application of the proceeds
therefrom, as applicable:

(a) all representations and warranties of Borrower contained in the Loan
Agreement are true, accurate and complete in all material respects as of the
date hereof;

(b) no Default or Event of Default has occurred and is continuing, or would
result from such proposed Advance;

(c) if applicable, the requested Advance will not cause the aggregate principal
amount of the outstanding Advances to exceed, as of the designated Funding Date,
the Availability Amount; and

(d) if applicable, the requested Acquisition Loan will not cause the aggregate
principal amount of the funded Acquisition Loans to exceed, as of the designated
Funding Date, the Acquisition Loan Amount.

 

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BORROWER

 

MERCURY COMPUTER SYSTEMS, INC. By:  

 

Name:  

 

Title:  

 

For internal Bank use only

 

LIBOR Pricing Date

  

LIBOR

  

LIBOR Variance

  

Maturity Date

              %   

 

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EXHIBIT C

FORM OF NOTICE OF CONVERSION/CONTINUATION

MERCURY COMPUTER SYSTEMS, INC.

Date:                     

 

TO:    SILICON VALLEY BANK   

One Newton Executive Park, Suite 200

2221 Washington Street, Newton, MA 02462

Attention: Ms. Lara Chilton

RE:    Loan and Security Agreement dated as of February 12, 2010 (as amended,
modified, supplemented or restated from time to time, the “Loan Agreement”), by
and between Mercury Computer Systems, Inc. (“Borrower) and Silicon Valley Bank
(the “Bank”)

Ladies and Gentlemen:

The undersigned refers to the Loan Agreement, the terms defined therein being
used herein as therein defined, and hereby gives you notice irrevocably,
pursuant to Section 3.5 of the Loan Agreement, of the [conversion]
[continuation] of the Credit Extensions specified herein, that:

1. The date of the [conversion] [continuation] is                     , 20    .

2. The aggregate amount of the proposed Credit Extension to be [converted] is
$                    or [continued] is $            .

3. The Credit Extensions are to be [converted into] [continued as] [LIBOR]
[Prime Rate] Advances.

4. The duration of the Interest Period for the LIBOR Credit Extensions included
in the [conversion] [continuation] shall be             month(s).

The undersigned, on behalf of Borrower, hereby certifies that the following
statements are true on the date hereof, and will be true on the date of the
proposed [conversion] [continuation], before and after giving effect thereto and
to the application of the proceeds therefrom:

(a) all representations and warranties of Borrower stated in the Loan Agreement
are true, accurate and complete in all material respects as of the date hereof;
and

(b) no Default or Event of Default has occurred and is continuing, or would
result from such proposed [conversion] [continuation].

[Signature page follows.]

 

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BORROWER

 

MERCURY COMPUTER SYSTEMS, INC. By:  

 

Name:  

 

Title:  

 

For internal Bank use only

 

LIBOR Pricing Date

  

LIBOR

  

LIBOR Variance

  

Maturity Date

              %   

 

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EXHIBIT D - BORROWING BASE CERTIFICATE

 

 

Borrower: Mercury Computer Systems, Inc.

Lender: Silicon Valley Bank

Commitment Amount: $            

 

ACCOUNTS RECEIVABLE   

1.      Accounts Receivable (invoiced) Book Value as of             

   $              

2.      Additions (please explain on reverse)

   $             

3.      TOTAL ACCOUNTS RECEIVABLE

   $              ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)   

4.      90 Days Past Invoice Date

   $             

5.      Balance of 50% over 90 Day Accounts

   $             

6.      Foreign Account Debtor Accounts

   $             

7.      Foreign Invoiced Accounts

   $             

8.      Contra/Customer Deposit Accounts

   $             

9.      Intercompany/Employee Accounts

   $             

10.    Credit Balances over 90 Days

   $             

11.    Concentration Limits (25%)

   $             

12.    U.S. Governmental Accounts

   $             

13.    Promotion or Demo Accounts; Guaranteed Sale or Consignment Sale Accounts

   $             

14.    Accounts with Progress/Milestone/Pre-billings; Contract Accounts

   $             

15.    Accounts for Retainage Billings

   $             

16.    Trust Accounts

   $             

17.    Bill and Hold Accounts

   $             

18.    Unbilled Accounts

   $             

19.    Non-Trade Accounts

   $             

20.    Accounts with Extended Term Invoices

   $             

21.    Accounts Subject to Chargebacks

   $             

22.    Disputed Accounts

   $             

23.    Deferred Revenue

   $             

24.    Other (please explain on reverse)

   $             

25.    TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

   $             

26.    Eligible Accounts (#3 minus #25)

   $             

27.    ELIGIBLE AMOUNT OF ACCOUNTS (80% of #26)

   $              BALANCES   

28.    Maximum Line Amount

   $             

29.    Total Funds Available [Lesser of #27 or #28]

   $             

30.    Present balance owing on Line of Credit

   $             

31.    Outstanding under Sublimits

   $             

32.    RESERVE POSITION (#29 minus #30 and #31)

   $             

[Continued on following page.]

 

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The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank.

 

COMMENTS:          BANK USE ONLY             Received by:   

 

               AUTHORIZED SIGNER             Date:   

 

   By:   

 

      Verified:   

 

      Authorized Signer          AUTHORIZED SIGNER    Date:   

 

      Date:   

 

            Compliance Status:                                Yes             No
  

 

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EXHIBIT E

COMPLIANCE CERTIFICATE

 

TO:    SILICON VALLEY BANK    Date:                      FROM:    Mercury
Computer Systems, Inc.   

The undersigned authorized officer of Mercury Computer Systems, Inc.
(“Borrower”) certifies that under the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the “Agreement”):

(1) Borrower is in complete compliance for the period ending
                    with all required covenants except as noted below; (2) there
are no Events of Default; (3) all representations and warranties in the
Agreement are true and correct in all material respects on this date except as
noted below; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date;
(4) Borrower, and each of its Subsidiaries, has timely filed all required tax
returns and reports, and Borrower has timely paid all foreign, federal, state
and local taxes, assessments, deposits and contributions owed by Borrower except
as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement;
and (5) no Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Bank.

Attached are the required documents supporting the certification. The
undersigned certifies that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The undersigned acknowledges that no
borrowings may be requested at any time or date of determination that Borrower
is not in compliance with any of the terms of the Agreement, and that compliance
is determined not just at the date this certificate is delivered. Capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Agreement.

Please indicate compliance status by circling Yes/No under “Complies” column.

 

Reporting Covenant

  

Required

  

Complies

A/R Agings    Monthly within 30 days    Yes    No Compliance Certificate   
Monthly within 30 days    Yes    No Quarterly Financial Statements    Quarterly
within 45 days    Yes    No Annual financial statement (CPA Audited) + CC    FYE
within 90 days    Yes    No 10-Q, 10-K and 8-K    Within 10 days after filing
with SEC    Yes    No Borrowing Base Certificate; A/R & A/P Agings; Deferred
Revenue Report; reconciliations    Monthly within 30 days (if in Borrowing Base
Period and Credit Extensions exceed $4MM    Yes    No Annual projections   
Within 45 days of year end    Yes    No The following Intellectual Property was
registered (or a registration application submitted) after the Effective Date
(if no registrations, state “None”)

 

Financial Covenant

   Required    Actual   

Complies

Maintain/achieve

        

Minimum Adjusted Quick Ratio (all times; tested monthly)

     1.50:1.0                  :1.0    Yes    No

Minimum Cash Flow (if Borrowing Base Period is in effect; tested quarterly )

   $ 15MM    $                 Yes    No Borrowing Balance: Borrower has
unrestricted cash and Cash Equivalents at Bank in an equal to or greater than
the sum of (i) Ten Million Dollars ($10,000,000) and (ii) the outstanding
balance of all Credit Extensions          Yes    No

 

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Performance Pricing

  

Applies

Leverage Ratio less than 1.00: 1.00    Prime Rate Margin -0.25%; LIBOR Rate
Margin 2.75%    Yes    No Leverage Ratio equal to or greater than 1.00: 1.00   
Prime Rate Margin 0.25%; LIBOR Rate Margin 3.25%    Yes    No

The following financial covenant analyses and information set forth in Schedule
1 attached hereto are true and accurate as of the date of this Certificate.

The following are the exceptions with respect to the certification above: (If no
exceptions exist, state “No exceptions to note.”)

 

 

 

 

 

Mercury Computer Systems. Inc.      BANK USE ONLY        Received by:   

 

By:  

 

        AUTHORIZED SIGNER Name:  

 

     Date:   

 

Title:  

 

    

 

Verified:

  

 

          AUTHORIZED SIGNER        Date:   

 

       Compliance Status:    Yes            No

 

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Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

In the event of a conflict between this Schedule and the Loan Agreement, the
terms of the Loan Agreement shall govern.

Dated:                     

I. Adjusted Quick Ratio (Section 6.7(a))

Required:    1.50:1.00

Actual:              :1.00

 

A.    Aggregate value of the unrestricted cash and Cash Equivalents of Borrower
and its Subsidiaries    $               B.    Aggregate value of the net billed
accounts receivable of Borrower and its Subsidiaries    $              C.   
Aggregate value of the Investments with maturities of fewer than 12 months of
Borrower and its Subsidiaries (excluding Pledged ARS and ARS Rights)    $
             D.    Quick Assets (the sum of lines A through C)    $             
E.    Aggregate value of Obligations to Bank    $              F.    Aggregate
value of liabilities that should, under GAAP, be classified as liabilities on
Borrower’s consolidated balance sheet, including all Indebtedness, and not
otherwise reflected in line E above that matures within one (1) year    $
             G.    Current Liabilities (the sum of lines E and F)    $
             H.    Current Portion of Deferred Revenue    $              I.   
Indebtedness under ARS Credit Facility    $              J.    Lines G, minus
the sum of lines H and I    K.    Quick Ratio (line D divided by line J)     
______

Is line K equal to or greater than 1.50:1:00?

 

             No, not in compliance

               Yes, in compliance

 

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II. Minimum Cash Flow (Section 6.7(b) if Borrowing Base Period is in effect)

Required:    $15,000,000

Actual (trailing four quarters):

 

A.    Net Income    $               B.    Interest Expense    $              C.
   Depreciation    $              D.    Amortization    $              E.   
Income tax expense    $              F.    Non-cash stock compensation    $
             G.    Other non-cash expenses approved by Bank    $              H.
   EBITDA (Line A plus line B plus line C plus line D plus line E plus line F)
   $              I.    Capital Expenditures    $              J.    Cash Taxes
   $              K.    Minimum Cash Flow (Line H minus line I minus line J)   
$             

Is line K equal to or greater than $15,000,000?

 

             No, not in compliance

               Yes, in compliance

 

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SCHEDULE A

PLEDGED ARS

 

CUSIP

   Par Value 194267AH3    $ 5,000,000.00 455900AV2    $ 2,550,000.00 452281HT8
   $ 3,550,000.00 491303HX4    $ 1,500,000.00 709163DA4    $ 600,000.00
452281HU5    $ 1,150,000.00 455900BA7    $ 2,450,000.00 462590GE4    $
3,475,000.00 49130NBE8    $ 2,350,000.00 207784AT6    $ 4,850,000.00 71722TAF1
   $ 850,000.00 917546FL2    $ 1,600,000.00 917546FL2    $ 1,900,000.00
917546GC1    $ 1,500,000.00 49130NBL2    $ 1,000,000.00 71722TAG9    $
3,000,000.00 606072HF6    $ 5,000,000.00

 

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