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  Exhibit 10.3    
    


 
    SECOND AMENDMENT AGREEMENT    
    


        This SECOND AMENDMENT AGREEMENT (this "Amendment") is made as of the 7th day of February, 2011 among: 


        (a)   KRATOS
DEFENSE & SECURITY SOLUTIONS, INC., a Delaware corporation ("Borrower"); 


        (b)   the
Lenders, as defined in the Credit Agreement, as hereinafter defined; and 


        (c)   KEYBANK
NATIONAL ASSOCIATION, as the lead arranger, sole book runner and administrative agent for the Lenders under the Credit Agreement ("Agent"). 



        WHEREAS,
Borrower, Agent and the Lenders are parties to that certain Credit and Security Agreement, dated as of May 19, 2010, that provides, among other things, for loans and
letters of credit aggregating Thirty-Five Million Dollars ($35,000,000), all upon certain terms and conditions (as amended and as the same may from time to time be further amended,
restated or otherwise modified, the "Credit Agreement"); 


        WHEREAS,
Borrower, Agent and the Lenders desire to amend the Credit Agreement to modify certain provisions thereof and add certain provisions thereto; 



        WHEREAS,
each capitalized term used herein and defined in the Credit Agreement, but not otherwise defined herein, shall have the meaning given such term in the Credit Agreement; and 


        WHEREAS,
unless otherwise specifically provided herein, the provisions of the Credit Agreement revised herein are amended effective as of the date of this Amendment; 


        NOW,
THEREFORE, in consideration of the premises and of the mutual covenants herein and for other valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
Borrower, Agent and the Lenders agree as follows: 


        1.    Amendments to Definitions in the Credit Agreement.    Section 1.1 of the
Credit Agreement is hereby amended to delete the definitions of "Consolidated EBITDA" and "Consolidated Fixed Charges" therefrom and to insert in place thereof, respectively, the following: 



        "Consolidated
EBITDA" means, for any period, as determined on a Consolidated basis, (a) Consolidated Net Income for such period plus, without duplication, the aggregate amounts
deducted in determining such Consolidated Net Income in respect of (i) Consolidated Interest Expense, (ii) Consolidated Income Tax Expense, (iii) Consolidated Depreciation and
Amortization Charges, (iv) non-cash losses or charges, (v) losses with respect to Kratos Southeast, Inc. (so long as Kratos Southeast, Inc. is held as a
discontinued operation and is sold or otherwise divested on or prior to the last day of the 2010 fiscal year of Borrower) for (A) the 2009 fiscal year of Borrower, and (B) the Quarterly
Reporting Periods in 2010 in an aggregate amount not to exceed Two Million Dollars ($2,000,000), (vi) losses with respect to discontinued operations, in an aggregate amount not to exceed Two
Million Dollars ($2,000,000); (vii) non-recurring transaction costs incurred in connection with the SCT Acquisition and the HBE Acquisition, in an aggregate amount not to exceed One
Million Seven Hundred Thousand Dollars ($1,700,000); and (viii) non-recurring transaction costs incurred in connection with the Herley Transactions, in an aggregate amount not to
exceed Eleven Million Dollars ($11,000,000); minus (b) to the extent included in Consolidated Net Income for such period, non-cash gains. 


        "Consolidated
Fixed Charges" means, for any period, as determined on a Consolidated basis, the aggregate, without duplication, of (a) Consolidated Interest Expense, and
(b) principal payments on Consolidated Funded Indebtedness (including, without limitation, performance based contingent obligations incurred in connection with one or more Acquisitions and
payments on Capitalized Lease Obligations); provided that, for the purposes of calculating Consolidated Fixed Charges, principal payments on Consolidated Funded Indebtedness shall exclude
(i) optional 








 




prepayments
of the Revolving Loans, (ii) payments of the Indebtedness of HBE made at the time of the HBE Acquisition, in an aggregate amount not to exceed Three Million Four Hundred Thousand
Dollars ($3,400,000), and (iii) payments of the Indebtedness of Herley made at the time of the Herley Transactions, in an aggregate amount not to exceed Fifteen Million Dollars ($15,000,000). 




        2.    Amendment to the Definition of Permitted Foreign Subsidiary Loans, Guaranties and
Investments.    The definition of "Permitted Foreign Subsidiary Loans, Guaranties and Investments" in the Credit Agreement is hereby amended to delete subpart (d)
therefrom and to insert in place thereof the following new subpart (d), and to add the following new subpart (e) at the end thereof: 



        (d)   intercompany
loans and investments from Herley or a Domestic Subsidiary of Herley to a Foreign Subsidiary of Herley, in an aggregate principal amount for all such loans
and investments of all Credit Parties, permitted pursuant to this subpart (d), not to exceed, at any time, Thirty-Three Million Dollars ($33,000,000); and 


        (e)   additional
loans and investments by Borrower or a Domestic Subsidiary to or in a Foreign Subsidiary, or guaranties by Borrower or a Domestic Subsidiary of the
Indebtedness or contract performance of a Foreign Subsidiary, made on or after the Closing Date in the ordinary course of business, so long as the aggregate amount of all such loans and investments of
all Credit Parties does not exceed, at any time, an aggregate amount of Four Million Dollars ($4,000,000). 




        3.    Additions to Definitions in the Credit Agreement.    Section 1.1 of the
Credit Agreement is hereby amended to add the following new definitions thereto: 



        "Exchange
Debt Offering" means that term as defined in Section 9(a) of the Second Amendment Agreement. 


        "HBE"
means Henry Bros. Electronics, Inc., a Delaware corporation. 



        "HBE
Acquisition" means that Acquisition by Borrower of HBE. 


        "Herley"
means Herley Industries, Inc., a Delaware corporation. 


        "Herley
Acquisition Notes" means that term as defined in Section 9(a) of the Second Amendment Agreement. 


        "Herley
Tender Offer" means that term as defined in Section 9(a)(ii) of the Second Amendment Agreement. 


        "Herley
Transactions" means that term as defined in Section 9(a) of the Second Amendment Agreement. 


        "SCT
Acquisition" means that Acquisition by Borrower of SCT Acquisition, LLC, a Delaware corporation. 


        "Second
Amendment Agreement" means that certain Second Amendment Agreement, dated as of the Second Amendment Effective Date, among Borrower, Agent and the Lenders. 


        "Second
Amendment Effective Date" means February 7, 2011. 




        4.    Amendment to Borrowing Covenant Provisions.    Section 5.8 of the Credit
Agreement is hereby amended to delete subsection (j) therefrom and to insert in place thereof the following revised subsection (j), and to add the following new subsections (l)
and (m) at the end thereof: 



        (j)    Indebtedness
incurred in connection with (i) prior to the date of the Exchange Debt Offering, the Herley Acquisition Notes, resulting in aggregate gross proceeds
not to exceed Three Hundred Twenty-Five Million Dollars ($325,000,000), and (ii) on and after the date of the Exchange Debt Offering, the additional Senior Notes issued by Borrower
in (A) the Exchange 



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Debt
Offering, in an original principal amount not to exceed the aggregate principal amount of the Herley Acquisition Notes or (B) an exchange offer made by Borrower for any and all of the
additional Senior Notes issued in the Exchange Debt Offering (the "Exchange Debt Offering Notes") such that the additional Senior Notes received in connection with such exchange offer will
(1) have substantially identical terms to the Exchange Debt Offering Notes, (2) be for the same aggregate principal amount as the Exchange Debt Offering Notes, and (3) be
registered under the Securities Act; 


        (l)    the
Indebtedness existing on the date of the completion of the Herley Tender Offer, in addition to the other Indebtedness permitted to be incurred pursuant to this
Section 5.8, as set forth in Schedule 5.8A hereto (and any extension, renewal or refinancing thereof but only to the extent that the principal amount thereof
does not increase after the date of the completion of the Herley Tender Offer); 


        (m)  other
Indebtedness, in addition to the Indebtedness listed above, in an aggregate principal amount for all Companies not to exceed Twenty-Five Million
Dollars ($25,000,000), with respect to (i) Indebtedness incurred in connection with the Senior Notes, (ii) unsecured Subordinated Indebtedness created pursuant to documentation in form
and substance reasonably satisfactory to Agent and the Required Lenders, and on terms reasonably satisfactory to Agent and the Required Lenders, and (iii) other unsecured Indebtedness; so long
as, in each case, as of the date such additional Indebtedness is incurred, (A) Borrower is in pro forma compliance with Section 5.7 hereof, both before and after giving effect to the
incurrence of such Indebtedness, and (B) no Default or Event of Default shall then exist or immediately thereafter shall begin to exist. 




        5.    Amendment to Permitted Liens Covenant.    Section 5.9 of the Credit
Agreement is hereby amended to delete subsection (h) therefrom and to insert in place thereof the following revised subsection (h), and to add the following new subsection (l) at
the end thereof: 



        (h)   the
Liens securing the Indebtedness under the Senior Notes permitted pursuant to Sections 5.8(h), (j) and (m) hereof, so long as (i) such
Liens are subject to the Intercreditor Agreement, and (ii) as of the issuance date of any additional Senior Notes issued after the date of the Exchange Debt Offering, (A) Borrower is in
pro forma compliance with Section 5.7 hereof, both before and after giving effect to the issuance of such additional Senior Notes, and (B) no Default or Event of Default shall then exist
or immediately thereafter shall begin to exist; 


        (l)    the
Liens existing on the date of the completion of the Herley Tender Offer, in addition to the other Liens permitted pursuant to this Section 5.9, as set forth
in Schedule 5.9A hereto and replacements, extensions, renewals, refundings or refinancings thereof, but only to the extent that the amount of debt secured thereby,
and the property encumbered thereby, shall not be increased. 




        6.    Amendment to Investments, Loans and Guaranties Provisions.    Section 5.11
of the Credit Agreement is hereby amended to delete subsection (v) therefrom and to insert in place thereof the following: 



        (v)   the
holding of each of the Subsidiaries listed on Schedule 6.1 hereto, and the creation, acquisition and holding of and any
investment in any new Subsidiary after the Closing Date so long as such new Subsidiary shall have been created, acquired or held, and investments made, in accordance with the terms and conditions of
this Agreement or the consent set forth in Section 9 of the Second Amendment Agreement; 




        7.    Amendment to Permitted Acquisition Provisions.    Section 5.13 of the Credit
Agreement is hereby amended to delete subsection (j) therefrom and to insert in place thereof the following: 



        (j)    the
aggregate amount of cash Consideration (exclusive of the issuance of equity) paid for all such Acquisitions (including Distressed Acquisitions, but excluding the
Herley Transactions) 



3







 

after
the Second Amendment Effective Date would not exceed Twenty-Five Million Dollars ($25,000,000); provided that, to the extent any cash Consideration for any such Acquisition is funded
with the net cash proceeds of an equity offering by Borrower, the aggregate amount of such net cash proceeds of an equity offering shall be excluded from the calculation of the maximum Dollar amounts
set forth in this subsection (j); and 




        8.    Addition of Schedules to the Credit Agreement.    The Credit Agreement is hereby
amended to add a new Schedule 5.8A and Schedule 5.9A thereto in the forms of the attached
Schedule 5.8A and Schedule 5.9A, respectively, hereto. 


        9.    Consent to the Herley Transactions.    


        (a)    Herley Transactions.    Borrower is seeking to acquire all of the capital stock of
Herley through a series of transactions described below (collectively, the "Herley Transactions"), with the result that Herley will become a wholly-owned Subsidiary of Borrower. Specifically: 



          (i)  Borrower
will create a wholly-owned direct Subsidiary corporation ("Acquisition Holdco"), and will cause Acquisition Holdco to create a wholly-owned direct Subsidiary
corporation ("Acquisition Co."); 


         (ii)  Acquisition
Holdco will, or will cause Acquisition Co. to, make a tender offer for all of the outstanding equity interest of Herley (the "Herley Tender Offer"); 


        (iii)  the
completion of the Herley Tender Offer will be followed by a back-end squeeze-out merger, pursuant to which Herley will be merged with and
into Acquisition Co, with Herley being the surviving entity and a wholly-owned direct Subsidiary of Acquisition Holdco (the "Squeeze-Out Merger"); and 



        (iv)  promptly
following the Squeeze-Out Merger, Acquisition Holdco will be merged with and into Borrower, with Borrower being the surviving entity (the
"Roll-up Merger" and, together with the Squeeze-Out Merger, collectively, the "Mergers"), so that Herley will become a direct wholly-owned Subsidiary of Borrower. 




        To
finance the Herley Transactions, pay fees and expenses of the Herley Transactions and provide working capital for general corporate purposes, Borrower (A) may issue common
equity, from which it would expect to receive net proceeds of up to Forty Million Dollars ($40,000,000) (the "Equity Offering"), (B) will cause Acquisition Holdco to issue new senior secured
notes (the "Herley Acquisition Notes"), from which it expects to receive aggregate gross proceeds of up to Three Hundred Twenty-Five Million Dollars ($325,000,000) less the net proceeds of
the Equity Offering, (C) expects to draw up to Five Million Dollars ($5,000,000) of Revolving Loans (the "Revolver Draw"), and (D) may use up to Four Million Eight Hundred Thousand
Dollars ($4,800,000) of unrestricted cash on hand of Borrower. Borrower will invest the net proceeds of the Equity Offering, the proceeds of the Revolver Draw and any necessary unrestricted cash on
hand of Borrower in Acquisition Holdco, and Acquisition Holdco will use such funds, together with the net proceeds of the Herley Acquisition Notes, to consummate the Herley Tender Offer and the
Squeeze-Out Merger. 


        The
Herley Acquisition Notes will be guaranteed solely by Acquisition Co, and will be secured solely by the assets of Acquisition Holdco and Acquisition Co (other than the equity
interests of Herley until Herley becomes a wholly-owned subsidiary of Acquisition Holdco). Prior to the Roll-up Merger, neither the Credit Agreement nor the Senior Notes will be guaranteed
by, or secured by any of the assets of, Acquisition Holdco, Acquisition Co or Herley (or any of its Subsidiaries). Following the Roll-up Merger, all of the Herley Acquisition Notes will be
exchanged for additional Senior Notes to be issued by Borrower under the Senior Notes Indenture (the "Exchange Debt Offering"), which additional Senior Notes will be guaranteed by each Guarantor of
Payment and secured by the same collateral as the currently outstanding Senior Notes on a pari passu basis. Any guaranties of, and 


4







 



security
interests granted by, Acquisition Holdco and Acquisition Co relating to the Herley Acquisition Notes will terminate and be released upon exchange of the Herley Acquisition Notes for the
additional Senior Notes to be issued by Borrower in the Exchange Debt Offering, and after the Roll-up Merger Herley and its Subsidiaries will give guaranties of the Obligations and the
Senior Notes and grant security interests in their respective assets as required by the Credit Agreement and the Senior Notes Indenture. 



        If,
in connection with the issuance of the Herley Acquisition Notes and the additional Senior Notes to be issued in the Exchange Debt Offering, Borrower is required to obtain a waiver
from the Senior Noteholders (the "Senior Note Waiver"), Borrower may pay a fifty (50.00) basis points fee to each of the Senior Noteholders. 


        (b)    Request for Consent.    Certain of the Herley Transactions are prohibited by one
or more provisions of the Credit Agreement, including but not limited to Sections 5.8 (Borrowing), 5.9 (Liens), 5.10 (Regulations T, U and X), 5.11 (Investments, Loans and Guaranties),
5.12 (Merger and Sale of Assets), 5.13 (Acquisitions), 5.15 (Restricted Payments), 5.17 (Affiliate Transactions), 5.20 (Subsidiary Guaranties, Security Documents and Pledge of Stock or Other Ownership
Interest), 5.28 (Other Covenants and Provisions), 5.30 (Guaranty Under Material Indebtedness Agreement) and 5.31 (Senior Note Documents). Borrower hereby specifically requests that Agent and the
Lenders consent to the Herley Transactions. 


        (c)    Consent of Agent and the Lenders.    Notwithstanding any provisions of the Credit
Agreement that may restrict or prohibit the Herley Transactions, Agent and the Lenders hereby consent to the Herley Transactions and Borrower's consummation of the Herley Transactions, subject to the
following conditions: 



          (i)  after
giving effect to the terms of this Amendment (including but not limited to the consent of Agent and the Lenders) and, if applicable, the Senior Note Waiver,
Borrower shall be in pro forma compliance with the Credit Agreement both before and after consummating the Herley Transactions; 


         (ii)  after
giving effect to the terms of this Amendment (including but not limited to the consent of Agent and the Lenders) and, if applicable, the Senior Note Waiver, no
Default or Event of Default shall exist under the Credit Agreement or any other Loan Document; 



        (iii)  the
Available Liquidity shall be no less than Twenty Million Dollars ($20,000,000) both before and after giving pro forma effect to the Herley Transactions; 


        (iv)  the
Herley Transactions are structured and occur substantially as set forth in Section 9(a) hereof; 


         (v)  the
Roll-up Merger and the Exchange Debt Offering occur within four Business Days of the completion of the Squeeze-Out Merger; 


        (vi)  the
Herley Transactions are not prohibited by the terms of the Senior Notes Documents (as such terms may be modified by any consent given by the Senior Noteholders); 



       (vii)  the
additional Senior Notes issued by Borrower in the Exchange Debt Offering are issued pursuant to the Senior Notes Indenture and subject to the Intercreditor
Agreement; 


      (viii)  neither
the Indenture Agent nor any Senior Noteholder files any U.C.C. Financing Statement on the assets of Herley or any of its subsidiaries prior to the date upon
which Agent has filed such U.C.C. Financing Statements; 


        (ix)  the
Herley Transactions are completed on or before June 30, 2011; and 


         (x)  Borrower
complies with the requirements of Section 10 hereof. 



5







 

This
Amendment shall serve as evidence of such consent. The consent contained in this Section 9 shall not be deemed to waive or amend any provision of the Credit Agreement or the Loan Documents
except with respect to the Herley Transactions, and shall not serve as consent to, or amendment of, any other matter inconsistent with the terms and conditions of the Credit Agreement or other Loan
Documents. Except as specifically set forth in this Section 9, all of the terms of the Credit Agreement and the other Loan Documents remain in full force and effect, and constitute the legal,
valid, binding and enforceable obligations of Borrower to Agent and the Lenders. 


        10.    Closing Deliveries.    Concurrently with the execution of this Amendment, Borrower
shall: 



        (a)   cause
each Guarantor of Payment to execute the attached Guarantor Acknowledgment and Agreement; and 


        (b)   pay
all legal fees and expenses of Agent in connection with this Amendment and any other Loan Documents to the extent then invoiced. 




        11.    Post-Closing Deliveries.    On or before each of the dates specified
in this Section 11 (unless a longer period is agreed to in writing by Agent), Borrower hereby covenants and agrees to satisfy each of the items specified in the subparts below: 



        (a)   prior
to or contemporaneously with the consummation of the Roll-up Merger, as defined in Section 9(a)(iv) hereof, Borrower shall enter into a further
amendment to the Credit Agreement, to be prepared by and in form and substance satisfactory to Agent, that provides for, among other things, amendments to the schedules to the Credit Agreement to
incorporate information relating to the assets acquired pursuant to the Herley Transactions and such other matters as shall be mutually agreed among Borrower, Agent and the Lenders; 


        (b)   prior
to or contemporaneously with the consummation of the Roll-up Merger, Borrower shall consent to an amendment to the Intercreditor Agreement, to be
prepared by and in form and substance satisfactory to Agent, that, in the reasonable judgment of Agent, adequately and appropriately accounts for the additional Senior Notes to be issued by Borrower
in the Exchange Debt Offering, which amendment shall also be signed by the Indenture Agent; 


        (c)   within
twenty (20) days after the Roll-up Merger (and, in any event, prior to or contemporaneously with (i) the grant of any security interest
in the assets of Herley to the Senior Noteholders, or (ii) the guaranty by Herley or any of its subsidiaries of the additional Senior Notes issued by Borrower in the Exchange Debt Offering),
Borrower shall cause Herley and, as appropriate, each Domestic Subsidiary of Herley, to execute and deliver all of the documentation required pursuant to Section 5.20 of the Credit Agreement;
and 


        (d)   within
forty-five (45) days after the Roll-up Merger, Agent shall have received the results of a collateral field audit of Herley and its
subsidiaries and, if required by Agent, an appraisal of the Inventory of Herley and its subsidiaries, each to be in form and substance satisfactory to Agent. 




        12.    Representations and Warranties.    Borrower hereby represents and warrants to
Agent and the Lenders that (a) Borrower has the legal power and authority to execute and deliver this Amendment; (b) the officers executing this Amendment have been duly authorized to
execute and deliver the same and bind Borrower with respect to the provisions hereof; (c) the execution and delivery hereof by Borrower and the performance and observance by Borrower of the
provisions hereof do not violate or conflict with the Organizational Documents of Borrower or any law applicable to Borrower, or, after giving effect to this Amendment (including but not limited to
the consent of Agent and the Lenders in Section 9 hereof) and the Senior Note Waiver, result in a breach of any provision of, or constitute a default under, any other agreement, instrument or
document binding upon or enforceable against Borrower; (d) after giving effect to this Amendment (including but not limited to the consent of Agent 


6







 

and
the Lenders in Section 9 hereof) and the Senior Note Waiver, no Default or Event of Default exists, nor will any occur immediately after the execution and delivery of this Amendment or by
the performance or observance of any provision hereof; (e) after giving effect to this Amendment (including but not limited to the consent of Agent and the Lenders in Section 9 hereof)
and the Senior Note Waiver, each of the representations and warranties contained in the Loan Documents is true and correct in all material respects as of the Second Amendment Effective Date as if made
on the Second Amendment Effective Date, except to the extent that any such representation or warranty expressly states that it relates to an earlier date (in which case such representation or warranty
is true and correct in all material respects as of such earlier date); (f) Borrower is not aware of any claim or offset against, or defense or counterclaim to, Borrower's obligations or
liabilities under the Credit Agreement or any Related Writing; and (g) this Amendment constitutes a valid and binding obligation of Borrower, enforceable in accordance with its terms. 


        13.    No Course of Dealing.    Borrower acknowledges and agrees that this Amendment is
not intended to, nor shall it, establish any course of dealing with respect to the various provisions amended herein, or otherwise, among Borrower, Agent and the Lenders that is inconsistent with the
express terms of the Loan Documents. 


        14.    Waiver and Release.    Borrower, by signing below, hereby waives and releases
Agent, and each of the Lenders, and their respective directors, officers, employees, attorneys, affiliates and subsidiaries, from any and all claims, offsets, defenses and counterclaims of any kind or
nature, absolute and contingent, of which Borrower is aware or should be aware on the date of this Amendment, such waiver and release being with full knowledge and understanding of the circumstances
and effect thereof and after having consulted legal counsel with respect thereto. 



        15.    References to Credit Agreement and Ratification.    Each reference that is made in
the Credit Agreement or any other Related Writing to the Credit Agreement shall hereafter be construed as a reference to the Credit Agreement as amended hereby. Except as herein otherwise specifically
provided, all terms and provisions of the Credit Agreement are confirmed and ratified and shall remain in full force and effect and be unaffected hereby. This Amendment is a Loan Document. 


        16.    Counterparts.    This Amendment may be executed in any number of counterparts, by
different parties hereto in separate counterparts and by facsimile signature, each of which, when so executed and delivered, shall be deemed to be an original and all of which taken together shall
constitute but one and the same agreement. 


        17.    Headings.    The headings, captions and arrangements used in this Amendment are
for convenience only and shall not affect the interpretation of this Amendment. 


        18.    Severability.    Any term or provision of this Amendment held by a court of
competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the term or provision so held to be
invalid or unenforceable. 


        19.    Governing Law.    The rights and obligations of all parties hereto shall be
governed by the laws of the State of New York, without regard to principles of conflicts of laws. 


[Remainder
of page intentionally left blank.] 


7













































 




        JURY TRIAL WAIVER.    BORROWER, AGENT AND THE LENDERS, TO THE EXTENT PERMITTED BY LAW, EACH HEREBY WAIVES ANY RIGHT TO HAVE
A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT AND THE LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AMENDMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS RELATED THERETO. 


        IN
WITNESS WHEREOF, the parties have executed and delivered this Amendment as of the date first set forth above. 

 






 



					
	 	 	 KRATOS DEFENSE & SECURITY SOLUTIONS, INC.
	

 	
 	
By:	
 	
/s/ Deanna H. Lund







 
	 	 	Name:	 	Deanna H. Lund







 
	 	 	Title:	 	Executive Vice President & Chief Financial Officer







 
	

 	
 	
KEYBANK NATIONAL ASSOCIATION,

as Agent and as a Lender
	

 	
 	
By:	
 	
/s/ John P. Dunn








 
	 	 	Name:	 	John P. Dunn







 
	 	 	Title:	 	Vice President







 




 

 Signature
Page to

Second Amendment Agreement 







 
 

  GUARANTOR ACKNOWLEDGMENT AND AGREEMENT    
    


        The undersigned consent and agree to and acknowledge the terms of the foregoing Second Amendment Agreement dated as of
February 7, 2011. The undersigned further agree that the obligations of the undersigned pursuant to the Guaranty of Payment executed by the undersigned are hereby ratified and shall remain in
full force and effect and be unaffected hereby. 


        The
undersigned hereby waive and release Agent and the Lenders and their respective directors, officers, employees, attorneys, affiliates and subsidiaries from any and all claims,
offsets, defenses and counterclaims of any kind or nature, absolute and contingent, of which the undersigned are aware or should be aware on the date of the foregoing Second Amendment Agreement, such
waiver and release being with full knowledge and understanding of the circumstances and effect thereof and after having consulted legal counsel with respect thereto. 



        JURY TRIAL WAIVER.    THE UNDERSIGNED, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWER, AGENT, THE LENDERS AND THE UNDERSIGNED, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AMENDMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE
TRANSACTIONS RELATED THERETO. 

 






 



							
	 KRATOS PUBLIC SAFETY & SECURITY SOLUTIONS, INC. (F/K/A KRATOS COMMERCIAL SOLUTIONS, INC.)

KRATOS MID-ATLANTIC, INC.

KRATOS SOUTHEAST, INC.

KRATOS TEXAS, INC.

WFI NMC CORP.

SYS

AI METRIX, INC.

POLEXIS, INC.

REALITY BASED IT SERVICES, LTD.

SHADOW I, INC.

SHADOW II, INC.

SHADOW III, INC.

DIGITAL FUSION, INC.

DIGITAL FUSION SOLUTIONS, INC.

SUMMIT RESEARCH CORPORATION

KRATOS GOVERNMENT SOLUTIONS, INC.	 	DEFENSE SYSTEMS, INCORPORATED

HAVERSTICK CONSULTING, INC.

HGS HOLDINGS, INC.

DTI ASSOCIATES, INC.

HAVERSTICK GOVERNMENT SOLUTIONS, INC.

ROCKET SUPPORT SERVICES, LLC

JMA ASSOCIATES, INC.

MADISON RESEARCH CORPORATION

GICHNER SYSTEMS GROUP, INC.

GICHNER HOLDINGS, INC.

GICHNER SYSTEMS INTERNATIONAL, INC.

CHARLESTON MARINE CONTAINERS INC.

DALLASTOWN REALTY I, LLC

DALLASTOWN REALTY II, LLC

DEI SERVICES CORPORATION

SCT ACQUISITION, LLC

SCT REAL ESTATE, LLC
	
 By:	
 	
/s/ Deanna H. Lund






  Deanna H. Lund

Executive Vice President & Chief Financial Officer	
 	
By:	
 	
/s/ Deanna H. Lund






  Deanna H. Lund

Executive Vice President & Chief Financial Officer




 

 Signature
Page 1 of 2 to

Guarantor Acknowledgement and Agreement 







 






 



							
	 KRATOS SOUTHWEST L.P.,

by Kratos Texas, Inc., its general partner	 	HENRY BROS. ELECTRONICS, INC.,

a Delaware corporation
	

By:	 	

/s/ Deanna H. Lund






  Deanna H. Lund

Executive Vice President & Chief Financial Officer	 	HENRY BROS. ELECTRONICS, INC.,

a Colorado corporation

HENRY BROS. ELECTRONICS, INC.,

a Virginia corporation

HENRY BROS. ELECTRONICS, INC.,

a New Jersey corporation

HENRY BROS. ELECTRONICS, INC.,

a California corporation

DIVERSIFIED SECURITY SOLUTIONS, INC.

HENRY BROS. ELECTRONICS, LLC

NATIONAL SAFE OF CALIFORNIA, INC.

AIRORLITE COMMUNICATIONS, INC.
	

 	
 	

 	
 	
By:	
 	
/s/ Deanna H. Lund






  Deanna H. Lund

Executive Vice President & Chief Financial Officer




 

 Signature
Page 2 of 2 to

Guarantor Acknowledgement and Agreement 








 



































 



 
 

  SCHEDULE 5.8A    
    
    ADDITIONAL SCHEDULE TO SECTION 5.8    
    


        1.     Indebtedness
of Herley GMI Eyal Ltd owing to The First International Bank of Israel Ltd. pursuant to documentation entered into on or about August, 2008
(the "Herley GMI Eyal Credit Facility"), in an aggregate principal amount not to exceed Ten Million Dollars ($10,000,000). 


        2.     The
guaranty by General Microwave Israel (1987) Ltd of the Indebtedness under the Herley Eyal Credit Facility. 


        3.     Indebtedness
of Herley to (i) East Hempfield Township Industrial Development Authority in respect of the loan of the proceeds of, and (ii) Allfirst Bank in
respect of its letter of credit supporting the payment of, those certain East Hempfield Township Industrial Development Authority $3,000,000 Variable Rate Demand/Fixed Rate Revenue Bonds (Herley
Industries. Inc. Project) Series of 2001, in an aggregate principal amount not to exceed Two Million Dollars ($2,000,000). 


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  SCHEDULE 5.9A    
    
    ADDITIONAL SCHEDULE TO SECTION 5.9    
    


        1.     Liens
on the assets of Herley GMI Eyal Ltd and General Microwave Israel (1987) Ltd securing the Indebtedness described in item 1 of
Schedule 5.8A. 


        2.     Open-End
Mortgage and Security Agreement dated October 17, 2001, executed by Herley, as mortgagor, to Allfirst Bank, as mortgagee, encumbering property
located in Lancaster, Pennsylvania, securing the Indebtedness described in item 3 of Schedule 5.8A, and related UCC-1 financing statements. 


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Exhibit 10.3


SECOND AMENDMENT AGREEMENT


GUARANTOR ACKNOWLEDGMENT AND AGREEMENT



SCHEDULE 5.8A ADDITIONAL SCHEDULE TO SECTION 5.8

SCHEDULE 5.9A ADDITIONAL SCHEDULE TO SECTION 5.9