**SECOND AMENDMENT TO CREDIT AGREEMENT**

This SECOND Amendment to Credit Agreement (the "Amendment")  is made and entered into as of March 12, 2002, by and between UNITED CALIFORNIA  BANK formerly known as SANWA BANK CALIFORNIA (the "Bank") and APPLIED  SIGNAL TECHNOLOGY, INC. (the "Borrower") with respect to the following:

This Amendment shall be deemed to be a part of and subject to  that certain Credit Agreement dated as of September 18, 2000, as it may be amended  from time to time, and any and all addenda and riders thereto (collectively  the "Agreement"). Unless otherwise defined herein, all terms used  in this Amendment shall have the same meanings as in the Agreement. To the extent  that any of the terms or provisions of this Amendment conflict with those contained  in the Agreement, the terms and provisions contained herein shall control.

WHEREAS, the Borrower and the Bank mutually desire to extend  and/or modify the Agreement.

NOW THEREFORE, for value received and hereby acknowledged, the  Borrower and the Bank agree as follows:

1. **Modification of Expiration Date.** Section 1.1.15  of the Agreement is modified and amended as follows: The date which is currently  March 15, 2002 is hereby modified and amended to be March 15, 2003.

2. **Modification of Financial Condition/Effective Tangible  Net Worth.** Section 5.2(i) of the Agreement is modified and amended as follows:  The dollar amount provided for in section 5.2(i) of the Agreement, which is  currently $55,000,000.00, is hereby modified and amended to be $58,500,000.00.

3. **Modification of Financial Condition/Quick Ratio.**  Section 5.2(iii) of the Agreement is modified and amended as follows: The ratio  provided for in section 5.2(iii) of the Agreement, which is currently 1.25 to  1, is hereby modified and amended to be 2.00 to 1 .

4. **Modification of Notice.** Section 5.13 of the Agreement  is modified and amended as follows: The dollar amount provided for in section  5.13 of the Agreement, which is currently $500,000.00, is hereby modified and  amended to be $100,000.00.

5. **Conditions Precedent.** As a condition precedent to  the effectiveness of this Amendment, Borrower agrees to pay to Bank a fee of  $6,500.00.

6. **Representations and Warranties.** The Borrower hereby  reaffirms the representations and warranties contained in the Agreement and  represents that no event, which with notice or lapse of time, could become an  Event of Default, has occurred or is continuing.

7. **Confirmation of Other Terms and Conditions of the Agreement.**  Except as specifically provided in this Amendment, all other terms, conditions  and covenants of the Agreement unaffected by this Amendment shall remain unchanged  and shall continue in full force and effect and the Borrower hereby covenants  and agrees to perform and observe all terms, covenants and agreements provided  for in the Agreement, as hereby amended.

8. **Governing Law.** This Amendment shall be governed  and construed in accordance with the laws of the State of California to which  jurisdiction the parties hereto hereby consent and submit.

9. **Counterparts.** This Amendment may be executed in  one or more counterparts, each of which shall be deemed an original and all  of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, this Amendment has been executed by the  parties hereto as of the date first hereinabove written.