EXHIBIT
10.3


 


THIRD FORBEARANCE AGREEMENT


 


THIS
THIRD FORBEARANCE AGREEMENT (this “Agreement”) is
entered into as of October 16, 2009, among Vitesse Semiconductor
Corporation, a Delaware corporation (the “Borrower”), the
other Loan Parties (as defined below), and Whitebox VSC Ltd., a British Virgin Islands business company (the “Agent”).  Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
such terms in the Loan Agreement dated as of August 23, 2007, by and among the lenders from time to
time signatory thereto (collectively the “Lenders” and
individually each a “Lender”), the
Borrower, and the Agent, as one of the Lenders and as agent for the Lenders.


 


RECITALS


 


WHEREAS,
the Borrower and U.S. Bank National Association (the “Trustee”)
are parties to that certain Indenture, dated as of September 22, 2004 (the
“Indenture”), which governs the
Borrower’s 1.50% Convertible Subordinated Debentures due 2024 (the “Notes”).


 


WHEREAS,
pursuant to the Indenture, the Borrower has issued Notes in principal amount of
$96,700,000 and certain holders of Notes (the “Forbearing Holders”) exercised their rights pursuant to Section 11.1
of the Indenture and required the Borrower to repurchase their Notes (the “Forbearing Notes”) on October 1, 2009
(the “Put Repurchase Date”).


 


WHEREAS,
a default has occurred and is continuing under Section 4.1(d) of the
Indenture as a result of the Borrower’s failure to mail a Repurchase Event
Notice (as defined in the Indenture) pursuant to Section 11.3 of the
Indenture and a Repurchase Event Purchase Notice (as defined in the Indenture)
pursuant to Section 11.4 of the Indenture or to file a Schedule TO
pursuant to Section 11.7 of the Indenture (the “Notes
Existing Defaults”).


 


WHEREAS,
the Forbearing Holders assert (and the Borrower disputes) that an event of
default has occurred and is continuing under Section 4.1(c) of the
Indenture because of the Borrower’s failure to repurchase the Forbearing Notes
from the Forbearing Holders on the Put Repurchase Date at a purchase price
equal to 113.76% of the principal amount of such Forbearing Notes (the “Notes  Put Repurchase
Default” and together with the Notes Existing Defaults, the “Notes  Specified Defaults”).


 


WHEREAS,
the Borrower and the Forbearing Holders have entered into a Forbearance
Agreement dated as of October 16, 2009 in substantially the form
previously provided by the Borrower to the Agent (the “Indenture
Forbearance Agreement”) pursuant to which the Forbearing Holders
have agreed to forbear from exercising their rights and remedies with respect
to the Notes Specified Defaults for a certain limited period, under the terms
and conditions specified therein.


 


WHEREAS,
the Notes Put Repurchase Default may result in an Event of Default under Section 7.1(i) of
the Loan Agreement and may also result in an Event of Default under Sections
7.1(d) and (e) of the Loan Agreement (the “Loan
Specified Defaults”) (it being expressly understood that the
Borrower makes no admissions hereunder to any Event of Default under the Loan
Agreement).


 

















 


WHEREAS,
the Borrower has requested that the Lenders agree to forbear, and the Lenders
have agreed to forbear, from exercising their rights and remedies with respect
to any Loan Specified Defaults during the Forbearance Period (as defined below)
should any Loan Specified Default be determined to have actually occurred, on
the terms and conditions and in consideration for the terms set forth below.


 


AGREEMENT


 


NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:


 


1                        Acknowledgement
and Reaffirmation.  The
Borrower hereby acknowledges and agrees that:


 


(a)                                  (i) the
Borrower is indebted and liable to the Lenders in the aggregate principal amount
of $30,000,000 in respect of the Term Loans, plus interest, fees, expenses
(including but not limited to attorneys’, advisors’ and consultants’ fees that
are reimbursable under the Loan Agreement), charges and all other obligations
incurred in connection therewith as provided in the Loan Agreement, and (ii) such
amounts outstanding under the Loan Agreement constitute valid and subsisting
obligations of the Borrower to the Agent and the Lenders that are not subject
to any credits, offsets, defenses, claims, counterclaims or adjustments of any
kind.  The Borrower and the undersigned Guarantors
(collectively, the “Loan Parties”)
hereby (i) acknowledge and affirm their obligations under the respective
Loan Documents to which they are party, (ii) acknowledge and affirm the
liens created and granted by the Loan Parties in the Loan Documents and (iii) agree
that this Agreement shall in no manner adversely affect or impair such
obligations and/or liens; and


 


(b)                                 the Lenders do
not waive any of the Loan Specified Defaults.


 


2                  Forbearance.  Subject to the terms and conditions set forth
herein, from the Effective Date (as defined below) through the earlier of (a) the
date on which the Loan Parties fail to comply with the covenants contained in Section 7
of this Agreement, (b) the date on which the “Forbearance Period” under
and as defined in the Indenture Forbearance Agreement ends, and (c) the
date of the commencement by the Borrower of a voluntary bankruptcy, insolvency,
reorganization or other similar proceeding or the commencement of any similar
non-voluntary case or proceeding with respect to the Borrower (the “Forbearance Period”), the Lenders hereby agree to forbear
from exercising any and all rights or remedies available under the Loan
Agreement or applicable law as a result of the Loan Specified Defaults, but
only to the extent that such rights and remedies arise solely as a result of
the occurrence and continuation of the Loan Specified Defaults; provided,
however, that in each case, the Lenders shall be free to exercise any or
all rights and remedies arising on account of any Loan Specified Default at the
end of the Forbearance Period; provided  further,
that except as expressly set forth herein, this Agreement shall not operate as
a waiver, amendment or modification of the Loan Agreement.


 


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3                  No Waiver of Rights or
Remedies.  The Lenders
and the Loan Parties agree that, other than as expressly set forth herein,
nothing in this Agreement, or the performance by the Lenders of their
obligations hereunder, constitutes or shall be deemed to constitute a waiver of
any of the rights or remedies available to the Lenders or the Loan Parties
under the Loan Agreement, the Loan Documents or any applicable law, all of which
are hereby reserved.


 


4                  Representations and
Warranties of the Loan Parties.  The Loan Parties hereby represents and
warrants to the Forbearing Holders that:


 


(a)                                                  No Default or
Event of Default exists (or shall exist), to the knowledge of the Loan Parties,
as of the date hereof (other than the Specified Defaults); and


 


(b)                                                 The execution,
delivery and performance by the Loan Parties of this Agreement has been duly
authorized by all necessary corporate or other organizational action, and do
not and will not: (i) contravene the terms of any of such Person’s
organizational documents; (ii) conflict with or result in any breach or
contravention of, or result in or require the creation of any Lien under, or
require any payment to be made under (A) any contractual obligation to
which such Person is a party or affecting such Person or the properties of such
Person or any of its subsidiaries or (B) any order, injunction, writ or
decree of any governmental authority or any arbitral award to which such Person
or its property is subject; or (iii) violate any applicable law.  No approval, consent, exemption,
authorization, or other action by, or notice to, or filing with, any
governmental authority or any other Person is necessary or required in
connection with the execution, delivery or performance by, or enforcement
against the Loan Parties of this Agreement.


 


5                  Interest.  The Term Loans will accrue interest in
accordance with the terms of the Loan Agreement, as amended by the First
Amendment to Loan Agreement entered into by the parties as of the date hereof.


 


6                  Representation and Warranty
of the Agent and the Lenders.  The Agent and the Lenders represent and
warrant to the Borrower that no Default or Event of Default exists (or shall
exist), to the knowledge of the Agent or such Lender, as of the date hereof
(other than the Loan Specified Defaults).


 


7                  Covenants.


 


(a)          The Loan
Parties shall not repay, in part or in full, any Notes that are not Forbearing
Notes.


 


(b)         The Loan
Parties shall not incur, create, issue, assume or suffer to exist any
indebtedness for borrowed money other than indebtedness existing on the
Effective Date, or as expressly contemplated and authorized pursuant to an
exchange of the Forbearing Notes (the “Noteholder Transaction”).


 


(c)          The Loan
Parties shall not incur, create, assume or suffer to exist any lien on any
assets or properties of any Loan Party other than (i) liens existing on
the Effective Date, (ii) the liens granted to the Trustee, for the benefit
of the Forbearing Holders, pursuant to the a third supplement to the Indenture, and (iii) customary
liens incurred


 


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in the ordinary course of business and otherwise permitted under the
Loan Agreement.


 


(d)         The Borrower
shall not actively solicit any transaction with a third party which, if
consummated, would be in lieu of the Noteholder Transaction.  For the avoidance of doubt, it shall not be a
forbearance termination event hereunder if the Borrower takes any action with
respect to an unsolicitated transaction with a third party if the Borrower
reasonably believes, following consultation with its legal counsel, that such
action is advisable in order for the Borrower’s Board of Director to comply
with its fiduciary duties under Delaware law. 
For the avoidance of doubt, (i) any communications with a third party
prior to the date hereof by the Borrower, its officers, directors, employees,
agents or representatives shall not be deemed to be a solicitation of such
third party for purposes hereof and (ii) nothing herein shall limit the
Borrower’s right to waive any existing standstill agreement with a third party.


 


8                  Conditions.  The agreement of the Agent, the Lenders, and
the Loan Parties hereunder shall become effective as of the date when the
following conditions shall have been satisfied (the “Effective
Date”):


 


(a)          the Agent shall have received
counterparts of this Agreement duly executed by the Loan Parties; and


 


(b)         the Agent shall have received fully
executed copies of the Indenture Forbearance Agreement (which copy may be
redacted to omit confidential information concerning the Forbearing Holders
from their respective signature pages), in form and substance satisfactory to
the Agent in its reasonable discretion.


 


9                  Release.  In partial consideration of the Lenders’
willingness to enter into this Agreement, the Loan Parties hereby release the
Lenders and the Agent and their officers, affiliates, employees,
representatives, agents, financial advisors, counsel and directors from any and
all actions, causes of action, claims, demands, damages and liabilities of
whatever kind or nature, in law or in equity, now known or unknown, suspected
or unsuspected to the extent that any of the foregoing arises from any action
or failure to act in connection with the Loan Agreement or any other Loan
Document on or prior to the date hereof.


 


10            Counterparts.  This Agreement may be executed in any number
of counterparts, each of which when so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument.


 


11            Effectiveness.  This Agreement shall become effective upon
the execution of a counterpart hereof by each of the parties hereto and receipt
by the Borrower and the Agent of written or telephonic notification of such
execution and authorization of delivery thereof.


 


12            APPLICABLE LAW.  THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.


 


13            Entirety.  This Agreement and the Loan Documents embody
the entire agreement between the parties and supersede all prior agreements and
understandings, if any, relating to the subject matter hereof.  This Agreement together with the Loan
Documents represent the final agreement between the parties and may not be
contradicted by evidence of prior, contemporaneous or subsequent oral
agreements of the parties.  There are no
oral agreements between the parties.  In
the event there is a conflict between this Agreement and the Loan Documents,
this Agreement shall control.


 


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14            Severability.  In case any provision in or obligation
hereunder shall be invalid, illegal or unenforceable in any jurisdiction, the
validity, legality and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.


 


15            Successors and Assigns;
Transfers.  This
Agreement shall be binding upon and inure to the benefit of each of the parties
and their respective successors and assigns. 
The Lenders may transfer all or any of the Term Loans at any time during
the Forbearance Period provided
that the transferee shall agree in writing with the Borrower, as a condition to
such transfer, to be bound by all of the provisions of this Agreement as if they had been original
signatories to this Agreement.


 


16            Notices.  Any notice or
other communication to any party in connection with this Agreement shall be in
writing and shall be sent by manual delivery, facsimile transmission, overnight
courier or United States mail (postage prepaid) addressed to such party at the
address specified on the signature page hereof, or at such other address
as such party shall have specified to the other party hereto in writing.  All periods of notice shall be measured from
the date of delivery thereof if manually delivered, from the date of sending
thereof if sent by facsimile transmission, from the first business day after
the date of sending if sent by overnight courier, or from four days after the
date of mailing if mailed.


 


17            Waivers and Amendments.  This
Agreement can be waived, modified, amended, or terminated only explicitly in a
writing signed by the parties.  A waiver
so signed shall be effective only in the specific instance and for the specific
purpose given.


 


18            Captions. 
Captions in this Agreement are for reference and convenience only and
shall not affect the interpretation or meaning of any provision of this
Agreement.


 


[Signature Page Follows]


 


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


 


	
   

  	
  VITESSE
  SEMICONDUCTOR CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christopher R.
  Gardner

  
	
   

  	
  Name:

  	
  Christopher R. Gardner

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VITESSE
  MANUFACTURING & DEVELOPMENT CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christopher R.
  Gardner

  
	
   

  	
  Name:

  	
  Christopher R. Gardner

  
	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VITESSE
  SEMICONDUCTOR SALES CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Christopher R.
  Gardner

  
	
   

  	
  Name:

  	
  Christopher R. Gardner

  
	
   

  	
  Title:

  	
  President

  



 


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  WHITEBOX
  VSC LTD., as Lender and Agent under the Loan Agreement

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jonathan Wood

  
	
   

  	
  Name:

  	
  Jonathan Wood

  
	
   

  	
  Title:

  	
  Director

  



 


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