Exhibit 10.2


 


FORM OF 

FORBEARANCE AGREEMENT


 


THIS
FORBEARANCE AGREEMENT (this “Agreement”) is
entered into as of October 18, 2009, between Vitesse Semiconductor
Corporation, a Delaware corporation (the “Issuer”) and
the beneficial owners of the 1.50% Convertible Subordinated Debentures due 2024
(the “Notes”) signatories hereto
(the “Forbearing Holders”).  Capitalized terms used herein and not
otherwise defined shall have the meanings ascribed to such terms in the
Indenture governing the Notes, dated as of September 22, 2004, between the
Issuer and U.S. Bank National Association (the “Trustee”)
(as amended and supplemented, or otherwise modified, the “Indenture”).


 


RECITALS


 


WHEREAS,
pursuant to the Indenture, the Issuer has issued Notes in principal amount of
$96,700,000 and the Forbearing Holders hold Notes in the principal amount
listed below each Forbearing Holder’s name on the signature pages hereto
(the “Forbearing Notes”).


 


WHEREAS,
the Forbearing Holders exercised their rights pursuant to Section 11.1 of
the Indenture and required the Issuer to repurchase 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 Issuer’s failure to mail a Repurchase Event Notice
pursuant to Section 11.3 of the Indenture and a Repurchase Event Purchase
Notice pursuant to Section 11.4 of the Indenture or to file a Schedule TO
pursuant to Section 11.7 of the Indenture (the “Existing
Defaults”).


 


WHEREAS,
the Forbearing Holders assert (and the Issuer disputes) that an Event of
Default has occurred and is continuing under Section 4.1(c) of the
Indenture because of the Issuer’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 “Put Repurchase Default” and together with
the Existing Defaults, the “Specified Defaults”).


 


WHEREAS,
certain of the Forbearing Holders and the Issuer have previously entered into a
Forbearance Agreement, dated as of October 1, 2009, pursuant to which,
among other things, such Forbearance Holders agreed to forbear from exercising
any rights or remedies in connection with the Specified defaults (as defined
therein) on the terms and conditions contained therein until October 9,
2009.


 


WHEREAS,
certain of the Forbearing Holders and the Issuer have previously entered into a
Forbearance Agreement, dated as of October 9, 2009, pursuant to which,
among other things, such Forbearance Holders agreed to forbear from exercising
any rights or remedies in  connection


 

















 


with
the Specified defaults (as defined therein) on the terms and conditions
contained therein until October 16, 2009.


 


WHEREAS,
the Issuer has requested that the Forbearing Holders agree to forbear, and the
Forbearing Holders have agreed to forbear, from exercising their rights and
remedies with respect to the Specified Defaults for the period, and on the
terms and conditions, specified herein.


 


WHEREAS,
on October 14, 2009, the Issuer delivered an irrevocable notice (the “Issuer Notice”) to the Forbearing Holders pursuant to which
the Issuer agreed that through October 16, 2009 it would exclusively
pursue a transaction in good faith with the Forbearing Holders pursuant to
which the Issuer will exchange the Forbearing Notes for a combination of cash
and new securities (the “Noteholder Transaction”).


 


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 Issuer
hereby acknowledges and agrees, with respect to the Forbearing Holders only,
that:


 


(a)           The Issuer is indebted and
liable to the Forbearing Holders pursuant to Section 11.1(a) of the
Indenture in an amount equal to 113.76% of the principal amount of the
Forbearing Notes, together with any accrued and unpaid interest and any
Additional Amounts and Forbearance Interest (the “Repurchase
Price”).  The Issuer
acknowledges and agrees that notwithstanding the fact that the Forbearing
Holders exercised their rights pursuant to Section 11.1 of the Indenture
as set forth above, until
such time as the Forbearing Holders receive the Repurchase Price, the Forbearing
Holders will continue to be the beneficial owner of the Forbearing Notes with
all rights and remedies under the Indenture;


 


(b)           the obligations of the
Issuer to the Forbearing Holders under the Indenture and hereunder constitute
valid and subsisting obligations of the Issuer to the Forbearing Holders that
are not subject to any credits, offsets, defenses, claims, counterclaims or
adjustments of any kind; and


 


(c)           the Forbearing Holders do
not waive any of the Specified Defaults.


 


2      Forbearance.  Subject to the terms and conditions set forth
herein, from the Effective Date through the earlier of (a) the date on
which the Issuer fails to comply with the covenants contained in Section 7
of this Agreement, (b) the date of the commencement by the Issuer 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 Issuer, and (c) the termination of that certain Conversion Agreement,
dated as of the date hereof, among the Issuer and the Forbearing Holders (the “Forbearance Period”), the Forbearing Holders hereby agree to
forbear from exercising any and all of their rights or remedies available under
the 


 

















 


Indenture
or applicable law as a result of any Defaults or Events of Defaults; provided,
however, that in each case, the Forbearing Holders shall be free to
exercise any or all rights and remedies arising on account of any Default or
Event of 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
Indenture.


 


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


 


4      Representations
and Warranties of the Issuer.  The Issuer 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 Issuer, as of the date hereof (other than
the Specified Defaults); and


 


(b)                The execution, delivery and
performance by the Issuer 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 Issuer of this Agreement.


 


5      Forbearance
Interest.  The Forbearing Notes will accrue cash
interest at the rate of 15% per annum (including the existing cash interest of
1.5% per annum), payable semi-annually in arrears (the “Forbearance Interest”), beginning on October 1,
2009 and ending on the earlier of (a) the last day of the Forbearance
Period, (b) the payment in full in cash of the Repurchase Price and (c) the
date on which the Noteholder Transaction (as defined above) is actually
consummated.  Notwithstanding the
foregoing, if the Noteholder Transaction is consummated, (i) on or prior
to October 31, 2009, the Forbearing Holders shall be deemed to have waived
the Forbearance Interest from the period beginning October 1, 2009 through
such date that the Noteholder Transaction is consummated and (ii) on or
after November 1, 2009, the Forbearance Interest shall be reduced to a
rate of 8% per annum (including the existing cash interest of 1.5% per annum)
for the period beginning October 16, 2009 through such date that the
Noteholder Transaction is consummated; provided  however, that
upon consummation of the Noteholder Transaction at any time, the Forbearing
Holders shall be deemed to have waived the Forbearance Interest for the period
beginning October 1, 2009 through October 16, 2009.  If the Noteholder Transaction is not
consummated, (i) the Forbearing Notes shall accrue the Forbearance
Interest 


 

















 


pursuant to the first
sentence of this Section 5 and (ii) thereafter, the Forbearing Notes
shall accrue cash interest at the rate of 8% per annum (including the existing
cash interest of 1.5% per annum) notwithstanding the termination of the
Forbearance Period.  For the avoidance of
doubt, the waiver of any Forbearance Interest pursuant to this Section 5
shall not effect the accrual of cash interest at the rate of 1.50% per annum
pursuant to the Indenture.


 


6      Representation
and Warranty of the Forbearing Holders.  The Forbearing Holders represent and warrant
to the Issuer that (a) no Default or Event of Default exists (or shall
exist), to the knowledge of the Forbearing Holders, as of the date hereof
(other than the Specified Defaults) and (b) the Forbearing Holders will
not direct the Trustee to take any action that is inconsistent with this
Agreement.


 


7      Covenants.


 


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


 


(b)   The Issuer 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 the Noteholder Transaction.


 


(c)   The Issuer shall not incur,
create, assume or suffer to exist any lien on any assets or properties of the
Issuer other than (i) liens existing on the Effective Date, (b) the
liens granted to the Trustee, for the benefit of the Forbearing Holders,
pursuant to the Third Supplemental Indenture (as defined below), and (ii) customary
liens incurred in the ordinary course of business.


 


(d)   The Issuer 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 Issuer takes any action with respect to an unsolicitated
transaction with a third party if the Issuer reasonably believes, following
consultation with its legal counsel, that such action is advisable in order for the Issuer’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 Issuer, 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 Issuer’s right to waive any existing standstill
agreement with a third party.


 


(e)   Within 3 business days of
receipt of reasonable documentation, the Issuer shall have shall have
reimbursed, all documented and reasonable fees, costs, and expenses of Gibson,
Dunn & Crutcher LLP incurred on or before the Forbearance Effective
Date in connection with this Agreement and the transactions contemplated
hereby.


 


8      Conditions.  The agreement of the Forbearing Holders and
the Issuer hereunder shall become effective as of the date when the following
conditions shall have been satisfied (the “Effective Date”):


 

















 


(a)   the Forbearing Holders shall have
received counterparts of this Agreement duly executed by the Issuer and each
Forbearing Holder;


 


(b)   the Forbearing Holders shall have
received counterparts of the definitive documents evidencing the Noteholder
Transaction duly executed by the Issuer and each Forbearing Holder;


 


(c)   the Issuer shall have entered into a
third supplement to the Indenture (the “Third Supplemental
Indenture”) pursuant to which it shall grant to the Trustee, for the
benefit of the Forbearing Holders, a perfected security interest, subject only
to the liens securing the First Lien Loan Agreement and certain customary
permitted liens; and


 


(d)   the Issuer shall have entered into a
forbearance agreement, in form and substance reasonably satisfactory to the
Issuer and the Forbearing Holders, with Whitebox VSC, Ltd. with respect to the
indebtedness under that certain Loan Agreement dated August 23, 2007 (the “First Lien Loan Agreement”).


 


9      Release.  In partial consideration of the Forbearing
Holders’ willingness to enter into this Agreement, the Issuer hereby releases
the Forbearing Holders and the Trustee 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 Indenture 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 Issuer and the Forbearing Holders 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 Indenture 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 Indenture
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 Indenture, this Agreement shall
control.


 

















 


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 Forbearing Holders may transfer all or any of their Forbearing Notes
at any time during the Forbearance Period provided that such transferee shall agree in writing,
as a condition to such transfer, to be bound by all of the provisions of this Agreement (any such transferee taking Forbearing Notes pursuant to the foregoing shall be
considered Forbearing Holders 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, telegram, telex, 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 telegram, telex or 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 Issuer and each Forbearing Holder.  A waiver so signed shall be effective only in
the specific instance, and for the specific purpose given and with respect to
such Forbearing Holder signatory thereto.


 


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.


 

















 


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:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				



 

















 


	
   

  	
  [HOLDER]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
  Amount
  of Forbearing Notes: