Document:

EXHIBIT
10.81

 

 

 

 

LOAN AND SECURITY AGREEMENT

by and between

MANUGISTICS GROUP, INC.,

AND MANUGISTICS, INC.,

as Borrowers

and

SILICON VALLEY BANK,

as Bank

MARCH 31, 2004

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT
dated March 31, 2004, between SILICON VALLEY BANK (“Bank”), whose address
is 3003 Tasman Drive, Santa Clara, California 95054 and having a loan
production office at 1660 International Drive, Suite 600, McLean,
Virginia  22102 and MANUGISTICS GROUP, INC., a corporation
organized under the laws of the State of Delaware whose address is 9715 Key
West Avenue, Rockville, Maryland  20850
(the “Company”), MANUGISTICS, INC., a corporation
organized under the laws of the State of Delaware whose address is 9715 Key
West Avenue, Rockville, Maryland  20850
and any Persons who are now or hereafter made parties to this Agreement (each a
“Borrower” and collectively, “Borrowers”), provides the terms on which Bank will
lend to Borrowers and Borrowers will repay Bank. The parties agree as follows:

1              ACCOUNTING
AND OTHER TERMS

Accounting
terms not defined in this Agreement will be construed following GAAP.
Calculations and determinations must be made following GAAP. The term “financial
statements” includes the notes and schedules. The terms “including” and “includes”
always mean “including (or includes) without limitation,” in this or any Loan
Document.

2              LOAN
AND TERMS OF PAYMENT

2.1          Promise to Pay

Borrowers
jointly and severally promise to pay Bank the unpaid principal amount of all
Credit Extensions and interest on the unpaid principal amount of the Credit
Extensions in accordance with the Loan Documents.

2.1.1       Equipment
Advances.

(a)           Subject to the terms and conditions of this
Agreement, Bank agrees to lend to Borrowers, from time to time prior to the
Commitment Termination Date, equipment advances (each an “Equipment Advance”
and collectively the “Equipment Advances”) in an aggregate amount not to exceed
the Committed Equipment Line. When repaid, the Equipment Advances may not be
reborrowed. The proceeds of the Equipment Advances will be used solely to
reimburse Borrowers for the purchase of Eligible Equipment purchased within one
hundred twenty (120) days of the Equipment Advance provided that the first
Equipment Advance may be used to reimburse Borrowers for Eligible Equipment
purchased since January 1, 2002 if such first Equipment Advance is
completed within one hundred twenty (120) days of the Closing Date. All
Equipment Advances shall be evidenced by the Equipment Term Note to be executed
and delivered by Borrowers to Bank on the Closing Date and shall be repaid in
accordance with the terms of the Equipment Term Note. Bank’s obligation to lend hereunder shall terminate on the earlier of (i) the
occurrence and continuance of an Event of Default, or (ii) the Commitment
Termination Date.  For purposes of this
Section, the minimum amount of each Equipment Advance is One Hundred Thousand
Dollars ($100,000) and the maximum number of Equipment Advances that will be
made is five (5).

(b)           To obtain an Equipment Advance,
Borrowers will deliver to Bank a completed supplement in substantially the form
attached as Exhibit B (“Loan Supplement”), copies of invoices for
the Financed Equipment, together with a UCC Financing Statement, if requested
by Bank, covering the Equipment described on the Loan Supplement, and such
additional information as Bank may request at least five (5) Business Days
before the proposed funding date (the “Funding Date”). On each Funding Date,
Bank will specify in the Loan Supplement for each Equipment Advance, the Basic
Rate, the Loan Factor, and the Payment Dates. If Borrowers satisfy the
conditions of each Equipment Advance specified herein, Bank will disburse such
Equipment Advance by internal transfer to Company’s deposit account with Bank. Each
Equipment Advance may not exceed one hundred percent (100%) of the Original
Stated Cost.

(c)           Bank’s obligation to lend the
undisbursed portion of the Committed Equipment Line will terminate if, in Bank’s
sole discretion, there has been a Material Adverse Change.

 

2.1.2       Interest
Rate, Payments.

(a)           Principal and Interest Payments On
Payment Dates.  Borrowers will repay each
Equipment Advance on the terms provided in the related Loan Supplement. Borrowers
will make payments monthly in advance of principal and accrued interest for
each Equipment Advance (collectively, “Scheduled Payments”), on the first
Business Day of the month following the Funding Date (or commencing on the
Funding Date if the Funding Date is the first Business Day of the month) with
respect to such Equipment Advance and continuing thereafter during the
Repayment Period on the first Business Day of each calendar month (each a “Payment
Date”), in an amount equal to the Loan Factor multiplied by the Loan Amount for
such Equipment Advance as of such Payment Date. All unpaid principal and
accrued interest is due and payable in full on the last Payment Date with
respect to such Equipment Advance. Payments received after 12:00 noon Eastern
time are considered received at the opening of business on the next Business
Day.  An Equipment Advance may only be
prepaid in accordance with Sections 2.1.2(d) and 2.1.2(f). Bank may debit
any of Borrowers’ deposit accounts including Account Number     _
for principal and interest payments owing or any amounts Borrowers owe Bank if
not paid when due or within the applicable cure period. Bank will promptly
notify Company when it debits Borrowers’ accounts. These debits are not a
set-off. When a payment is due on a day that is not a Business Day, the payment
is due the next Business Day and additional fees or interest accrue.

(b)           Interest Rate.  Borrowers will pay interest on the Payment
Dates (as described above) at the per annum rate of interest equal to the Basic
Rate.  Any amounts outstanding during the
continuance of an Event of Default shall bear interest at a per annum rate
equal to the Basic Rate plus four percent (4%). If any change in the law
increases Bank’s expenses or decreases its return from the Equipment Advances,
Borrowers will pay Bank (upon request and delivery by Bank to Borrowers of a
description of such increased expenses or decreased returns and the methods by
which Bank has allocated such increases or decreases to its customers) the
amount of such increase or decrease.

(c)           Interim Payment. In
addition to the Scheduled Payments, on the Funding Date for each Equipment
Advance (unless the Funding Date is the first Business Day of the month)
Borrowers shall pay to Bank, on behalf of Bank, the projected interest to
accrue from the Funding Date to the first Payment Date, at the Basic Rate.

(d)           Prepayment Upon an Event of Loss. If any Financed
Equipment is subject to an Event of Loss and Borrowers are required to or elect
to prepay the Equipment Advance with respect to such Financed Equipment
pursuant to Section 6.7, then such Equipment Advance shall be prepaid to
the extent and in the manner provided in such section.

(e)           Mandatory Prepayment Upon an Acceleration. If the
Equipment Advances are accelerated following the occurrence of an Event of
Default or otherwise (other than following an Event of Loss), then Borrowers
will immediately pay to Bank (i) all unpaid Scheduled Payments (including
principal and interest) with respect to each Equipment Advance, (ii) all
outstanding principal, (iii) all accrued unpaid interest, including the
default rate of interest, to the date of the prepayment, (iv) the
Prepayment Fee, and (v) all other sums, if any, that shall have become due
and payable with respect to any Equipment Advance.

(f)            Permitted Prepayment of Loans. Borrowers shall have the
option to prepay any Equipment Advance (or all Equipment Advances) advanced by
Bank under this Agreement, provided Borrowers (i) provide written
notice to Bank of its election to prepay such Equipment Advance at least thirty
(30) days prior to such prepayment, and (ii) pays, on the date of the
prepayment (A) all outstanding principal; (B) all unpaid accrued
interest to the date of the prepayment; (C) a prepayment fee (the “Prepayment
Fee”) equal to (i) one and one half of one percent (1.5%) of the amount
prepaid if the prepayment occurs within the first twelve (12) months from the
date of the Equipment Advance; (ii) one percent (1%) of the amount prepaid
if the prepayment occurs after the first twelve (12) months, and prior to the
twenty fourth (24th)
month from the date of the Equipment Advance; and (iii) one half of one
percent (.5%) of the amount prepaid at all times after the first twenty four
(24) months from the date of the

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Equipment Advance; and (D) all other
sums, if any, that shall have become due and payable hereunder with respect to
this Agreement. Notwithstanding the foregoing, Borrower shall not be required
to pay the Prepayment Fee in the event it elects to pay the Obligations in full
within thirty (30) days of obtaining knowledge that all or any part of, or any
interest in, Bank’s obligations, rights and benefits under this Agreement have
been transferred, sold or assigned as permitted under Section 12.1 herein.

2.2          Requests
for Advances, Etc.

(a)           Each
of the Borrowers hereby represents and warrants to Bank that each such Borrower
will derive benefits, either directly or indirectly, from the proceeds of each
Credit Extension, both in its individual capacity and as a member of the
integrated group to which the Borrowers belong, because the successful
operation of the integrated group referred to in this Agreement as “the
Borrowers” is dependent upon the continued successful performance of the
functions of the integrated group as a whole.

(b)           The
Borrowers, in the discretion of their respective managements, are to agree
among themselves as to the allocation of the benefits of the proceeds of the
Credit Extensions and the purposes for which such benefits and proceeds will be
used, provided that no allocation, purpose or use shall be in violation of this
Agreement. For administrative convenience, each Borrower is hereby irrevocably
appointed by each and every other Borrower as agent for each and every other
Borrower for the purpose of requesting Credit Extensions, receiving the
benefits of the proceeds of such Credit Extensions, and disbursing the proceeds
of such Credit Extensions among the Borrowers. By reason thereof, each Borrower
is hereby irrevocably appointed by each and every other Borrower with power and
authority through its duly authorized officer or officers (i) to endorse
any check (if any) for the proceeds of any Credit Extension for and on behalf
of each and every Borrower and in the name of each and every Borrower, and (ii) to
instruct Bank to credit the proceeds of any Credit Extension directly to a
banking account of one or more of the Borrowers which shall evidence the making
of such Credit Extension and shall constitute the acknowledgment by each and
every Borrower of the receipt of the proceeds of such Credit Extension. Bank
may require from time to time such certificates, reports and other items as
Bank may reasonably deem necessary to evidence the allocation of the proceeds
of the Credit Extensions among the Borrowers. In particular, Bank may require
from time to time that any advances of the proceeds of the Credit Extensions by
one or more of the Borrowers be evidenced by one or more promissory notes or
other written instruments or agreements between one or more of the Borrowers to
evidence intercompany receivables between one or more of the Borrowers. All
actions taken by each Borrower in connection with the Credit Extensions and the
Loan Documents shall be conclusively presumed to be the joint and several
actions of the Borrowers even though any one Borrower may act from time to time
in its name alone. This appointment is coupled with an interest and is
irrevocable without the prior written consent of Bank.

(c)           Without
implying any limitation on the joint and several nature of the Obligations,
Bank agrees that, notwithstanding any other provision of this Agreement, the
Borrowers may create inter-company indebtedness between and/or among the
Borrowers with respect to the allocation of the benefits and proceeds of the
advances under this Agreement. The Borrowers agree among themselves, and Bank
consents to that agreement, that each and every Borrower shall have rights of
contribution from all of the other Borrowers to the extent each such Borrower
incurs Obligations in excess of the proceeds of the Credit Extensions received
by, or allocated to purposes for the direct benefit of, each such Borrower. All
such indebtedness and rights shall be, and are hereby agreed by the Borrowers
to be, subordinate in priority and payment to the indefeasible payment in full
of the Obligations, and, unless Bank agrees in writing otherwise, shall not be
exercised or repaid in whole or in part until all of the Obligations have been
satisfied, provided, however, that prior to the occurrence of a payment
Default, the Borrowers shall be permitted to make payments on account of any
such inter-company indebtedness from time to time in accordance with the terms
thereof. Each and every Borrower hereby waives all rights of counterclaim,
recoupment and offset between or among themselves arising on account of that
indebtedness. Unless required by the laws of the United States or the country
where such indebtedness is created, each and every Borrower agrees not to
evidence that indebtedness or rights by note or other instrument, and shall not
secure that indebtedness with any mortgage, security agreement or otherwise.

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(d)           Bank
is hereby irrevocably authorized by the Borrowers to make Credit Extensions to the
Borrowers, all pursuant to the provisions of this Agreement upon the written,
oral or telephone request of any one of the Persons who is from time to time a
Responsible Officer of the Borrowers under the provisions of the most recent
certificate of corporate resolutions of the Borrowers on file with Bank or as
otherwise designated in writing by the Borrowers. Except for gross negligence
or willful misconduct, Bank assumes no responsibility or liability for any
errors, mistakes, and/or discrepancies in the oral, telephonic, written or
other transmissions of any instructions, orders, requests and confirmations
between Bank and the Borrowers in connection with any of Credit Extension, or
any other transaction in connection with the provisions of this Agreement.

2.3          Fees.

Borrowers
will pay:

(a)           Facility Fee.
A fully earned, nonrefundable fee in the amount of Eighteen Thousand Seven
Hundred Fifty Dollars ($18,750) on the Closing Date.

(b)           Bank Expenses.
All Bank Expenses (including reasonable attorneys’ fees and reasonable
expenses) incurred through and after the date of this Agreement, are payable
when due.

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 it receive the agreements, documents and fees it requires and
Bank’s receipt of an insurance certificate in form and substance acceptable to
Bank showing that Bank has been added to such policies pursuant to a lender’s
loss payable endorsement as an additional loss payee and with respect to all
liability policies, showing the Bank as an additional insured and providing
that the insurer must give Bank at least twenty (20) days notice before
canceling its policy.

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:

(a)           timely receipt of
any Loan Supplement; and

(b)           the representations
and warranties in Section 5 must be true on the date of the Loan
Supplement and on the effective date of each Credit Extension and no Event of
Default may have occurred and be continuing, or result from the Credit
Extension. Each Credit Extension is Borrowers’ representation and warranty on
that date that the representations and warranties of Section 5 remain
true.

4              CREATION
OF SECURITY INTEREST

4.1          Grant of Security Interest.

Borrowers
grant Bank a continuing security interest in all presently existing and later
acquired Collateral to secure all Obligations and performance of each of
Borrowers’ duties under the Loan Documents. Any security interest will be a
first priority security interest in the Collateral. Bank upon the occurrence of
any Event of Default, may place a “hold” on any deposit account of any Borrower
maintained with Bank. The Bank’s hold on any such deposit account shall be
limited to the aggregate amount of the outstanding Obligations, including
without limitation, the outstanding Obligations under the Committed Revolving
Line, including the face amount of all undrawn letters of credit issued
thereunder. If this Agreement is terminated, Bank’s lien and security interest
in the Collateral will continue until Borrowers fully satisfy their
Obligations.

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5              REPRESENTATIONS
AND WARRANTIES

Each
Borrower represents and warrants as follows:By:

5.1          Due Organization and Authorization.

Each
Borrower is duly existing and in good standing in its state of incorporation
and qualified and licensed to do business in, and in good standing in, any
state 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 cause a Material Adverse Change. Each Borrower’s
exact legal name is as set forth on the signature pages of this Agreement.
The execution, delivery and performance of the Loan Documents have been duly
authorized, and do not conflict with Borrower’s formation documents, nor
constitute an event of default under any material agreement by which Borrower
is bound. Each 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 cause a Material Adverse Change.

5.2          Collateral.

Each
Borrower has good title to the Collateral, free of Liens.

5.3          Litigation.

There
are no actions or proceedings pending or, to the knowledge of each Borrower’s
Responsible Officers, threatened by or against any Borrower or any Subsidiary
in which a likely adverse decision could reasonably be expected to cause a
Material Adverse Change.

5.4          No Material Adverse Change in
Financial Statements.

All
consolidated financial statements for the Company and its Subsidiaries,
delivered to Bank fairly present in all material respects the consolidated
financial condition and the consolidated results of operations of the Company
and its Subsidiaries. There has not been any material deterioration in the
consolidated financial condition of the Company and its Subsidiaries since the
date of the most recent consolidated financial statements submitted to Bank.

5.5          Solvency.

The
fair salable value of Borrowers’ assets (including goodwill minus disposition
costs) exceeds the fair value of their liabilities; no Borrower is left with
unreasonably small capital after the transactions in this Agreement or any of
the Loan Documents; and each Borrower is able to pay its debts (including trade
debts) as they mature.

5.6          Regulatory Compliance.

No
Borrower is an “investment company” or a company “controlled” by an “investment
company” under the Investment Company Act. No Borrower is engaged as one of its
important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower
has complied in all material respects with the Federal Fair Labor Standards Act.
No Borrower has violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of any
Borrowers’ or any Subsidiary’s properties or assets has been used by any
Borrower or any Subsidiary or, to the best of any Borrower’s knowledge, by
previous Persons, in disposing, producing, storing, treating, or transporting
any hazardous substance other than legally. Each Borrower and each Subsidiary
has timely filed all required tax returns and paid, or made adequate provision
to pay, all material taxes, except those being contested in good faith with
adequate reserves under GAAP. Each Borrower and each Subsidiary has obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all

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government
authorities that are necessary to continue its business as currently conducted,
except where the failure to do so could not reasonably be expected to cause a
Material Adverse Change.

5.7          Omitted.

5.8          Designated Senior Indebtedness.

The
Company represents, warrants and agrees with the Bank that the Obligations
shall at all times be deemed to be “Designated Senior Indebtedness” under that
certain Indenture dated October 20, 2000 between the Company and State
Street Bank and Trust Company as the same may from time to time be amended,
restated or otherwise modified.

5.9          Full Disclosure.

No
written representation, warranty or other statement of any Borrower in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements 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 each
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 from the projected and forecasted results.

6              AFFIRMATIVE
COVENANTS

Each
Borrower will do all of the following for so long as Bank has an obligation to
make any Credit Extension, or there are outstanding Obligations:

6.1          Government Compliance.

Each
Borrower will maintain its legal existence and good standing as a Registered
Organization in only the State of such Borrower’s incorporation as set forth in
the Schedule and maintain qualification in each jurisdiction in which the
failure to so qualify would reasonably be expected to cause a material adverse
effect on such Borrower’s business or operations. Each Borrower will 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 such Borrower’s business or operations or would reasonably be
expected to cause a Material Adverse Change.

6.2          Financial Statements, Reports,
Certificates.

(a)           The Company will
deliver to Bank:  (i) as soon as
available, but no later than fifty (50) days after the last day of each of the
Company’s fiscal quarters, a company prepared quarterly financial statement
including a consolidated balance sheet and income statement covering Borrowers’
consolidated operations during the period certified by a Responsible Officer; (ii) as
soon as available, but no later than one hundred twenty (120) days after the
last day of the Company’s fiscal year, 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; (iii) a prompt report of any
legal actions pending or threatened against any Borrower or any Subsidiary that
could result in damages or costs to any Borrower or any Subsidiary in excess of
$3,000,000 or which could result in a Material Adverse Change; and (iv) budgets,
sales projections, operating plans or other financial information Bank
reasonably requests. In lieu of items (a)(i) and (a)(ii) above,
Company may deliver to Bank, Company’s 10-Q and 10-K along with the
unqualified opinion described above, as applicable, within the time frame
described above for delivering such financial statements.

(b)           Within fifty (50)
days after the last day of each of the Company’s fiscal quarters, the Company
will deliver to Bank with the quarterly financial statements a Compliance
Certificate signed by a Responsible Officer in the form of Exhibit C.

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(c)           Each document
required to be delivered pursuant to paragraphs (a) and (b) of this Section 6.2
shall be deemed to have been delivered on the date on which the Company posts
such document on the Company’s website on the Internet at the website address
listed on the Schedule, or when such document is posted on the Securities and
Exchange Commission’s website at www.sec.gov; provided that (i) if the
Bank so requests, the Company shall deliver paper copies of all such documents
to the Bank until the Bank requests that the Company cease delivering such
paper copies and (ii) the Company shall notify the Bank by facsimile of
the posting of each such document.

6.3          Financial Covenants.

Borrowers
will maintain as of the last day of each fiscal quarter:

(a)              Quick
Ratio. A ratio of (i) Quick Assets to (ii) Current Liabilities,
plus long term Indebtedness to Bank and outstanding letters of credit under the
Committed Revolving Line minus deferred revenue of at least 1.75 to 1.00.

(b)              Tangible Net Worth. A
Tangible Net Worth of at least $130,000,000 as of the quarter ending May 31,
2004, $140,000,000 as of the quarters ending August 31, 2004 and November 30,
2004, and $150,000,000 for the quarter ending February 28, 2005, and
thereafter at such levels as agreed to by Bank based upon the Company’s
projections.

6.4          Taxes.

Each
Borrower will make, and cause each Subsidiary to make, timely payment of all
material federal, state, and local taxes or assessments (other than taxes and
assessments which Borrowers are contesting in good faith, with adequate
reserves maintained in accordance with GAAP) and will deliver to Bank, on
demand, appropriate certificates attesting to the payment.

6.5          Insurance.

Each
Borrower will keep its business and the Collateral insured for risks and in
amounts standard for Borrower’s industry, and as Bank may reasonably request. Insurance
policies will be in a form, with companies, and in amounts that are
satisfactory to Bank in Bank’s reasonable discretion. At Bank’s request, Borrower
will deliver certified copies of policies and evidence of all premium payments.
Proceeds payable under any policy will, at Bank’s option, be payable to Bank on
account of the Obligations.

6.6          Deposit Accounts.

Borrowers
will at all times, maintain not less than $50,000,000 in cash and/or
investments with Bank and/or its Affiliates. Funds may be maintained in
investment vehicles or operating accounts at the Borrower’s discretion. Borrowers
agree that in the event that Borrowers request that any such amounts required
to be maintained herein be held in an investment or other account with any
Affiliate of Bank, Borrowers shall promptly execute and deliver an Account
Control Agreement to Bank in Bank’s standard form

6.7          Loss, Destruction or Damage.

Each
Borrower will bear the risk of the Financed Equipment being lost, stolen,
destroyed, or damaged. If during the term of this Agreement any item of
Financed Equipment is lost, stolen, destroyed, damaged beyond repair, rendered
permanently unfit for use, or seized by a governmental authority for any reason
for a period equal to at least the remainder of the term of this Agreement (an “Event
of Loss”), then in each case, Borrowers:

(a)           prior to the
occurrence of an Event of Default, at Borrowers’ option, will (1) pay to
Bank on account of the Obligations relating to the Financed Equipment affected
by the Event of Loss all accrued interest to the date of the prepayment, plus
all outstanding principal, plus a prepayment fee equal

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to (i) one
and one half of one percent (1.5%) of the amount prepaid if the prepayment
occurs within the first twelve (12) months from the date of the Equipment
Advance; (ii) one percent (1%) of the amount prepaid if the prepayment
occurs after the first twelve (12) months, and prior to the twenty fourth (24th) month from the date of the
Equipment Advance; and (iii) one half of one percent (.5%) of the amount
prepaid at all times after the first twenty four (24) months from the date of
the Equipment Advance; or (2) repair or replace any Financed Equipment
subject to an Event of Loss provided the repaired or replaced Financed
Equipment is of equal or like value to the Financed Equipment subject to an
Event of Loss and provided further that Bank has a first priority perfected
security interest in such repaired or replaced Financed Equipment.

(b)           during the
continuance of an Event of Default, on or before the Payment Date after such
Event of Loss for each such item of Financed Equipment subject to such Event of
Loss, Borrowers will, at Bank’s option, pay to Bank an amount equal to all
accrued interest to the date of the prepayment, plus all outstanding principal,
plus a prepayment fee equal to (i) one and one half of one percent (1.5%)
of the amount prepaid if the prepayment occurs within the first twelve (12)
months from the date of the Equipment Advance; (ii) one percent (1%) of
the amount prepaid if the prepayment occurs after the first twelve (12) months,
and prior to the twenty fourth (24th) month from the date of the Equipment
Advance; and (iii) one half of one percent (.5%) of the amount prepaid at
all times after the first twenty four (24) months from the date of the
Equipment Advance, plus all other sums, if any, that shall have become due and
payable, including interest at the Default Rate with respect to any past due
amounts.

On
the date of receipt by Bank of the amount specified above with respect to each
such item of Financed Equipment subject to an Event of Loss, this Agreement
shall terminate as to such Financed Equipment. If any proceeds of insurance or
awards received from governmental authorities are in excess of the amount owed
under this Section, Bank shall promptly remit to Borrowers the amount in excess
of the amount owed to Bank.

6.8          Joinder of Subsidiaries.

In
the event that any Subsidiary of any Borrower which is not then a Borrower
under this Loan Agreement becomes the owner of any interest in any Financed
Equipment purchased with any Equipment Advance through either the initial
purchase of such Financed Equipment from a third party or by way of any
transfer, assignment or sale of such Financed Equipment by any other Borrower,
Borrowers shall cause such Subsidiary to deliver to Bank, within twenty (20)
days of acquiring any such interest in any Financed Equipment, an Additional Borrower
Joinder Supplement in substantially the form attached hereto as Exhibit D
pursuant to which (a) it shall join as a Borrower under each of the Loan
Documents to which the Borrowers are parties, and (b) encumber such
Financed Equipment to secure the Obligations, free and clear of all Liens.

6.9          Further Assurances.

Each
Borrower will execute any further instruments and take further action as Bank
reasonably requests to perfect or continue Bank’s security interest in the
Collateral or to effect the purposes of this Agreement.

7              NEGATIVE
COVENANTS

No
Borrower will do any of the following without Bank’s prior written consent, for
so long as Bank has an obligation to make Credit Extensions or there are any
outstanding Obligations:

7.1          Dispositions.

Convey,
sell, lease, transfer or otherwise dispose of (collectively “Transfer”), or
permit any of its Subsidiaries to Transfer, all or any part of the Collateral
(including, any Transfer to another Borrower for which Bank has not filed a
financing statement on such Borrower with respect to such Collateral).

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7.2          Changes in Business, Ownership,
Management or Business Locations.

Engage
in or permit any of its Subsidiaries to engage in any business other than the
businesses currently engaged in by Borrower or reasonably related thereto or
have a material change in its senior management, unless such senior management
is replaced with an individual or individuals with comparable experience and
qualifications in Borrower’s good faith business judgment within 120 days or any
Person or group of Persons acting in concert shall acquire more thirty five
percent (35%) (other than by the sale of Borrower’s equity securities in a
public offering or to venture capital investors so long as Borrower identifies
and advises Bank of the venture capital investors prior to the closing of the
investment), except where (i) no Event of Default has occurred and is
continuing or would result from such action during the term of this Agreement
and (ii) Borrowers remain in compliance with Section 6.3 hereof
following any such transaction. A Subsidiary may merge or consolidate into
another Subsidiary or into any Borrower. Borrower will not, without at least
thirty (30) days prior written notice, change its state of formation, or change
the locations where the Collateral is located as set forth in the Schedule or
as previously disclosed to Bank.

7.3          Mergers or Acquisitions.

Merge
or consolidate, or permit any of its Material 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 (a “Target”), except (a) a Subsidiary may merge
or consolidate into another Subsidiary or into any Borrower (b) in
connection with a Permitted Acquisition (as hereinafter defined). Borrower may
acquire by merger, stock purchase, asset purchase or otherwise, all or
substantially all the assets of any Person or make any investments in any such
Person (each a “Permitted Acquisition” and collectively, the “Permitted
Acquisitions”) during the existence of this Agreement without Bank’s consent, provided,
however, that each of the following conditions precedent are in
satisfied:

(i) 
          After giving effect to such
Permitted Acquisition, Borrower shall continue to be in compliance with the
financial covenants set forth in Section 6.3 hereof;

(ii) 
         The net cash consideration (after
adding any cash and cash equivalents to be acquired through the acquisition of
the Target) for any single Permitted Acquisition does not exceed Fifteen
Million Dollars ($15,000,000) and the aggregate net cash consideration of all
Permitted Acquisitions within a single fiscal year does not exceed Thirty
Million Dollars ($30,000,000) (the “Acquisition Cap”);

(iii)          The Person being acquired (“Target”)
is a going concern;

(iv)          With respect to any Permitted
Acquisitions financed with the Company’s equity, the number of the shares of
the Company’s common stock issued as consideration for any single Permitted
Acquisition does not exceed twenty percent (20%) of the  number of the shares of the Company’s issued
and outstanding common stock on the closing date of such Permitted Acquisition

(v)           After giving affect to the Permitted
Acquisition, the Borrowers’ current Senior Management remains actively involved
in the ongoing business of each Borrower (subject to changes in Senior
Management permitted by Section 7.2 hereof); and

(vi)          After giving affect to the Permitted
Acquisition, there shall not exist any Event of Default under this Agreement or
any of the Loan Documents.

For purposes
hereof, only cash consideration incurred in connection with each Permitted
Acquisition (not the value of non-compete agreements and the value of assets,
stock, warrants, or other property transferred, pledged or given in connection
with any Permitted Acquisition) shall be included in the calculation of the
Acquisition Cap, if such Target is a Material Subsidiary.

Upon completion of
each Permitted Acquisition, Borrowers shall at Borrowers’ expense, cause each Target
which is organized in the United States to be added as a co-obligor on this
Agreement and the Loan Documents.

 9
 

 

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, or allow any Lien on any Collateral, or permit any of its Subsidiaries
to do so, or permit any Collateral not to be subject to the first priority
security interest granted here.

7.6          Distributions; Investments.

Directly
or indirectly acquire or own any Person, or make any Investment in any Person,
other than Permitted Investments, or permit any of its Subsidiaries to do so or
pay any dividends or make any distribution or payment or redeem, retire or
purchase any capital stock, except where (i) no Event of Default has
occurred and is continuing or would result from such action during the term of
this Agreement and (ii) and Borrowers remain in compliance with Section 6.3
hereof following any such transaction.

7.7          Transactions with Affiliates.

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

7.8          Subordinated Debt.

(a)           Make any Material
Subordinated Debt Modification to any document relating to the Subordinated
Debt without Bank’s prior written consent, or (b) make any payment on the
Subordinated Debt, provided, however, that (i) Borrowers are permitted to
make payments (“Permitted Conversion Payments”) of up to Ten Million Dollars
($10,000,000) in the aggregate in any twelve-month period in connection with
the conversion of Subordinated Debt into equity so long as such payments are
not payments of principal or interest, but are additional consideration paid to
the holders of the Subordinated Debt in connection with such conversion, and
provided, further, that Permitted Conversion Payments may only be made if such
Permitted Conversion Payments are approved by the Board of Directors of the
Company, and further provided that at the time of and on a pro forma basis
after giving effect to such Permitted Conversion Payments, no Event of Default
shall have occurred or would thereby occur under any Loan Document, and (ii) Borrowers
are permitted to make payments on the Subordinated Debt from proceeds of sales
of the Company’s capital stock from and after the date hereof, provided that at
the time of and on a pro forma basis after giving effect to such payments, no
Event of Default shall have occurred or would thereby occur under any Loan
Document.

7.9          Compliance.

Become
an “investment company” or a company controlled by an “investment company,”
under the Investment Company Act of 1940 or undertake as one of its important
activities extending credit to purchase or carry margin stock, 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 any Borrower’s
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.

 10

 

8              EVENTS
OF DEFAULT

Any one of the following is an Event of Default:

8.1          Payment Default.

If Borrowers fail to pay any of the Obligations when due and such
failure shall continue for three (3) Business Days. During the additional
time, the failure to cure the default is not an Event of Default (but no Credit
Extensions will be made during the cure period);

8.2          Covenant Default.

If any Borrower does not perform any obligation in Section 6 or
violates any covenant in Section 7; or if any Borrower does not perform or
observe any other material term, condition or covenant in this Agreement, any
Loan Documents, or in any agreement between any Borrower and Bank; and in each
such case, as to any default under a term, condition or covenant that can be
cured, has not cured the default within fifteen (15) days from the earlier of (i) notice
from Bank of such default to a Responsible Officer of the Company or (ii) actual
knowledge of such default by an officer of any Borrower, provided, however, if
the default cannot be cured within fifteen (15) days or cannot be cured after
the defaulting Borrower’s attempts within such fifteen (15) day period, and the
default may be cured within a reasonable time, then the defaulting Borrower has
an additional period (of not more than thirty (30) days) to attempt to cure the
default. During the additional time, the failure to cure the default is not an
Event of Default (but no Credit Extensions will be made during the cure
period);

8.3          Material Adverse Change.

If there (i) occurs a material adverse
change in the business, operations, or condition (financial or otherwise) of
the Borrowers and their Subsidiaries taken as a whole, or (ii) is a
material impairment of the prospect of repayment of any portion of the
Obligations or (iii) is a material impairment of the value or priority of
Bank’s security interests in the Collateral.

8.4          Attachment.

If any material portion of any Borrower’s assets is attached, seized,
levied on, or comes into possession of a trustee or receiver and the attachment,
seizure or levy is not removed in ten (10) days, or if any Borrower is
enjoined, restrained, or prevented by court order from conducting a material
part of its business or if a judgment or other claim becomes a Lien on a
material portion of any Borrower’s assets, or if a notice of lien, levy, or
assessment is filed against any of any Borrower’s assets by any government
agency and not paid within ten (10) days after such Borrower receives
notice. These are not Events of Default if stayed or if a bond is posted
pending contest by such Borrower (but no Credit Extensions will be made during
the cure period);

8.5          Insolvency.

If any Borrower becomes insolvent or if any Borrower begins an
Insolvency Proceeding or an Insolvency Proceeding is begun against any Borrower
and not dismissed or stayed within forty-five (45) days (but no Credit
Extensions will be made before any Insolvency Proceeding is dismissed);

8.6          Other Agreements.

If there is a default in any agreement between any Borrower and a third
party that gives the third party the right to accelerate any Indebtedness
exceeding $3,000,000 or that could cause a Material Adverse Change;

 11
 

 

8.7          Judgments.

If a money judgment(s) in the aggregate of at least $3,000,000 is
rendered against any Borrower and is unsatisfied and unstayed for 10 days (but
no Credit Extensions will be made before the judgment is stayed or satisfied);

8.8          Misrepresentations.

If any Borrower or any Person acting for any Borrower makes any
material misrepresentation or material misstatement now or later in any
warranty or representation in this Agreement or in any writing delivered to
Bank or to induce Bank to enter this Agreement or any Loan Document; or

8.9          Subsidiaries.

Any circumstance described in Sections 8.4, 8.5 or 8.7 occurs to
any Material Subsidiary of any Borrower.

9              BANK’S
RIGHTS AND REMEDIES

9.1          Rights and Remedies.

When 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);

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

(c)           Make any payments
and do any acts it considers necessary or reasonable to protect its security
interest in the Collateral. Borrowers will assemble the Collateral if Bank
requires 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. Each Borrower grants Bank a license to enter and occupy any of its
premises, without charge, to exercise any of Bank’s rights or remedies;

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

(e)           Ship, reclaim,
recover, store, finish, maintain, repair, prepare for sale, advertise for sale,
and sell the Collateral;

(f)            Exercise a right of
set off or bank lien as to any monies of any Borrower deposited in any accounts
of any nature maintained by any Borrower with Bank or any Affiliate of Bank,
without advance notice, regardless of whether such accounts are general or
special. Each Borrower, Bank and any Affiliate of Bank at which any such
accounts are maintained agree that such Affiliate shall comply with any
instructions given by Bank with respect to the disposition of funds held in any
such account without further consent of any Borrower; and

(g)           Dispose of the
Collateral according to the Code.

9.2          Power of Attorney.

Effective only when an Event of Default occurs and continues, each
Borrower irrevocably appoints Bank as its lawful attorney to:  (i) endorse such Borrower’s name on any
checks or other forms

 12
 

 

of payment or
security; (ii) make, settle, and adjust all claims under such Borrower’s
insurance policies; and (iii) transfer the Collateral into the name of
Bank or a third party as the Code permits. Bank may exercise the power of
attorney to sign each Borrower’s name on any documents necessary to perfect or
continue the perfection of any security interest regardless of whether an Event
of Default has occurred if Borrower has refused to do so upon the Bank’s
request. Bank’s appointment as each 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          Omitted.

9.4          Bank Expenses.

If any Borrower fails to pay any amount or furnish any required proof
of payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank’s waiver of any Event of Default.

9.5          Bank’s Liability for Collateral.

If Bank complies with reasonable banking practices and the Code, it is
not liable 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. Borrowers bear all risk of loss, damage or destruction of the
Collateral.

9.6          Remedies Cumulative.

Bank’s rights and remedies under this Agreement, the Loan Documents,
and all other agreements 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 Bank’s waiver of any Event of Default is not a
continuing waiver. Bank’s delay is not a waiver, election, or acquiescence. No
waiver is effective unless signed by Bank and then is only effective for the
specific instance and purpose for which it was given.

9.7          Demand Waiver.

Each 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 Borrowers are
liable.

10           NOTICES

All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an
overnight delivery service, by certified mail, postage prepaid, return receipt
requested, or by telefacsimile to the addresses set forth at the beginning of
this Agreement. A party may change its notice address by giving the other party
written notice.

11           CHOICE
OF LAW , VENUE AND JURY TRIAL WAIVER

Virginia law governs the
Loan Documents without regard to principles of conflicts of law. Each Borrower
and Bank each submit to the exclusive jurisdiction of the State and Federal
courts in the Commonwealth of Virginia provided, however, that if for any
reason the Bank can not avail itself of the courts of the Commonwealth of
Virginia, the Borrower and Bank each submit to the jurisdiction of the State
and Federal Courts in Santa Clara County, California.

 13
 

 

EACH
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF 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. Borrowers may not assign this Agreement or any
rights under it without Bank’s prior written consent which may be granted or
withheld in Bank’s discretion. Bank has the right, without the consent of or
notice to Borrowers, to sell, transfer, negotiate, or grant participation in
all or any part of, or any interest in, Bank’s obligations, rights and benefits
under this Agreement.

12.2        Indemnification.

Each Borrower will indemnify, defend and hold harmless Bank and its
officers, employees, and agents against: 
(a) all obligations, demands, claims, and liabilities asserted by
any other party in connection with the transactions contemplated by the Loan
Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank
from, following, or consequential to transactions between Bank and any Borrower
(including reasonable attorneys fees and expenses), except with respect to (a) and
(b) above where such losses, obligations, demands, claims or liabilities
are caused by Bank’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 Provision.

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

12.5        Amendments in Writing, Integration.

All amendments to this Agreement must be in writing and signed by
Borrowers and Bank. This Agreement represents the entire agreement about this
subject matter, and supersedes prior negotiations or agreements. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of this Agreement merge into this
Agreement and the Loan Documents.

12.6        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, are an original, and all taken together, constitute one Agreement.

12.7        Survival.

All covenants, representations and warranties made in this Agreement
continue in full force while  any
Obligations remain outstanding. The obligations of Borrowers in Section 12.2
to indemnify Bank will survive until all statutes of limitations for actions
that may be brought against Bank have run.

 14
 

 

12.8        Confidentiality.

In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank’s subsidiaries or
affiliates in connection with their business with Borrowers, (ii) to
prospective transferees or purchasers of any interest in the loans (provided,
however, Bank shall use commercially reasonable efforts in obtaining such
prospective transferee or purchasers agreement of the terms of this provision),
(iii) as required by law, regulation, subpoena, or other order, (iv) as
required in connection with Bank’s examination or audit and (v) as Bank
considers appropriate exercising remedies under this Agreement. Confidential
information does not include information that either: (a) is in the public
domain or in Bank’s possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (b) is disclosed to Bank by a
third party, if Bank does not know that the third party is prohibited from
disclosing the information.

12.9        Attorneys’ Fees, Costs and Expenses.

In any action or proceeding between any Borrower and Bank arising out
of the Loan Documents, the prevailing party will be entitled to recover its
reasonable attorneys’ fees and other reasonable costs and expenses incurred, in
addition to any other relief to which it may be entitled.

13           DEFINITIONS

13.1        Definitions.

In this Agreement:

“Affiliate” of a Person is
a 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.

“Bank Expenses” are all
audit fees and expenses and reasonable costs and expenses (including reasonable
attorneys’ fees and expenses) for preparing, negotiating, administering (except
for administrative expenses incurred in the ordinary course or where such
administration does not result in out-of-pocket expenses), defending and
enforcing the Loan Documents (including appeals or Insolvency Proceedings).

“Basic Rate” is a per
annum rate of interest (based on a year of 360 days) equal to seven and
three-quarters percent (7.75%).

“Borrower’s Books” are all
of each Borrower’s books and records including ledgers, records regarding each
Borrower’s assets or liabilities, the Collateral, business operations or
financial condition and all computer programs or discs or any equipment
containing the information.

“Business Day” is any day
that is not a Saturday, Sunday or a day on which the Bank is closed.

“Closing Date” is the date
of this Agreement.

“Code” is the Uniform
Commercial Code, in effect in the Commonwealth of Virginia as of the Closing
Date.

“Collateral” is the
property described on Exhibit A.

“Committed Equipment Line”
is a Credit Extension of up to Five Million Dollars ($5,000,000).

 15
 

 

“Committed Revolving Line”
is a line of credit from Bank to Borrowers in the original maximum principal
amount of Fifteen Million Dollars ($15,000,000), as the same may be amended,
modified, increased or renewed from time to time.

“Commitment Termination Date”
is December 31, 2004.

“Contingent Obligation”
is, for any Person, any direct or indirect liability, contingent or not, of
that Person for (i) any indebtedness, lease, dividend, letter of credit or
other obligation of another such as an obligation 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; (ii) any
obligations for undrawn letters of credit for the account of that Person; and (iii) 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 the guarantee or other support arrangement.

“Credit Extension”
is each Equipment Advance, or any other extension of credit by Bank for any
Borrower’s benefit.

“Current Liabilities”
are the aggregate amount of the Total Liabilities of the Company and its
consolidated Subsidiaries which mature within one (1) year.

“Eligible Equipment”
is general purpose computer equipment, office equipment, test and laboratory
equipment, furnishings, and, subject to the limitations set forth below, Other
Equipment that complies with all of Borrowers’ representations and warranties
to Bank and which is acceptable to Bank in all respects. Equipment financed
with the proceeds of Equipment Advances may be new or used Equipment.

“Equipment” has the
meaning set forth in the Code and includes all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which any Borrower has any interest.

“Equipment Advance”
is defined in Section 2.1.1.

“Equipment Term Note”
means that certain Equipment Term Note of even date herewith in the principal
amount of Five Million Dollars ($5,000,000) from Borrowers in favor of Bank,
together with all renewals, amendments, modifications and substitutions
therefor.

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

“Financed Equipment”
is defined in the Loan Supplement.

“Funding Date” is
any date on which an Equipment Advance is made to or on account of Borrowers.

“GAAP” is generally
accepted accounting principles.

“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.

 16
 

 

“Insolvency Proceeding”
are proceedings 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.

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

“Lien” is a
mortgage, lien, deed of trust, charge, pledge, security interest or other
encumbrance.

“Loan Amount” is the
aggregate amount of the Equipment Advance.

“Loan Documents”
are, collectively, this Agreement, the Equipment Term Note, any note, or notes
or guaranties executed by any Borrower and any other present or future
agreement between any Borrower and/or for the benefit of Bank in connection
with this Agreement, all as amended, extended or restated.

“Loan Factor” is the
percentage which results from amortizing the Equipment Advance over the
Repayment Period, using the Basic Rate as the interest rate.

“Loan Supplement” is
attached as Exhibit B.

“Material Adverse Change”
has the meaning set forth in Section 8.3.

“Material Subordinated Debt Modification”
means any amendment or modification to any instrument, agreement or other
document relating to the Subordinated Debt or any other action in connection
with the Subordinated Debt that, individually or in combination with other
amendments, modifications or actions, (a) increases the interest rate,
fees or expenses due under the Subordinated Debt, (b) increases the
maximum principal amount of the Subordinated Debt, (c) accelerates the due
date or maturity date of all or part of the Subordinated Debt, (d) changes
the collateral, if any, for the Subordinated Debt or (e) otherwise has a
material adverse effect on Borrower’s ability to pay and perform its
obligations in favor of Bank or the validity or priority of Bank’s security
interest in the Collateral.

“Material Subsidiary”
means any Subsidiary now or hereafter existing, that owns assets with an
aggregate book value exceeding 5% of the aggregate book value of the
consolidated total assets of the Company and its consolidated Subsidiaries
taken as a whole, in each case, as measured as of the last day of the most
recently completed fiscal quarter for which financial statements have been
delivered pursuant to Section 6.2, or (ii) has generated revenue
during the most recently completed four fiscal quarter period exceeding 5% of
the aggregate consolidated revenue generated by the Company and its
Subsidiaries during the most recently completed four fiscal quarter period for
which financial statements have been delivered pursuant to Section 6.2.

“Obligations” are
debts, principal, interest, Bank Expenses and other amounts Borrowers owe Bank
now or later, including cash management services, letters of credit and foreign
exchange contracts, if any and including interest accruing after Insolvency
Proceedings begin and debts, liabilities, or obligations of Borrowers assigned
to Bank.

“Original Stated Cost”
is (i), the original cost to any Borrower of the item of new Equipment
(including without limitation Other Equipment) any and all freight,
installation, tax and related charges associated with the purchase of such
Equipment or  (ii) the fair market
value assigned to such item of used Equipment (including without limitation
Other Equipment) by mutual agreement of Borrowers and Bank at the time of
making of the Equipment Advance, plus any and all freight, installation, tax
and related charges associated with the purchase of such Equipment, subject to
the sub-limit on Other Equipment set forth below.

“Other Equipment” is
leasehold improvements, intangible property such as computer software and
software licenses, equipment specifically designed or manufactured for any
Borrower, other

 17
 

 

intangible
property, limited use property and other similar property and any and all
freight, installation, tax and other related charges associated with the
purchase of Financed Equipment. Unless otherwise agreed to by Bank not more
than twenty percent (20%) of the Committed Equipment Line shall consist of
Other Equipment.

“Permitted Indebtedness”
is:

(a)           Borrowers’ indebtedness to Bank under
this Agreement or any other Loan Document;

(b)           Indebtedness existing on the Closing
Date and shown on the Schedule and any Indebtedness hereafter incurred for the
purpose of refinancing such existing Indebtedness, provided the principal
amount of such Indebtedness does not increase as a result of such refinancing
(it being understood that the Indebtedness permitted under this clause shall be
in addition to the Indebtedness permitted under any of the other clauses of
this definition of Permitted Indebtedness);

(c)           Subordinated Debt;

(d)           Indebtedness to trade creditors and
other account payables incurred in the ordinary course of business;

(e)           Unsecured Indebtedness of the Company
and certain of its Subsidiaries in the maximum aggregate principal amount of
Ten Million Dollars ($10,000,000), provided the maturity date of all such
Indebtedness is not less than one hundred eighty (180) days after the Revolving
Maturity Date;

(f)            Indebtedness under capital leases
and purchase money obligations provided such Indebtedness does not exceed
Fifteen Million Dollars ($15,000,000) in the aggregate for all Borrowers;

(g)           Guaranty obligations of the Company
or any Subsidiary in respect of Indebtedness otherwise permitted hereunder of
the Company or any Subsidiary; and

(h)           Indebtedness not otherwise permitted
under subsections (a) through (g) above to the extent that such
Indebtedness does not exceed Ten Million Dollars ($10,000,000) in the aggregate
for all Borrowers.

“Permitted Investments”
are:

(a)           Investments shown on the Schedule and
existing on the Closing Date;

(b)           (i) marketable direct
obligations issued or unconditionally guaranteed by the United States or its
agency or any State maturing within 2 years from its acquisition, (ii) commercial
paper maturing no more than 2 years after its creation and having the highest
rating from either Standard & Poor’s Corporation or Moody’s Investors
Service, Inc., and (iii) Bank’s certificates of deposit issued maturing
no more than 2 years after issue;

(c)           Investments made in accordance with
any investment policy approved by the Company’s Board of Directors; and

(d)           Investments in any Subsidiary of
Borrower which is not a Borrower under this Agreement, provided that (a) all
such Investments in the aggregate do not exceed $10,000,000 in any 12-month
period and (b) no Event of Default exists at the time of any such
Investment or would exist after giving effect to any such Investment.

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

“Proceeds” has the
meaning described in the Code as in effect from time to time.

 18
 

 

“Quick Assets” is,
on any date, all unrestricted cash, cash equivalents and investments held at
Bank or at an Affiliate of Bank, plus all net accounts receivables of the Company
and its consolidated Subsidiaries, determined according to GAAP.

“Quick Ratio” is
unrestricted cash, cash equivalents and investments at Bank plus total accounts
receivable divided by total current liabilities plus long-term Bank debt and
issued letters of credit and minus deferred revenue.

“Registered Organization”
means an organization organized solely under the law of a single state or the
United States and as to which the state or the United States must maintain a
public record showing the organization to have been organized.

“Repayment Period,”
as to the initial Equipment Advance is twenty-four (24) months and as to all
other Equipment Advances is thirty (30) months.

“Responsible  Officer” is each of the chief executive
officer, the president, the chief financial officer and the chief accounting
officer, the treasurer or the assistant treasurer of either Borrower.

“Schedule” is any
attached schedule of exceptions.

“Subordinated Debt”
is indebtedness under the Notes issued pursuant to the Indenture dated as of October 20,
2000 between the Company and State Street Bank & Trust Company, as
Trustee, and any other debt incurred by any Borrower subordinated to Borrowers’
indebtedness owed to Bank and which is reflected in a written agreement in a
manner and form acceptable to Bank and approved by Bank in writing.

“Subsidiary” is for
any Person, or any other business entity of which more than 50% of the voting
stock or other equity interests is owned or controlled, directly or indirectly,
by the Person or one or more Affiliates of the Person.

“Tangible Net Worth”
is on any date, the total assets of the Company and its consolidated
Subsidiaries minus (i) any amounts attributable to (a) goodwill
and, (b) other intangible assets such as acquired technology, customer
relationships, patents, trade and service marks and names, copyrights and
capitalized software costs, and (ii) Total Liabilities.

“Total Liabilities”
is on any day, obligations that should, under GAAP, be classified as
liabilities of the Company and its consolidated Subsidiaries, including all
Indebtedness, and the current portion of the Subordinated Debt, if any, that
Borrowers are allowed to pay under Section 7.8 hereof, but only to the
extent that Borrowers have notified Bank in writing that they plan to make such
a payment, but excluding all other Subordinated Debt.

[Signatures
appear on the following page]

 19

 

	
  BORROWERS:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  MANUGISTICS GROUP, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Raghavan Rajaji

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Raghavan Rajaji

  	
   

  	
   

  
	
   

  	
   

  	
  Title: Executive Vice President and Chief Financial
  Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MANUGISTICS, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Raghavan Rajaji

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Raghavan Rajaji

  	
   

  	
   

  
	
   

  	
   

  	
  Title: Executive Vice President and Chief Financial
  Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BANK:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SILICON VALLEY BANK

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Megan Scheffel

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Megan Scheffel

  	
   

  	
   

  
	
   

  	
   

  	
  Title: Vice President

  	
   

  	
   

  

 

 

 

EXHIBIT A

The
Collateral consists of all of Borrowers’ right, title and interest in and to
the following:

Each
item of equipment, or personal property financed with a “Equipment Advance”
pursuant to that certain Loan and Security Agreement, dated as of March     ,
2004 (the “Loan Agreement”), by and between Borrowers and Bank, including,
without limitation, the property described in Annex A hereto or Annex A to any
Loan Supplement, whether now owned or hereafter acquired, together with all
substitutions, renewals or replacements of and additions, improvements, and
accessions to any and all of the foregoing, and all proceeds from sales,
renewals, releases or other dispositions thereof.

 

EXHIBIT B

FORM OF LOAN
AGREEMENT SUPPLEMENT

LOAN AGREEMENT SUPPLEMENT No. [ ]

LOAN
AGREEMENT SUPPLEMENT No. [ ], dated               ,
200   (“Supplement”), to the Loan and Security Agreement dated as of March   ,
2004 (the “Loan Agreement) by and between the undersigned (“Borrowers”), and
Silicon Valley Bank (“Bank”).

Capitalized
terms used herein but not otherwise defined herein are used with the respective
meanings given to such terms in the Loan Agreement.

To secure the
prompt payment by Borrowers of all amounts from time to time outstanding under
the Loan Agreement, and the performance by Borrowers of all the terms contained
in the Loan Agreement, Borrowers grant Bank, a first priority security interest
in each item of equipment and other property described in Annex A hereto, which
equipment and other property shall be deemed to be additional Financed
Equipment and Collateral. The Loan Agreement is hereby incorporated by
reference herein and is hereby ratified, approved and confirmed.

Annex A
(Equipment Schedule) and Annex B (Loan Terms Schedule) are attached hereto.

The proceeds of
the Loan should be transferred to Borrowers’ account with Bank set forth below:

Bank Name:           Silicon Valley Bank

Account No.:                                    

Borrowers hereby
certify that (a) the foregoing information is true and correct and
authorizes Bank to endorse in its respective books and records, the Basic Rate
applicable to the Funding Date of the Loan contemplated in this Loan Agreement
Supplement and the principal amount set forth in the Loan Terms Schedule; (b) the
representations and warranties made by Borrowers in the Loan Agreement are true
and correct on the date hereof and will be true and correct on such Funding
Date. No Event of Default has occurred and is continuing under the Loan
Agreement. This Supplement may be executed by Borrowers and Bank in separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.

This
Supplement is delivered as of this day and year first above written.

The Financed Equipment subject to this Loan
Supplement is owned by
                           
and Borrowers hereby authorize Bank to file a financing statement naming such
Borrower as the debtor with respect to such Financed Equipment.

	
  SILICON VALLEY BANK

  	
   

  	
  MANUGISTICS GROUP, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  MANUGISTICS, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Title:

  	
   

  

 

Annex A - Description of Financed Equipment

Annex B - Loan Terms Schedule

 

Annex A to Exhibit B

The
Financed Equipment being financed with the Equipment Advance which this Loan
Agreement Supplement is being executed is listed below. Upon the funding of
such Equipment Advance, this schedule automatically shall be deemed to be a part
of the Collateral.

	
  Description of Equipment:

  	
   

  	
  Make

  	
   

  	
  Model

  	
   

  	
  Serial #

  	
   

  	
  Invoice #

  

 

 

Annex B to Exhibit B

LOAN TERMS SCHEDULE #              

Loan Funding
Date: 
              ,
200

Original Loan
Amount:  $

Basic Rate:  7.5%

Loan Factor:
              %

Scheduled Payment
Dates and Amounts*:

One (1) payment
of
$             
due                         
                     
payment of
$             
due monthly in advance from
             
through
             .
        One (1) payment of
$             
due                        

Maturity Date:                         

Payment No.                                         Payment
Date

  1
  2
  3
  4

.. . .
 35

[36]

.. . .

*/                                     The
amount of each Scheduled Payment will change as the Loan Amount changes.

 

EXHIBIT C

COMPLIANCE CERTIFICATE

TO:                                                                            SILICON VALLEY BANK

                                                                                                3003 Tasman Drive

                                                                                                Santa Clara, CA 95054

FROM:                                                         MANUGISTICS
GROUP, INC.

The
undersigned authorized officer of Manugistics Group, Inc. (“Company”)
certifies that under the terms and conditions of the Loan and Security
Agreement between Borrowers and Bank (the “Agreement”), (i) Borrowers are
in complete compliance for the period ending
                              
with all required covenants except as noted below and (ii) all
representations and warranties in the Agreement are true and correct in all
material respects on this date. Attached are the required documents supporting
the certification. The Officer certifies that these are prepared in accordance
with Generally Accepted Accounting Principles (GAAP) consistently applied from
one period to the next except as explained in an accompanying letter or
footnotes. The Officer acknowledges that no borrowings may be requested at any
time or date of determination that Borrowers are 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.

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

	
  Reporting Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  	
   

  
	
  Quarterly Financial
  Statement + CC

  	
   

  	
  Quarterly
  within 50 days

  	
   

  	
  Yes    No

  	
   

  
	
  Annual Financial
  Statement

  	
   

  	
  FYE within 120 days

  	
   

  	
  Yes    No

  	
   

  

 

	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  	
   

  
	
  Measured Quarterly:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Adjusted Quick
  Ratio,

  	
   

  	
  1.75
  to 1.00

  	
   

  	
        
  to 1.00

  	
   

  	
  Yes    No

  	
   

  
	
  Minimum Tangible Net
  Worth

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  05/31/04

  	
   

  	
  $

  	
  130,000,000

  	
   

  	
  $

  	
   

  	
   

  	
  Yes    No

  	
   

  
	
  08/31/04

  	
   

  	
  $

  	
  140,000,000

  	
   

  	
  $

  	
   

  	
   

  	
  Yes    No

  	
   

  
	
  11/30/04

  	
   

  	
  $

  	
  140,000,000

  	
   

  	
  $

  	
   

  	
   

  	
  Yes    No

  	
   

  
	
  02/28/05

  	
   

  	
  $

  	
  140,000,000

  	
   

  	
  $

  	
   

  	
   

  	
  Yes    No

  	
   

  
	
  Thereafter

  	
   

  	
  Reset

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

	
  Comments Regarding Exceptions: See Attached.

  	
   

  	
  BANK
  USE ONLY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Received by:

  	
   

  	
   

  
	
  Sincerely,

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  SIGNATURE

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Verified:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  TITLE

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Compliance Status:

  	
  Yes    No

  	
   

  
	
  DATE

  	
   

  	
   

  	
   

  
								

 

 

Schedule to Loan and Security Agreement

	
  The exact correct corporate
  name of each Borrower is (attach a copy of the formation documents,

  
	
  e.g., articles,
  partnership agreement):

  	
   

  
	
   

  
	
  Each Borrower’s
  State of formation:

  	
   

  
	
   

  
	
  In the last five
  (5) years each Borrower has operated under only the following other
  names (if

  
	
  none, so state):

  
	
   

  
	
   

  
	
  Liens existing
  on the Closing Date and disclosed to and accepted by Bank in writing:

  
	
   

  
	
  Subordinated
  Debt:

  
	
   

  
	
  Indebtedness on
  the Closing Date and disclosed to and consented to by Bank in writing:

  
	
   

  
	
   

  
	
  Each Borrower’s
  Tax ID Number is:

  	
   

  
	
   

  
	
  Each Borrower’s
  Organizational Number, if any, is:

  	
   

  
	
   

  
	
  The Company’s
  website is

  	
   

  
	
   

  
	
  Investments on
  the Closing Date and disclosed to and consented to by Bank in writing:Exhibit
4.1

 

AMENDED AND RESTATED MANAGEMENT STOCKHOLDERS AGREEMENT

 

 

DATED AS OF APRIL 27, 2006

 

 

among

 

CPI INTERNATIONAL, INC. 

(FORMERLY KNOWN AS CPI ACQUISITION CORP. AND CPI HOLDCO, INC.)

 

CYPRESS MERCHANT BANKING PARTNERS II L.P.

 

CYPRESS MERCHANT B II C.V.

 

55TH STREET PARTNERS II L.P.

 

CYPRESS SIDE-BY-SIDE LLC

 

and

 

THE MANAGEMENT STOCKHOLDERS NAMED HEREIN

 

 

AMENDED AND RESTATED MANAGEMENT STOCKHOLDERS
AGREEMENT

 

AMENDED
AND RESTATED MANAGEMENT STOCKHOLDERS AGREEMENT dated as of April 27, 2006 (this
“Agreement”) among CPI International, Inc. (formerly known as CPI
Acquisition Corp. and CPI Holdco, Inc.), a Delaware corporation (the “Company”),
Cypress Merchant Banking Partners II L.P., a Delaware limited partnership (“Cypress
Onshore”), Cypress Merchant B II C.V., a Netherlands limited partnership (“Cypress
Offshore”), 55th Street Partners II L.P., a Delaware limited partnership (“Cypress
55th Street”), Cypress Side-by-Side LLC, a Delaware limited liability
company (“Cypress Side-by-Side,” and together with Cypress Onshore,
Cypress Offshore, Cypress 55th Street, “Cypress”), and certain
management stockholders of the Company listed on Schedule I hereto (each
such management stockholder is hereinafter referred to as a “Management Stockholder”).

 

WITNESSETH:

 

WHEREAS,
all of the parties hereto are parties to the Management Stockholders Agreement,
dated as of January 23, 2004 (the “Original Agreement”), which provided
for certain restrictions on the sale, assignment, transfer, encumbrance or
other disposition of the Shares, and certain rights, obligations and other
agreements in respect of the Shares and the Company, all as set forth therein; and

 

WHEREAS,
in connection with the contemplated Initial Public Offering (as defined below),
and effective upon the consummation thereof, the parties hereto desire to amend
and restate the Original Agreement in its entirety, as hereinafter provided;

 

NOW
THEREFORE, in consideration of the mutual covenants and agreements contained
herein, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1.            Definitions.
 As used in this Agreement, the following
terms have the following meanings:

 

“Affiliate”,
as applied to any Person, shall mean any other Person directly or indirectly
controlling, controlled by, or under common control with, that Person.  For the purposes of this definition “control”
(including, with correlative meanings, the terms “controlling”, “controlled
by” and “under common control with”), as applied to any Person, means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of that Person, whether through the
ownership of voting securities (the ownership of more than 50% of the voting
securities of an entity shall for purposes of this definition be deemed to be “control”),
by contract or otherwise.

 

“Agreement”
shall have the meaning set forth in the preamble of this Agreement.

 

 

“Business
Day” shall mean any day that is not a Saturday or Sunday or a day on which
banks located in New York City are authorized or required to be closed.

 

“Cause”
shall mean, unless otherwise defined in a Management Stockholder’s Employment
Agreement, (i) the Management Stockholder’s continued failure to perform
such Management Stockholder’s duties (other than as a result of total or
partial incapacity due to physical or mental illness) which is not cured for a
period of 10 days following written notice by the Company or its Affiliates to
the Management Stockholder of such failure, (ii) conviction or plea of
guilty or no contest to a (x) felony, or (y) crime involving moral turpitude
or the property or business of the Company or its Affiliates, (iii) willful
malfeasance or willful misconduct in performance of duties to the Company or
its Affiliates, or (iv) breach by the Management Stockholder of the
material terms of any non-compete, non-solicitation or confidentiality
provisions of this Agreement.

 

“Common
Stock” shall mean the common stock, par value $0.01 per share, of the Company.

 

“Company”
shall have the meaning set forth in the preamble of this Agreement.

 

“Competitive
Business” shall have the meaning set forth in Section 3.4(b).

 

“Confidential
Information” shall have the meaning set forth in Section 3.5(c).

 

“Cypress”
shall have the meaning set forth in the preamble of this Agreement.

 

“Cypress
Onshore” shall have the meaning set forth in the preamble of this Agreement.

 

“Cypress
Offshore” shall have the meaning set forth in the preamble of this Agreement.

 

“Cypress
Side-by-Side” shall have the meaning set forth in the preamble of this Agreement.

 

“Cypress
55th Street” shall have the meaning set forth in the preamble of this Agreement.

 

“Employment
Agreement” shall mean an employment agreement between a Management
Stockholder and the Company or any of its Subsidiaries that is in effect as of
the date hereof or that becomes effective at the time of the Initial Public
Offering and continues to be effective thereafter in accordance with its terms.

 

“Employment”
shall mean (i) a Management Stockholder’s employment if the Management
Stockholder is an employee of the Company or any of its Affiliates, (ii) a
Management Stockholder’s services as an non-employee director, if the
Management Stockholder is a non-employee member of the board of directors of
the Company or an Affiliate or (iii) a Management Stockholder’s services
as an independent contractor, vendor or third-party service provider, if the
Management Stockholder is an independent contractor, vendor or third-party service
provider to the Company or any of its Affiliates; provided,

 

2

 

however, that unless otherwise
determined by a committee of the board of directors of the Company, a change in
a Management Stockholder’s status from employee to a consultant shall
constitute a termination of employment hereunder.

 

“Exchange
Act” shall mean the United States Securities and Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

 

“Initial
Public Offering” shall mean the initial Public Offering (other than pursuant
to a registration statement on Form S-8 (or comparable form for a private
issuer or otherwise relating to equity securities issuable under any employee
benefit plan)) of the Common Stock.

 

“Majority
Management Stockholders” shall mean, at any time, Management Stockholders
and their Permitted Transferees holding a majority of the number of Shares (including
any Shares issuable upon the conversion, exchange or exercise of Share
Equivalents) then outstanding and held by the Management Stockholders and their
Permitted Transferees.

 

“Management
Stockholder” shall have the meaning set forth in the preamble of this
Agreement.

 

“Original
Agreement” shall have the meaning set forth in the recitals of this
Agreement.

 

“Permitted
Transferee” shall mean, with respect to any Management Stockholder,
(a) in the event of such Management Stockholder’s death, the heirs, executors,
administrators, testamentary trustees, legatees or beneficiaries of such
Management Stockholder (or their Permitted Transferees), (b) such
Management Stockholder’s spouse and lineal descendants and (c) trusts,
partnerships, limited liability companies or other entities of which such
Management Stockholder and/or such Management Stockholder’s spouse or lineal descendants
are the sole owners and beneficiaries.

 

“Person”
shall mean an individual, partnership, corporation, business trust, joint stock
company, limited liability company, unincorporated association, joint venture
or other entity of whatever nature.

 

“Public
Offering” shall mean any public offering of equity securities of the Company
pursuant to an effective registration statement under the Securities Act.

 

“Restricted
Period” shall have the meaning set forth in Section 3.4(a).

 

“Securities
Act” shall mean the United States Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.

 

“Senior
Manager” shall mean each of the persons listed on Schedule II hereto.

 

“Share
Equivalents” shall mean securities of any kind (including “phantom” securities)
issued by the Company convertible into or exchangeable for Shares or options,

 

3

 

warrants or other rights to purchase or subscribe for Shares or
securities convertible into or exchangeable for Shares.

 

“Shares”
shall mean, with respect to any Stockholder, any and all shares of Common
Stock, whether now owned or hereafter acquired (including upon exercise of
options, preemptive rights or otherwise), held by such Stockholder.

 

“Stockholder”
shall mean each of Cypress and the Management Stockholders.

 

“Subsidiary”
shall mean, with respect to any Person, any corporation or other entity of
which a majority of the capital stock or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
persons performing similar function at the time directly or indirectly owned by
such Person.

 

ARTICLE II

 

PERMITTED TRANSFEREES

 

No
Management Stockholder shall Transfer any Shares to a Permitted Transferee of such
Management Stockholder, unless, as a condition precedent to such Transfer, the
Permitted Transferee executes an instrument in the form of Exhibit B
hereto or otherwise reasonably satisfactory to the Company agreeing to be bound
hereby as a Permitted Transferee of such Management Stockholder; provided,
however, the foregoing restriction shall not apply after the Piggy-Back
Termination Date (as defined in Exhibit C); provided, further, the foregoing
restriction shall not apply to Transfers to parties that are not Permitted
Transferees.

 

ARTICLE III

 

RIGHTS AND OBLIGATIONS 

OF MANAGEMENT STOCKHOLDERS AND THE COMPANY

 

Section 3.1.            [Intentionally
Omitted]

 

Section 3.2.            Registration
Rights.  The Company hereby grants to
the Management Stockholders (and their Permitted Transferees) the registration
and other rights set forth in, and the Management Stockholders (and their
Permitted Transferees) agree to comply with the terms and conditions contained
in, Exhibit C hereto.

 

Section 3.3.            [Intentionally
Omitted]

 

Section 3.4.            Covenant
Not to Compete; Non-Solicitation.  Each Senior Manager acknowledges and
recognizes the highly competitive nature of the businesses of the Company and
its Subsidiaries and accordingly agrees that, if such Senior Manager is subject
to an Employment Agreement, he/she will abide by the non-competition and
non-solicitation covenants contained therein, which are incorporated herein by
reference with respect to such Senior Manager.  If no such covenants are contained in the
Employment Agreement or if

 

4

 

there is no such
agreement, then each Senior Manager agrees, subject to Section 3.4(f), as
follows:

 

(a)           During
the term of Employment by the Company or any of its Subsidiaries and for the
period of time set forth on Schedule II opposite such Senior Manager’s name following
the date such Senior Manager ceases to be employed by the Company for any
reason (the “Restricted Period”), such Senior Manager will not, whether
on his/her own behalf or on behalf of or in conjunction with any Person,
directly or indirectly solicit or assist in soliciting in competition with the
Company or any of its Subsidiaries, the business of any client or prospective
client:

 

(i)            with
whom such Senior Manager had personal contact or dealings on behalf of the
Company or its Subsidiaries during the one year period preceding such Senior
Manager’s termination of Employment;

 

(ii)           with
whom employees reporting to such Senior Manager have had personal contact or
dealings on behalf of the Company or any of its Subsidiaries during the one
year immediately preceding such Senior Manager’s termination of Employment; or

 

(iii)          for
whom such Senior Manager had direct or indirect responsibility during the one
year immediately preceding such Senior Manager’s termination of Employment.

 

(b)           During
the Restricted Period, such Senior Manager will not directly or indirectly:

 

(i)            engage
in any business that competes with the business of the Company or its
Subsidiaries (including, without limitation, businesses which the Company or
its Subsidiaries have specific plans to conduct in the future and as to which such
Senior Manager is aware of such planning) in any geographic area in which the Company
or its Subsidiaries conducts such business (a “Competitive Business”);

 

(ii)           enter
the employ of, or render any services to, any Person (or any division or
controlled or controlling Affiliate of any Person) who or which engages in a Competitive
Business;

 

(iii)          acquire
a financial interest in, or otherwise become actively involved with, any
Competitive Business, directly or indirectly, as an individual, partner, shareholder,
officer, director, principal, agent, trustee or consultant; or

 

(iv)          interfere
with, or attempt to interfere with, business relationships (whether formed
before, on or after the date of this Agreement) between the Company or any of
its Subsidiaries, on the one hand, and customers, clients, suppliers partners, members
or investors of the Company or its Subsidiaries, on the other hand.

 

5

 

(c)           During
the Restricted Period, such Senior Manager will not, whether on such Senior
Manager’s own behalf or on behalf of or in conjunction with any Person,
directly or indirectly:

 

(i)            solicit
or encourage any employee of the Company or its Subsidiaries to leave the
Employment of the Company or its Subsidiaries (except in cases during a Senior
Manager’s Employment where such Senior Manager reasonably believes such action
to be in the best interests of the Company or its Subsidiaries); or

 

(ii)           hire
any such employee who was employed by the Company or its Subsidiaries as of the
date of such Senior Manager’s termination of Employment with the Company or who
left the Employment of the Company or its Subsidiaries coincident with, or
within one year prior to, the termination of such Senior Manager’s Employment with
the Company (other than any such employee whose Employment with the Company is
terminated by the Company without Cause).

 

(d)           During
the Restricted Period, such Senior Manager will not, directly or indirectly,
encourage or solicit to cease to work with the Company or its Subsidiaries any consultant
then under contract with the Company or its Subsidiaries.

 

(e)           Notwithstanding
anything to the contrary in this Agreement, any Senior Manager may, directly or
indirectly own, solely as an investment, securities of any Person engaged in
the business of the Company or its Subsidiaries which are publicly traded on a national
or regional stock exchange or on the over-the-counter market if the Senior
Manager (i) is not a controlling person of, or a member of a group which
controls, such person and (ii) does not, directly or indirectly, own 5% or
more of any class of securities of such Person.

 

(f)            It
is expressly understood and agreed that although the Senior Managers and the
Company consider the restrictions contained in this Section 3.4 to be
reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in
this Agreement is an unenforceable restriction against the relevant Senior
Manager, the provisions of this Agreement will not be rendered void but will be
deemed amended to apply as to such maximum time and territory and to such
maximum extent as such court may judicially determine or indicate to be
enforceable.  Alternatively, if any court
of competent jurisdiction finds that any restriction contained in this
Agreement is unenforceable, and such restriction cannot be amended so as to
make it enforceable, such finding will not affect the enforceability of any of
the other restrictions contained herein.

 

Section 3.5.            Confidential
Information.  (a) No Management
Stockholder will at any time (whether during or after such Management
Stockholder’s employment with the Company) (i) retain or use for the
benefit, purposes or account of such Management Stockholder or any other
Person; or (ii) disclose, divulge, reveal, communicate, share, transfer or
provide access to any Person outside the Company (other than its professional
advisers who are bound by confidentiality obligations), any non-public,
proprietary or

 

6

 

confidential
information – including without limitation trade secrets, know-how,
research and development, software, databases, inventions, processes, business
strategies, formulae, technology, designs and other intellectual property,
information concerning finances, investments, profits, pricing, costs,
products, services, vendors, customers, clients, partners, investors,
personnel, compensation, recruiting, training, advertising, sales, marketing,
promotions, government and regulatory activities and approval – concerning
the past, current or future business, activities and operations of the Company,
its subsidiaries, Affiliates or any third party that has disclosed or provided
any of same to the Company on a confidential basis (“Confidential
Information”) without the prior written authorization of the board of
directors of the Company.

 

(b)           “Confidential
Information” will not include any information that is (i) generally known
to the industry or the public other than as a result of such Management Stockholder’s
breach of this covenant or any breach of other confidentiality obligations by
third parties; (ii) made legitimately available to the Management
Stockholder by a third party without breach of any confidentiality obligation;
or (iii) required by law or a court of competent jurisdiction to be
disclosed; provided that such Management Stockholder will give prompt written
notice to the Company of such requirement, disclose no more information than is
so required, and cooperate with any attempts by the Company to obtain a
protective order or similar treatment.

 

(c)           [Intentionally
Omitted]

 

(d)           Upon
termination of such Management Stockholder’s employment for any reason, the
Management Stockholder will (i) cease and not thereafter commence use of
any Confidential Information or intellectual property (including without
limitation, any patent, invention, copyright, trade secret, trademark, trade
name, logo, domain name or other source indicator) owned or used by the Company
or its Affiliates; (ii) immediately destroy, delete, or return to the
Company, at the Company’s option, all originals and copies in any form or
medium (including memoranda, books, papers, plans, computer files, letters and
other data) in such Management Stockholder’s possession or control (including
any of the foregoing stored or located in the Management Stockholder’s office,
home, laptop or other computer, whether or not Company property) that contain
Confidential Information or otherwise relate to the business of the Company and
its Affiliates, except that such Management Stockholder may retain only those
portions of any personal notes, notebooks and diaries that do not contain any
Confidential Information; and (iii) notify and fully cooperate with the
Company regarding the delivery or destruction of any other Confidential
Information of which the Management Stockholder is or becomes aware

 

Section 3.6.            [Intentionally
Omitted]

 

ARTICLE IV

 

MISCELLANEOUS

 

Section 4.1.            [Intentionally
Omitted]

 

7

 

Section 4.2.            [Intentionally
Omitted]

 

Section 4.3.            Employment
by the Company.  Nothing contained in
this Agreement or any option agreement entered into by the Company and any
Management Stockholder (a) obligates the Company or any Subsidiary or
Affiliate of the Company to employ any Management Stockholder or his/her
Permitted Transferees in any capacity whatsoever or (b) prohibits or
restricts the Company (or any such Subsidiary or Affiliate) from terminating
the Employment of any Management Stockholder at any time or for any reason
whatsoever, with or without Cause, and each of the Management Stockholders and
their Permitted Transferees hereby acknowledges and agrees that neither the
Company nor any other Person has made any representations or promises in this
Agreement or in any option agreement to such Management Stockholder or Permitted
Transferee concerning such person’s Employment or continued Employment by the
Company or any Subsidiary or Affiliate of the Company.

 

Section 4.4.            [Intentionally
Omitted]

 

Section 4.5.            Successors
and Assigns.  This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto, and their
respective successors and permitted assigns.

 

Section 4.6.            No
Waivers, Amendments.

 

(a)           Except
as expressly set forth herein, no failure or delay by any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.

 

(b)           Any
amendment, modification or supplement to this Agreement shall not be enforced
against any party hereto unless such amendment, modification or supplement is signed
by the Company and the Majority Management Stockholders, provided, however
that notwithstanding the foregoing, any amendment, modification or supplement
to this Agreement with respect to a matter that does not directly or indirectly
adversely affect the rights of any of the Management Stockholders shall be
enforceable without requiring that such amendment, modification or supplement
be signed by the Majority Management Stockholders.

 

(c)           Any
provision of this Agreement may be waived if, but only if, such waiver is in
writing and is signed by the party against whom the enforcement of such waiver
is sought.

 

Section 4.7.            Notices.
 All notices, requests and other
communications to any party hereunder shall be in writing (including telex,
telecopier or similar writing) and shall be given to such party at its address
or telecopier number set forth below, or such other address or telecopier
number as such party may hereinafter specify for the purpose to the party
giving such notice.  Each such notice,
request or other communication shall be effective (a) if given by telecopy,
when such telecopy is transmitted to the telecopy number specified

 

8

 

in this Section
and the appropriate answerback is received or, (b) if given by overnight
courier or express mail service, when delivery is confirmed or, (c) if
given by any other means, when delivered at the address specified in this
Section 4.7.  In each case, notice shall
be sent to the parties at the following addresses (or at such other address for
a party as shall be specified by like notice):

 

(i)            if
to the Company:

 

CPI International, Inc.

811 Hansen Way, Mail Stop
A-028

Palo Alto, California
94303

Attention:  Joel A. Littman

Telecopier:  (650) 846-3276

 

with a copy to:

 

Irell & Manella LLP

1800 Avenue of the Stars,
Suite 900

Los Angeles, California
90067

Attention:  Richard C. Wirthlin

Telecopier:  (310) 203-7199

 

(ii)           if
to Cypress:

 

c/o The Cypress Group
L.L.C.

65 East 55th
Street

New York, New York 10022

Attention:  Michael F. Finley

Telecopier:  (212) 705-0199

 

with a copy to:

 

Simpson Thacher &
Bartlett LLP

425 Lexington Avenue

New York, New York 10017

Attention:  Marni J. Lerner

Telecopier:  (212) 455-2502

 

(iii)          if
to a Management Stockholder, at the address for such Management Stockholder
listed below such Management Stockholder’s signature hereto.

 

Section 4.8.            Term
of Agreement.  This Agreement shall
terminate (a) in full on the earlier to occur of (i) January 23, 2014 (provided
that the registration rights in Exhibit C hereto shall survive any such
termination until such time as all Management Stockholders hold no Registrable
Securities) and (ii) when all Management Stockholders cease to
beneficially own any Shares, and, if earlier, (b) with respect to any
Management Stockholder, when such Management Stockholder ceases to beneficially
own any Shares;

 

9

 

provided
that any termination pursuant to this Section 4.8 will not relieve any party
for any liability arising from a breach of representation, warranty, covenant
or agreement occurring prior to such termination.  Notwithstanding the foregoing, Section 5.3
(Holdback Agreements) of Exhibit C shall terminate on the second
anniversary of the date of the Initial Public Offering.

 

Section 4.9.            Inspection.
 So long as this Agreement shall be in
effect, this Agreement and any amendments hereto shall be made available for
inspection by any Management Stockholder at the principal offices of the
Company.

 

Section 4.10.          GOVERNING LAW; SUBMISSION TO JURISDICTION.
 THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE.  Each of the parties hereto hereby (a) submits
to the jurisdiction of the courts of the State of Delaware and the United
States District Court for the District of Delaware with respect to matters
arising out of or relating hereto, (b) agrees that all claims with respect
to such matters may be heard and determined in an action or proceeding in such
Delaware courts, and (c) agrees that a final judgment in any such action
or proceeding will be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law.

 

Section 4.11.          Section
Headings.  The section headings
contained in this Agreement are for reference purposes only and shall not
affect the meaning or interpretation of this Agreement.

 

Section 4.12.          Entire
Agreement.  This Agreement (including
the Exhibits hereto) constitutes the entire agreement and understanding among
the parties hereto and supersedes any and all prior agreements and
understandings, written or oral, relating to the subject matter hereof.

 

Section 4.13.          Severability.
 Any term or provision of this Agreement
which is invalid or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdictions, it
being intended that all rights and obligations of the parties hereunder shall
be enforceable to the fullest extent permitted by law.

 

Section 4.14.          Counterparts.
 This Agreement may be signed in counterparts,
each of which shall constitute an original and which together shall constitute
one and the same agreement.

 

Section 4.15.          Parties
in Interest.  This Agreement and all
the provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and Permitted Transferees.  Except as expressly set forth herein, neither
this Agreement nor any of their rights hereunder shall be assigned by any of
the parties hereto who are not Permitted Transferees without the prior written
consent of the other parties.

 

10

 

Section 4.16.          Enforcement;
Further Assurances.

 

(a)            The
parties hereto agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms.  It is accordingly agreed
that the parties shall be entitled to specific performance of the terms hereof,
this being in addition to any other remedy to which they are entitled at law or
in equity.

 

(b)           The
parties hereto agree to execute, acknowledge, deliver, file and record such
further certificates, amendments, instruments, agreements and documents, and to
do all such other acts and things, as may be required by law or as may be
necessary or advisable to carry out the intent and purposes of this Agreement.

 

Section 4.17.          Advice
of Counsel.  Each Management
Stockholder and Permitted Transferee of a Management Stockholder acknowledges
that, in executing this Agreement, he or she has had the opportunity to seek
the advice of independent legal counsel, and has read and understood all of the
terms and provisions of this Agreement.

 

Section 4.18.          Amendment
and Restatement of Original Agreement; Effectiveness of Agreement. The
parties hereto intend that this Agreement shall amend and restate, and shall
supersede in all respects, the Original Agreement.  Notwithstanding anything to the contrary
contained herein, this Agreement shall become effective upon the consummation of
the Initial Public Offering.  In the
event that the Initial Public Offering shall not be consummated, this Agreement
shall be null and void and shall have no force or effect.

 

Section 4.19.          Additional
Parties to this Agreement.  Except
for Permitted Transferees of a Management Stockholder who become a party hereto
by executing and delivering to the Company an instrument in the form of Exhibit
B hereto or otherwise reasonably satisfactory to the Company, no additional
Persons shall become a party hereto.

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

11

 

IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
set forth above.

 

	
   

  	
  CPI
  INTERNATIONAL, INC.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  O. Joe Caldarelli

  	
   

  
	
   

  	
   

  	
  Name:

  	
  O.
  Joe Caldarelli

  
	
   

  	
   

  	
  Title:

  	
  CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CYPRESS
  MERCHANT BANKING PARTNERS II

  L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Cypress
  Associates II LLC, as general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  James A. Stern

  	
   

  
	
   

  	
   

  	
  Name:

  	
  James
  A. Stern

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CYPRESS
  MERCHANT B II C.V.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Cypress
  Associates II LLC, as managing

  general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  James A. Stern

  	
   

  
	
   

  	
   

  	
  Name:

  	
  James
  A. Stern

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CYPRESS
  SIDE-BY-SIDE LLC

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  James A. Stern

  	
   

  
	
   

  	
   

  	
  Name:

  	
  James
  A. Stern

  
	
   

  	
   

  	
  Title:

  	
  Sole
  Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  55TH
  STREET PARTNERS II L.P.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  Cypress
  Associates II LLC, as general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  James A. Stern

  	
   

  
	
   

  	
   

  	
  Name:

  	
  James
  A. Stern

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Member

  
							

 

 

	
   

  	
  Joe
  Caldarelli

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  O. Joe Caldarelli

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Fax:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Robert
  Fickett

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Robert A. Fickett

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Fax:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Don
  Coleman

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Don Coleman

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Fax:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Joel
  Littman

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Joel A. Littman

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Fax:

  	
   

  	
   

  

 

2

 

	
   

  	
  Mike
  Cheng

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Mike Cheng

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Fax:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  John
  Beighley

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  John Beighley

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Fax:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Michael
  Targoff

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Michael Targoff

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Fax:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Chris
  Toffales

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Chris Toffales

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Fax:

  	
   

  	
   

  

 

3

 

SCHEDULE I

 

Management Stockholders

 

Joe
Caldarelli

 

Robert
Fickett

 

Don
Coleman

 

Joel
Littman

 

Mike
Cheng

 

John
Beighley

 

Michael
Targoff

 

Chris
Toffales

 

 

SCHEDULE II

 

Senior Managers

 

	
  Name

  	
   

  	
  Restricted Period

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Joe
  Caldarelli

  	
   

  	
  18
  months

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Robert
  Fickett

  	
   

  	
  18
  months

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Don
  Coleman

  	
   

  	
  12
  months

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Joel
  Littman

  	
   

  	
  18
  months

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Mike
  Cheng

  	
   

  	
  12
  months

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  John
  Beighley

  	
   

  	
  12
  months

  	
   

  

 

 

EXHIBIT A

 

[Intentionally Omitted]

 

 

EXHIBIT B

 

PERMITTED TRANSFEREE

FORM OF AGREEMENT TO BE BOUND

 

[DATE]

 

To the
Parties to the

Amended
and Restated Management Stockholders Agreement

dated
as of April 27, 2006

 

Ladies
and Gentlemen:

 

Reference
is made to the Amended and Restated Management Stockholders Agreement, dated as
of April 27, 2006 (as may be amended, supplemented or modified from time to
time in accordance with the terms thereof, the “Management Stockholders
Agreement”), among CPI International, Inc., Cypress Merchant Banking Partners
II L.P., Cypress Merchant B II C.V., 55th Street Partners II L.P., Cypress
Side-by-Side LLC, and the stockholders listed on Schedule 1 thereto and each
other Permitted Transferee who shall become party to the Management
Stockholders Agreement as provided therein, as the same may be subsequently
modified, supplemented or amended in accordance with its terms.  Capitalized terms used herein and not defined
have the meanings ascribed to them in the Management Stockholders Agreement.

 

In
consideration of the mutual covenants and agreements contained in the Management
Stockholders Agreement, the undersigned hereby confirms and agrees that it
shall be bound by all of the provisions thereof as a Permitted Transferee of
[Name of Transferor].

 

This
letter shall be construed and enforced in accordance with the laws of Delaware.

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  [Permitted
  Transferee]

  

 

 

EXHIBIT C

 

REGISTRATION RIGHTS

 

ARTICLE I

DEFINITIONS

 

Section 1.1.            Definitions.
 Terms defined in the Amended and
Restated Management Stockholders Agreement, dated as of April 27, 2006 (as may
be amended, supplemented or modified from time to time in accordance with the
terms thereof, the “Management Stockholders Agreement”), among CPI
International, Inc., Cypress Merchant Banking Partners II L.P., Cypress
Merchant B II C.V., 55th Street Partners II L.P., Cypress Side-by-Side LLC, and
the stockholders listed on Schedule I thereto and each other person who shall become
party to the Management Stockholders Agreement as provided therein, are used
herein as therein defined. In addition, the following terms shall have the
meanings ascribed to them below:

 

“Commission”
means the United States Securities and Exchange Commission.

 

“Exchange
Act” means the United States Securities Exchange Act of 1934, as amended.

 

“Holder”
means any Management Stockholder and any Permitted Transferee of a Management
Stockholder, in each case holding Registrable Securities.

 

“Indemnified
Party” has the meaning set forth in Section 4.3.

 

“Indemnifying
Party” has the meaning set forth in Section 4.3.

 

“Inspectors”
has the meaning set forth in Section 3.1(h).

 

“Piggy-Back
Registration” has the meaning set forth in Section 2.1.

 

“Records”
has the meaning set forth in Section 3.1(h).

 

“Registrable
Security” means any outstanding shares of Common Stock held by a Holder as
of the date of the Initial Public Offering or shares of Common Stock issuable pursuant
to stock options held by a Holder as of the date of the Initial Public Offering
(whether or not such options are vested at the time of the Initial Public
Offering) until (i) a registration statement covering such Common Stock
has been declared effective by the Commission and such stock has been disposed
of pursuant to such effective registration statement, (ii) such stock is
sold pursuant to Rule 144 (or any similar provisions then in force) under the
Securities Act or (iii) such stock is eligible to be sold pursuant to Rule
144(k) (or any similar provision then in force) under the Securities Act.

 

“Registration
Expenses” has the meaning set forth in Section 3.2.

 

 

“Selling
Holder” means a Holder who is selling Registrable Securities pursuant to a
registration statement under the Securities Act.

 

“Underwriter”
means a securities dealer who purchases any Registrable Securities as principal
in an underwritten offering and not as part of such dealer’s market-making
activities.

 

ARTICLE II

REGISTRATION RIGHTS

 

Section 2.1.            Piggy-Back
Registration.  If at any time
following the consummation of an Initial Public Offering the Company proposes
to file a registration statement under the Securities Act with respect to an
offering by the Company for its own account and/or for the account of any of
its security holders of any common stock (other than (i) a registration statement
on Form S-4 (or F-4) or S-8 (or any substitute form that may be adopted by the Commission)
or (ii) a registration statement filed in connection with an exchange
offer or an offering of securities solely to the Company’s existing
securityholders), then the Company shall give written notice of such proposed
filing to the Holders as soon as practicable (but in no event less than 15 days
before the anticipated filing date), and such notice shall identify the
anticipated filing date and offer such Holders the opportunity to register such
number of shares of Registrable Securities as each such Holder may request
(which request shall specify the Registrable Securities intended to be disposed
of by such Holder and the intended method of distribution thereof and shall be
delivered to the Company at least two days prior to the anticipated filing
date) (a “Piggy-Back Registration”).  The Company shall use its commercially reasonable
efforts to cause the managing Underwriter or Underwriters of a proposed underwritten
offering to permit the Registrable Securities requested to be included in a Piggy-Back
Registration to be included on the same terms and conditions to permit the sale
or other disposition of such Registrable Securities in accordance with the
intended method of distribution thereof.  Any Holder shall have the right to withdraw its
request for inclusion of its Registrable Securities in any registration
statement pursuant to this Section 2.1 by giving written notice to the Company
of its request to withdraw.  The Company
may withdraw a Piggy-Back Registration at any time prior to the time it becomes
effective, provided that, in such event, the Company shall reimburse
Holders requested to be included in such Piggy-Back Registration for all
Registration Expenses (including reasonable counsel fees and expenses) incurred
prior to such withdrawal; provided, further, a Holder shall not be eligible for
piggy-back registration rights pursuant to this Section 2.1 with
respect to any registration statements which are initially filed by the Company
after the Piggy-Back Termination Date with respect to such Holder (or offerings
made after such Piggy-Back Termination Date pursuant to shelf registration
statements previously on file).   For
these purposes, the “Piggy-Back Termination Date” shall mean the second
anniversary of the Company’s Initial Public Offering; provided, however, with
respect to any Holder whose status as an employee or director of the Company or
its subsidiaries terminates prior to such second anniversary, the Holder may,
by written notice to the Company, elect to have the Piggy-Back Termination Date
(with respect to such Holder and his Permitted Transferees only) occur any date
after the date of such termination of employee or director status and before
such second anniversary.

 

2

 

Section 2.2.            Reduction
of Offering.  Notwithstanding
anything contained herein, if the managing Underwriter(s) of an offering
described in Section 2.1 determine that the offering that the Holders, the
Company and/or such other Persons intend to make is such that the success of
the offering would be materially and adversely affected by inclusion of the Registrable
Securities requested to be included, then the Company shall include in such registration:
 (i) first, the shares, if
any, proposed to be registered by the Company for its own account or for the
account of a holder exercising “demand registration rights”; and (ii) second,
an amount of securities requested to be included in such registration
(including pursuant to Section 2.1) by the holders exercising “piggy-back
registration rights” (such amount to be allocated among such holders in
proportion to the number of shares of Common Stock held by such holders).  Holders may not sell shares in a Public
Offering if the managing Underwriter(s) determine in their reasonable business
judgment that such participation will have an adverse impact on such Public
Offering.  Notwithstanding any provision
in this Agreement to the contrary, no Holder may exercise piggyback
registration rights to the extent it would otherwise result in the sale by him
or her, on a cumulative basis taking into account all prior sales, of a greater
percentage of the Common Stock that has ever been held by him than the
percentage equal to the cumulative shares of Common Stock sold by Cypress
divided by the total shares of Common Stock ever held by Cypress.  The Holders agree that they will not sell any
shares in an Initial Public Offering.

 

ARTICLE III

REGISTRATION PROCEDURES

 

Section 3.1.            Filings;
Information.  Whenever the Holders
have requested that any Registrable Securities be registered pursuant to this
agreement, the Company will use its reasonable efforts to effect the
registration of such Registrable Securities in accordance with the intended
method of disposition thereof as quickly as practicable, and in connection with
any such request:

 

(a)           The
Company will as expeditiously as practicable prepare and file with the Commission
a registration statement on any form for which the Company then qualifies or
which counsel for the Company shall deem appropriate and which form shall be
available for the sale of the Registrable Securities to be registered
thereunder in accordance with the intended method of distribution thereof (it
being understood that the Company shall use Form S-3 (or any replacement form)
if such form is then available), and use its commercially reasonable efforts to
cause such filed registration statement to become effective.

 

(b)           The
Company will prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement until such
time as all of such securities have been disposed of in accordance with the
intended methods of disposition by the Selling Holder or Selling Holders
thereof set forth in such registration statement.

 

(c)           The
Company will, prior to filing a registration statement or prospectus or any
amendment or supplement thereto, furnish to each Selling Holder, counsel

 

3

 

representing
any Selling Holders, and each Underwriter, if any, of the Registrable
Securities covered by such registration statement copies of such registration
statement as proposed to be filed, together with exhibits thereto, which
documents will be subject to review by the foregoing within 5 Business Days
after delivery, and thereafter furnish to such Selling Holder, counsel and
Underwriter, if any, such number of copies of such registration statement, each
amendment and supplement thereto (in each case including all exhibits thereto
and documents incorporated by reference therein), the prospectus included in
such registration statement (including each preliminary prospectus) and such
other documents as such Selling Holder or Underwriter may reasonably request in
order to facilitate the disposition of the Registrable Securities owned by such
Selling Holder.

 

(d)           After
the filing of the registration statement, the Company will promptly notify each
Selling Holder covered by such registration statement of any stop order issued
or threatened by the Commission and take all reasonable actions required to
prevent the entry of such stop order or to remove it if entered.

 

(e)           The
Company will use its commercially reasonable efforts to (i) register or qualify
the Registrable Securities under such other securities or blue sky laws of such
jurisdictions in the United States and such other jurisdictions as any Selling
Holder reasonably (in light of such Selling Holder’s intended plan of
distribution) requests and (ii) cause such Registrable Securities to be
registered with or approved by such other governmental agencies or authorities
in the United States as may be necessary by virtue of the business and
operations of the Company and do any and all other acts and things that may be
reasonably necessary or advisable to enable such Selling Holder to consummate
the disposition of the Registrable Securities owned by such Selling Holder; provided
that the Company will not be required to (A) qualify generally to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this paragraph (d), (B) subject itself to taxation in any such
jurisdiction or (C) consent to general service of process in any such
jurisdiction.

 

(f)            The
Company will immediately notify each Selling Holder of such Registrable
Securities, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the occurrence of an event requiring the
preparation of a supplement or amendment to such prospectus so that, as
thereafter delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and will promptly make available to each
Selling Holder any such supplement or amendment.

 

(g)           The
Company will enter into customary agreements (including, if applicable, an
underwriting agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such Registrable
Securities in accordance with the intended plan of distribution of the Selling
Holders.

 

(h)           The
Company will deliver promptly to each Selling Holder of such Registrable
Securities and each Underwriter, if any, subject to restrictions imposed by the
United States federal government or any agency or instrumentality thereof,
copies of all correspondence between the Commission and the Company and its
counsel or auditors and

 

4

 

all
memoranda relating to discussions with the Commission or its staff with respect
to the registration statement and make available for inspection by any Selling
Holder of such Registrable Securities, any Underwriter participating in any
disposition pursuant to such registration statement and any attorney,
accountant or other professional retained by any such Selling Holder or
Underwriter (collectively, the “Inspectors”), all financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the “Records”), as shall be reasonably necessary to enable
them to perform a reasonable and customary due diligence investigation, and
cause the Company’s officers, directors and employees to supply all information
reasonably requested by any Inspectors in connection with such registration
statement.  Records which the Company determines,
in good faith, to be confidential and which it notifies the Inspectors are
confidential shall not be disclosed by the Inspectors unless (i) the
disclosure of such Records is necessary to avoid or correct a misstatement or
omission in such registration statement or (ii) the disclosure or release
of such Records is requested or required pursuant to oral questions,
interrogatories, requests for information or documents or a subpoena or other
order from a court of competent jurisdiction or other process; provided
that prior to any disclosure or release pursuant to clause (ii), the Inspectors
shall provide the Company with prompt notice of any such request or requirement
so that the Company may seek an appropriate protective order or waive such Inspectors’
obligation not to disclose such Records; and provided, further,
that if failing the entry of a protective order or the waiver by the Company
permitting the disclosure or release of such Records, the Inspectors, upon
advice of counsel, are compelled to disclose such Records, the Inspectors may
disclose that portion of the Records which counsel has advised the Inspectors
that the Inspectors are compelled to disclose.  Each Selling Holder of such Registrable
Securities agrees that it will, upon learning that disclosure of such Records
is sought in a court of competent jurisdiction, give notice to the Company and
allow the Company at its expense, to undertake appropriate action to prevent
disclosure of the Records deemed confidential.

 

(i)            The
Company will furnish to each Underwriter, if any, (i) an opinion or opinions
of counsel to the Company and (ii) a comfort letter or comfort letters from
the Company’s independent public accountants, each in customary form and
covering such matters of the type customarily covered by opinions or comfort
letters, as the case may be, as the managing Underwriter, if any, therefor
reasonably requests.

 

(j)            The
Company will use its commercially reasonable efforts to comply with all
applicable rules and regulations of the Commission, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering a period of 12 months, beginning within three months after the
effective date of the registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder.

 

(k)           The
Company will use its commercially reasonable efforts (a) to cause all such
Registrable Securities to be listed on a national securities exchange (if such
shares are not already so listed) and on each additional national securities
exchange on which similar securities issued by the Company are then listed (if
any), if the listing of such Registrable Securities is then permitted under the
rules of such exchange or (b) to secure designation of all such
Registrable Securities covered by such registration statement as a

 

5

 

NASDAQ
“national market system security” within the meaning of Rule 11Aa2-1 of the
Commission or, failing that, to secure NASDAQ authorization for such
Registrable Securities and, without limiting the generality of the foregoing,
to arrange for at least two market makers to register as such with respect to
such Registrable Securities with the NASD.

 

(l)            The
Company will appoint a transfer agent and registrar for all such Registrable
Securities covered by such registration statement not later than the effective
date of such registration statement.

 

The
Company may require each Selling Holder of Registrable Securities to promptly
furnish in writing to the Company such information regarding the distribution
of the Registrable Securities as the Company may from time to time reasonably
request and such other information as may be legally required in connection
with such registration.

 

Each
Selling Holder agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3.1(f) hereof, such
Selling Holder will forthwith discontinue disposition of Registrable Securities
pursuant to the registration statement covering such Registrable Securities
until such Selling Holder’s receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3.1(f) hereof, and, if so directed
by the Company such Selling Holder will deliver to the Company all copies,
other than permanent file copies then in such Selling Holder’s possession, of
the most recent prospectus covering such Registrable Securities at the time of
receipt of such notice.  In the event the
Company shall give such notice, the Company shall extend the period during
which such registration statement shall be maintained effective (including the
period referred to in Section 3.1(b) hereof) by the number of days during the
period from and including the date of the giving of notice pursuant to Section
3.1(f) hereof to the date when the Company shall make available to the Selling
Holders of Registrable Securities covered by such registration statement a
prospectus supplemented or amended to conform with the requirements of Section
3.1(f) hereof.

 

Section 3.2.            Registration
Expenses.  In connection with any
registration statement filed pursuant to Section 2.1, the Company shall pay the
following registration expenses incurred in connection with the registration
hereunder (the “Registration Expenses”): 
(i) all registration and filing fees, (ii) fees and expenses
of compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities), (iii) printing expenses, (iv) the Company’s
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing legal or accounting duties), (v) fees
and expenses incurred in connection with the listing of the Registrable
Securities, (vi) reasonable fees and disbursements of counsel for the Company
and not more than one counsel for the Selling Holders, as may be chosen by a
majority of the Selling Holders, and customary fees and expenses for
independent certified public accountants retained by the Company (including the
expenses of any comfort letters or costs associated with the delivery by
independent certified public accountants of a comfort letter or comfort letters
requested pursuant to Section 3.1(i) hereof) and (vii) reasonable fees and
expenses of any special experts retained by the Company in connection with such
registration.  The Company shall have no

 

6

 

obligation to pay any underwriting fees, discounts or
commissions attributable to the sale of Registrable Securities.

 

ARTICLE IV

INDEMNIFICATION AND CONTRIBUTION

 

Section 4.1.            Indemnification
by the Company.  To the fullest
extent permitted by law, the Company agrees to indemnify and hold harmless each
Selling Holder of Registrable Securities, its officers, directors, employees
and agents, and each person, if any, who controls such Selling Holder within
the meaning of the Securities Act from and against any loss, claim, damage or
liability, joint or several, or any action in respect thereof (including, but
not limited to, any loss, claim, damage, liability or action relating to
purchases and sales of Common Stock) to which such Selling Holder, officer,
director, employee or agent or controlling Person may become subject under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement, preliminary prospectus or final prospectus or any amendment or
supplement thereto relating to the Registrable Securities or (ii) any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading and
shall reimburse each Selling Holder and each such officer, director, employee,
agent and controlling Person for any legal and other expenses reasonably
incurred by that Selling Holder, officer, director, employee, agent or controlling
Person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred, except insofar as the same are contained in any information furnished
in writing to the Company by such Selling Holder expressly for use therein; provided,
however, that the Company shall not be liable to any Selling Holder or
such Person’s directors, officers, agents or controlling Persons, in any such case
for any such loss, claim, damage or liability to the extent that it arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in connection with such registration statement,
preliminary prospectus, final prospectus or amendments or supplements thereto,
in conformity with written information relating to such Selling Holder furnished
to the Company by such Selling Holder expressly for inclusion therein in
connection with such registration; and, provided, further, that
as to any preliminary prospectus or any final prospectus, this indemnity
agreement shall not inure to the benefit of any Selling Holder or such Person’s
directors, officers, agents or controlling Persons, on account of any loss, claim,
damage or liability arising from the sale of Registrable Securities to any
Person by such Selling Holder if such Selling Holder or its representatives
failed to send or give a copy of the final prospectus or a prospectus
supplement, as the case may be (excluding documents incorporated by reference
therein), as the same may be amended or supplemented, to that Person within the
time required by the Securities Act, and the untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact in such preliminary prospectus or final prospectus was corrected
in the final prospectus or such prospectus supplement, as the case may be
(excluding documents incorporated by reference therein), unless such failure
resulted from the non-compliance by the Company with Section 3.1(f).  The Company also agrees to indemnify any
Underwriters of the Registrable Securities, their officers and directors and
each Person who controls such Underwriters on substantially the same basis as

 

7

 

that of the indemnification of the Selling Holders
provided in this Section 4.1.  The indemnities
provided by this Section 4.1 shall remain in full force and effect regardless
of any investigation made by or on behalf of such Selling Holder or
Underwriter.

 

Section 4.2.            Indemnification
by Holders of Registrable Securities.  To the fullest extent permitted by law, each
Selling Holder agrees, severally but not jointly, to indemnify and hold
harmless the Company its officers, directors and agents and each Person, if
any, who controls the Company within the meaning of the Securities Act to the
same extent as the indemnity from the Company to such Selling Holder pursuant
to clauses (i) and (ii) of Section 4.1, but only with reference to information
related to such Selling Holder furnished in writing by such Selling Holder or
on such Selling Holder’s behalf expressly for use in any registration statement
or prospectus relating to the Registrable Securities, or any amendment or
supplement thereto, or any preliminary prospectus; provided that the
obligation to indemnify will be individual to each Selling Holder and will be
limited to the net amount of proceeds received by such Selling Holder from the
sale of Registrable Securities pursuant to such Registration Statement. Each
Selling Holder also agrees to indemnify and hold harmless Underwriters of the Registrable
Securities, their officers and directors and each Person who controls such Underwriters
on substantially the same basis as that of the indemnification of the Company provided
in this Section 4.2, subject to the proviso in the first sentence of this
Section 4.2.  Notwithstanding the
foregoing, the indemnity set forth in this Section 4.2, shall not apply to amounts
paid in settlements effected without the consent of such Selling Holder (which
consent shall not be unreasonably withheld or delayed).

 

Section 4.3.            Conduct
of Indemnification Proceedings.  Promptly after receipt by any person in
respect of which indemnity may be sought pursuant to Section 4.1 or 4.2 (an “Indemnified
Party”) of notice of any claim or the commencement of any action, the
Indemnified Party shall, if a claim in respect thereof is to be made against
the person against whom such indemnity may be sought (an “Indemnifying Party”)
notify the Indemnifying Party in writing of the claim or the commencement of
such action, provided that the failure to notify the Indemnifying Party
shall not relieve it from any liability which it may have to an Indemnified Party
otherwise than under Section 4.1 or 4.2, except to the extent of any actual
prejudice resulting therefrom.  If any
such claim or action shall be brought against an Indemnified Party, and it
shall notify the Indemnifying Party thereof, the Indemnifying Party shall be
entitled to participate therein, and, to the extent that it wishes, jointly
with any other similarly notified Indemnifying Party, to assume the defense
thereof with counsel satisfactory to the Indemnified Party.  After notice from the Indemnifying Party to
the Indemnified Party of its election to assume the defense of such claim or
action, the Indemnifying Party shall not be liable to the Indemnified Party for
any legal or other expenses subsequently incurred by the Indemnified Party in
connection with the defense thereof other than reasonable costs of
investigation; provided that the Indemnified Party shall have the right
to employ separate counsel to represent the Indemnified Party and its
controlling Persons who may be subject to liability arising out of any claim in
respect of which indemnity may be sought by the Indemnified Party against the Indemnifying
Party, but the fees and expenses of such counsel shall be for the account of
such Indemnified Party unless (i) the Indemnifying Party and the
Indemnified Party shall have mutually agreed to the retention of such counsel
or (ii) in the reasonable judgment of such Indemnified Party
representation of both parties by the same counsel would be inappropriate due to
actual or

 

8

 

potential differing interests between them.  No Indemnifying Party shall, without the prior
written consent of the Indemnified Party, effect any settlement of any claim or
pending or threatened proceeding in respect of which the Indemnified Party is
or could have been a party and indemnity could have been sought hereunder by
such Indemnified Party, unless such settlement includes an unconditional
release of such Indemnified Party from all liability arising out of such claim
or proceeding.

 

Section 4.4.            Contribution.
 If the indemnification provided for in
this Article IV is unavailable to the Indemnified Parties in respect of any
losses, claims, damages, liabilities or expenses referred to herein, then each
such Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such losses, claims, damages, liabilities or expenses (i) as between
the Company and the Selling Holders on the one hand and the Underwriters on the
other, in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Selling Holders on the one hand and the
Underwriters on the other from the offering of the Registrable Securities, or if
such allocation is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits but also the relative
fault of the Company and the Selling Holders on the one hand and of the
Underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations and (ii) as between the Company on the one hand
and each Selling Holder on the other, in such proportion as is appropriate to
reflect the relative fault of the Company and of each Selling Holder in connection
with such statements or omissions, as well as any other relevant equitable
considerations.  The relative benefits
received by the Company and the Selling Holders on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total proceeds from the offering (net of underwriting discounts and commissions
but before deducting expenses) received by the Company and the Selling Holders bear
to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
prospectus.  The relative fault of the Company
and the Selling Holders on the one hand and of the Underwriters on the other
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company and the
Selling Holders or by the Underwriters.  The
relative fault of the Company on the one hand and of each Selling Holder on the
other shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by
such party, and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.

 

The
Company and the Selling Holders agree that it would not be just and equitable
if contribution pursuant to this Section 4.4 were determined by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding
paragraph.  The amount paid or payable by
an Indemnified Party as a result of the losses, claims, damages or liabilities
referred to in the immediately preceding paragraph shall be deemed to include,
subject to the limitations set forth above, any legal or

 

9

 

other expenses reasonably incurred by such Indemnified
Party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section
4.4, no Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Registrable Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission, and no Selling Holder shall be required to
contribute any amount in excess of the amount by which the total price at which
the Registrable Securities of such Selling Holder were offered to the public
(less underwriting discounts and commissions) exceeds the amount of any damages
which such Selling Holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.  Each
Selling Holder’s obligations to contribute pursuant to this Section 4.4 are
several in proportion to the proceeds of the offering received by such Selling
Holder and not joint.

 

ARTICLE V

MISCELLANEOUS

 

Section 5.1.            Participation
in Underwritten Registrations.  No
Person may participate in any underwritten registration hereunder unless such
Person (a) agrees to sell such Person’s securities on the basis provided
in any underwriting arrangements approved by the Persons entitled hereunder to
approve such arrangements and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements and these
Registration Rights.

 

Section 5.2.            Rule
144.  The Company covenants that it
will file any reports required to be filed by it under the Securities Act and
the Exchange Act and that it will take such further action as any Holder may
reasonably request, all to the extent required from time to time to enable
Holders to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule
144 under the Securities Act, as such Rules may be amended from time to time,
or (b) any similar rule or regulation hereafter adopted by the Commission.
 Upon the request of any Holder, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.

 

Section 5.3.            Holdback
Agreements.  If any registration
statement shall be in connection with a Public Offering to be underwritten on a
firm commitment basis, then each Holder of Registrable Securities agrees not to
effect any sale or distribution of the securities being registered or of a
similar security of the Company or any securities convertible into or
exchangeable or exercisable for such securities, including a sale pursuant to
Rule 144 under the Securities Act, during the 14 days prior to, and during the
90-day period beginning on, the effective date of such Public Offering (except
as part of such underwritten registration), unless the investment banks or
underwriters managing the public offering otherwise agree.  Notwithstanding anything to the contrary
contained in the Management Stockholders Agreement or in this Exhibit C,
this Section 5.3 shall not apply with respect to any

 

10

 

registration
statements initially filed after the Piggy-Back Termination Date with respect
to a Holder (or offerings made after such Piggy-Back Termination Date pursuant
to shelf registration statements previously on file).

 

Section 5.4.            Other
Registration Rights.  Notwithstanding
anything contained in this Exhibit C or the Management Stockholders
Agreement to the contrary, no provision herein or therein shall be interpreted
to limit (i) the right of the Company to grant Cypress or any other Person
any right of registration in respect of any securities of the Company (provided,
however, that the Company shall not enter into any agreement with
respect to the Registrable Securities which would prevent the Company from
complying with its obligations under this Agreement or (ii) the number of
times the Company may grant any such right of registration under the Securities
Act to any Person (including Cypress).

 

11

 

EXHIBIT D

 

[Intentionally Omitted]

 

 

Schedules

 

Schedule
I             Management
Stockholders

Schedule
II            Senior Managers

 

Exhibits

 

Exhibit
A                [Intentionally
Omitted]

Exhibit
B                Permitted
Transferee Form of Agreement to be Bound

Exhibit
C                Registration
Rights

Exhibit
D                [Intentionally
Omitted]

 

i

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