**Exhibit 10.39**

 

CREDIT AGREEMENT

 

THISAGREEMENT is entered into as of May 1, 2004, by and between SYMMETRICOM,INC., a Delaware corporation (“Borrower”), and WELLS FARGO BANK, NATIONALASSOCIATION (“Bank”).

 

RECITALS

 

Borrowerhas requested that Bank extend or continue credit to Borrower as describedbelow, and Bank has agreed to provide such credit to Borrower on the terms andconditions contained herein.

 

NOW,THEREFORE, for valuable consideration, the receipt and sufficiency of which arehereby acknowledged, Bank and Borrower hereby agree as follows:

 

ARTICLE I

CREDIT TERMS

 

SECTION 1.1LINE OF CREDIT.

 

(a) Lineof Credit. Subject to the terms and conditions of this Agreement, Bankhereby agrees to make advances to Borrower from time to time up to and includingMarch 1, 2005, not to exceed at any time the aggregate principal amount ofFive Million and 00/100 Dollars ($5,000,000.00) (“Line of Credit”), theproceeds of which shall be used to finance Borrower’s working capitalrequirements. Borrower’s obligation to repay advances under the Line of Creditshall be evidenced by a promissory note dated as of May 1, 2004 (“Line ofCredit Note”), all terms of which are incorporated herein by this reference.

 

(b) Letterof Credit Subfeature. As a subfeature under the Line of Credit, Bank agreesfrom time to time during the term thereof to issue or cause an affiliate toissue standby letters of credit for the account of Borrower (each, a “Letter ofCredit” and collectively, “Letters of Credit”); provided however, that theaggregate undrawn amount of all outstanding Letters of Credit shall not at anytime exceed Five Million Dollars ($5,000,000.00). The form and substance ofeach Letter of Credit shall be subject to approval by Bank, in its solediscretion. No Letter of Credit shall have an expiration date subsequent to December 1,2005. The undrawn amount of all Letters of Credit shall be reserved under theLine of Credit and shall not be available for borrowings thereunder. EachLetter of Credit shall be subject to the additional terms and conditions of theLetter of Credit agreements, applications and any related documents required byBank in connection with the issuance thereof. Each drawing paid under a Letterof Credit shall be deemed an advance under the Line of Credit and shall berepaid by Borrower in accordance with the terms and conditions of thisAgreement applicable to such advances; provided however, that if advances underthe Line of Credit are not available, for any reason, at the time any drawingis paid, then Borrower shall immediately pay to Bank the full amount drawn,together with interest thereon from the date such drawing is paid to the datesuch amount is fully repaid by Borrower, at the rate of interest applicable toadvances under the Line of Credit. In such event Borrower agrees that Bank, inits sole discretion, may debit any account maintained by Borrower with Bank forthe amount of any such drawing.

 

(c) Borrowingand Repayment. Borrower may from time to time during the term of the Lineof Credit borrow, partially or wholly repay its outstanding borrowings, andreborrow, subject to all of the limitations, terms and conditions containedherein or in the Line of Credit Note; provided however, that the totaloutstanding borrowings under the Line of Credit shall not at any time exceedthe maximum principal amount available thereunder, as set forth above.

 

SECTION 1.2INTEREST/FEES.

 

(a) Interest.The outstanding principal balance of each credit subject hereto shall bearinterest at the rate of interest set forth in each promissory note or otherinstrument or document executed in connection therewith.

 

(b) Computationand Payment. Interest shall be computed on the basis of a 360-day year,actual days elapsed. Interest shall be payable at the times and place set forthin each promissory note or other instrument or document required hereby.

 

(c) CommitmentFee. Borrower shall pay to Bank a non-refundable commitment fee for theLine of Credit equal to $25,000.00, which fee shall be due and payable in fullupon execution of this Agreement.

 

(d) UnusedCommitment Fee. Borrower shall pay to Bank a fee equal to one-quarter ofone percent (.25%) per annum (computed on the basis of a 360-day year, actualdays elapsed) on the average daily unused amount of the Line of Credit, whichfee shall be calculated on a calendar quarter basis by Bank and shall be dueand payable by Borrower in arrears on each March 31, June 30, September 30and December 31.

 

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(e) Letterof Credit Fees. Borrower shall pay to Bank (i) fees upon the issuanceof each Letter of Credit equal to two percent (2%) per annum (computed on thebasis of a 360-day year, actual days elapsed) of the face amount thereof, and (ii) feesupon the payment or negotiation of each drawing under any Letter of Credit andfees upon the occurrence of any other activity with respect to any Letter ofCredit (including without limitation, the transfer, amendment or cancellationof any Letter of Credit) determined in accordance with Bank’s standard fees andcharges then in effect for such activity.

 

SECTION 1.3COLLATERAL.

 

Assecurity for all indebtedness of Borrower to Bank subject hereto, Borrowerhereby grants to Bank security interests of first priority in (a) allBorrower’s accounts receivable and other rights to payment, generalintangibles, inventory and equipment, (b) Borrower’s Wells CapitalManagement account no. 16096400 maintained at Bank.

 

Allof the foregoing shall be evidenced by and subject to the terms of such securityagreements, financing statements, deeds of trust and other documents as Bankshall reasonably require, all in form and substance satisfactory to Bank.Borrower shall reimburse Bank immediately upon demand for all costs andexpenses incurred by Bank in connection with any of the foregoing security,including without limitation, filing and recording fees and costs ofappraisals, audits and title insurance.

 

ARTICLE II

REPRESENTATIONS ANDWARRANTIES

 

Borrowermakes the following representations and warranties to Bank, whichrepresentations and warranties shall survive the execution of this Agreementand shall continue in full force and effect until the full and final payment,and satisfaction and discharge, of all obligations of Borrower to Bank subjectto this Agreement.

 

SECTION 2.1LEGAL STATUS. Borrower is a **corporation,**dulyorganized and existing and in good standing under the laws of the State of **Delaware,**and is qualified or licensed todo business (and is in good standing as a foreign corporation, if applicable}in all jurisdictions in which such qualification or licensing is required or inwhich the failure to so qualify or to be so licensed could have a materialadverse effect on Borrower.

 

SECTION 2.2AUTHORIZATION AND VALIDITY. This Agreement and each promissory note, contract,instrument and other document required hereby or at any time hereafterdelivered to Bank in connection herewith (collectively, the “Loan Documents”)have been duly authorized, and upon their execution and delivery in accordancewith the provisions hereof will constitute legal, valid and binding agreementsand obligations of Borrower or the party which executes the same, enforceablein accordance with their respective terms.

 

SECTION 2.3NO VIOLATION. The execution, delivery and performance by Borrower of each ofthe Loan Documents do not violate any provision of any law or regulation, orcontravene any provision of the Articles of Incorporation or By-Laws ofBorrower, or result in any breach of or default under any contract, obligation,indenture or other instrument to which Borrower is a party or by which Borrowermay be bound.

 

SECTION 2.4LITIGATION. There are no pending, or to the best of Borrower’s knowledgethreatened, actions, claims, investigations, suits or proceedings by or beforeany governmental authority, arbitrator, court or administrative agency whichcould have a material adverse effect on the financial condition or operation ofBorrower other than those disclosed by Borrower to Bank in writing prior to thedate hereof.

 

SECTION 2.5CORRECTNESS OF FINANCIAL STATEMENT. The financial statement of Borrower dated December 31,2003, a true copy of which has been delivered by Borrower to Bank prior to thedate hereof, (a) is complete and correct and presents fairly the financialcondition of Borrower, (b) discloses all liabilities of Borrower that arerequired to be reflected or reserved against under generally acceptedaccounting principles, whether liquidated or unliquidated, fixed or contingent,and (c) has been prepared in accordance with generally accepted accountingprinciples consistently applied. Since the date of such financial statementthere has been no material adverse change in the financial condition ofBorrower, nor has Borrower mortgaged, pledged, granted a security interest inor otherwise encumbered any of its assets or properties except in favor of Bankor as otherwise permitted by Bank in writing.

 

SECTION 2.6INCOME TAX RETURNS. Borrower has no knowledge of any pending assessments oradjustments of its income tax payable with respect to any year.

 

SECTION 2.7NO SUBORDINATION. There is no agreement, indenture, contract or instrument towhich Borrower is a party or by which Borrower may be bound that requires thesubordination in right of payment of any of Borrower’s obligations subject tothis Agreement to any other obligation of Borrower.

 

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SECTION 2.8PERMITS, FRANCHISES. Borrower possesses, and will hereafter possess, allpermits, consents, approvals, franchises and licenses required and rights toall trademarks, trade names, patents, and fictitious names, if any, necessaryto enable it to conduct the business in which it is now engaged in compliancewith applicable law.

 

SECTION 2.9ERISA. Borrower is in compliance in all material respects with all applicableprovisions of the Employee Retirement Income Security Act of 1974, as amendedor recodified from time to time (“ERISA”); Borrower has not violated anyprovision of any defined employee pension benefit plan (as defined in ERISA)maintained or contributed to by Borrower (each, a “Plan”); no Reportable Eventas defined in ERISA has occurred and is continuing with respect to any Planinitiated by Borrower; Borrower has met its minimum funding requirements underERISA with respect to each Plan; and each Plan will be able to fulfill itsbenefit obligations as they come due in accordance with the Plan documents andunder generally accepted accounting principles.

 

SECTION 2.10OTHER OBLIGATIONS. Borrower is not in default on any obligation for borrowedmoney, any purchase money obligation or any other material lease, commitment,contract, instrument or obligation.

 

SECTION 2.11ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Bank in writing priorto the date hereof, Borrower is in compliance in all material respects with allapplicable federal or state environmental, hazardous waste, health and safetystatutes, and any rules or regulations adopted pursuant thereto, whichgovern or affect any of Borrower’s operations and/or properties, includingwithout limitation, the Comprehensive Environmental Response, Compensation andLiability Act of 1980, the Superfund Amendments and Reauthorization Act of1986, the Federal Resource Conservation and Recovery Act of 1976, and theFederal Toxic Substances Control Act, as any of the same may be amended,modified or supplemented from time to time. None of the operations of Borroweris the subject of any federal or state investigation evaluating whether any remedialaction involving a material expenditure is needed to respond to a release ofany toxic or hazardous waste or substance into the environment. Borrower has nomaterial contingent liability in connection with any release of any toxic orhazardous waste or substance into the environment.

 

ARTICLE III

CONDITIONS

 

SECTION 3.1CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of Bank to extend anycredit contemplated by this Agreement is subject to the fulfillment to Bank’ssatisfaction of all of the following conditions:

 

(a) Approvalof Bank Counsel. All legal matters incidental to the extension of credit byBank shall be satisfactory to Bank’s counsel.

 

(b) Documentation.Bank shall have received, in form and substance satisfactory to Bank, each of thefollowing, duly executed:

 

(i)                  ThisAgreement and each promissory note or other instrument or document requiredhereby.

 

(ii)               CorporateResolution: Borrowing.

 

(iii)            Certificateof Incumbency.

 

(iv)           ContinuingSecurity Agreement: Rights to Payment and Inventory.

 

(v)              SecurityAgreement: Equipment.

 

(vi)           SecurityAgreement: Securities Account and Addendum thereto.

 

(vii)        SecuritiesAccount Control Agreement.

 

(viii)     Statementof Purpose (U-1).

 

(ix)             Suchother documents as Bank may require under any other Section of thisAgreement.

 

(c) FinancialCondition. There shall have been no material adverse change, as determinedby Bank, in the financial condition or business of Borrower, nor any materialdecline, as determined by Bank, in the market value of any collateral requiredhereunder or a substantial or material portion of the assets of Borrower.

 

(d) Insurance.Borrower shall have delivered to Bank evidence of insurance coverage on allBorrower’s property, in form, substance, amounts, covering risks and issued bycompanies satisfactory to Bank, and where required by Bank, with loss payableendorsements in favor of Bank.

 

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SECTION 3.2CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Bank to make eachextension of credit requested by Borrower hereunder shall be subject to thefulfillment to Bank’s satisfaction of each of the following conditions:

 

(a) Compliance.The representations and warranties contained herein and in each of the otherLoan Documents shall be true on and as of the date of the signing of thisAgreement and on the date of each extension of credit by Bank pursuant hereto,with the same effect as though such representations and warranties had beenmade on and as of each such date, and on each such date, no Event of Default asdefined herein, and no condition, event or act which with the giving of noticeor the passage of time or both would constitute such an Event of Default, shallhave occurred and be continuing or shall exist.

 

(b) Documentation.Bank shall have received all additional documents which may be required inconnection with such extension of credit.

 

ARTICLE IV

AFFIRMATIVE COVENANTS

 

Borrowercovenants that so long as Bank remains committed to extend credit to Borrowerpursuant hereto, or any liabilities (whether direct or contingent, liquidatedor unliquidated) of Borrower to Bank under any of the Loan Documents remainoutstanding, and until payment in full of all obligations of Borrower subjecthereto, Borrower shall, unless Bank otherwise consents in writing:

 

SECTION 4.1PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or otherliabilities due under any of the Loan Documents at the times and place and inthe manner specified therein.

 

SECTION 4.2ACCOUNTING RECORDS. Maintain adequate books and records in accordance withgenerally accepted accounting principles consistently applied, and permit anyrepresentative of Bank, at any reasonable time, to inspect, audit and examinesuch books and records, to make copies of the same, and to inspect theproperties of Borrower.

 

SECTION 4.3FINANCIAL STATEMENTS. Provide to Bank all of the following, in form and detailsatisfactory to Bank:

 

(a) notlater than 90 days after and as of the end of each fiscal year, a consolidatedaudited and unqualified financial statement of Borrower, prepared by acertified public accountant acceptable to Bank, to include balance sheet,income statement, statement of cash flows, management report, auditor’s reportand all supporting schedules;

 

(b) notlater than 45 days after and as of the end of each quarter, a consolidated copyof the 10Q report of Borrower filed with the Securities Exchange Commission,prepared by a certified public accountant acceptable to Bank, to includebalance sheet, income statement and statement of cash flows;

 

(c) notlater than 20 days after and as of the end of each month, a financial statementof Borrower, prepared by Borrower, to include balance sheet and incomestatement;

 

(d) notlater than 20 days after and as of the end of each month, a copy of Borrower’sWells Capital Management securities portfolio statement;

 

(e) contemporaneouslywith each annual and quarter end financial statement of Borrower requiredhereby, a certificate of the president or chief financial officer of Borrowerthat said financial statements are accurate and that there exists no Event ofDefault nor any condition, act or event which with the giving of notice or thepassage of time or both would constitute an Event of Default; and

 

(f) fromtime to time such other information as Bank may reasonably request.

 

SECTION 4.4COMPLIANCE. Preserve and maintain all licenses, permits, governmentalapprovals, rights, privileges and franchises necessary for the conduct of itsbusiness; and comply with the provisions of all documents pursuant to whichBorrower is organized and/or which govern Borrower’s continued existence andwith the requirements of all laws, rules, regulations and orders of anygovernmental authority applicable to Borrower and/or its business.

 

SECTION 4.5INSURANCE. Maintain and keep in force insurance of the types and in amountscustomarily carried in lines of business similar to that of Borrower, includingbut not limited to fire, extended coverage, public liability, flood, propertydamage and workers’ compensation, with all such insurance carried withcompanies and in amounts satisfactory to Bank, and deliver to Bank from time totime at Bank’s request schedules setting forth all insurance then in effect.

 

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SECTION 4.6FACILITIES. Keep all properties useful or necessary to Borrower’s business ingood repair and condition, and from time to time make necessary repairs,renewals and replacements thereto so that such properties shall be fully andefficiently preserved and maintained.

 

SECTION 4.7TAXES AND OTHER LIABILITIES. Pay and discharge when due any and allindebtedness, obligations, assessments and taxes, both real or personal,including without limitation federal and state income taxes and state and localproperty taxes and assessments, except such (a) as Borrower may in goodfaith contest or as to which a bona fide dispute may arise, and (b) forwhich Borrower has made provision, to Bank’s satisfaction, for eventual paymentthereof in the event Borrower is obligated to make such payment.

 

SECTION 4.8LITIGATION. Promptly give notice in writing to Bank of any litigation pendingor threatened against Borrower with a claim in excess of $500,000.00.

 

SECTION 4.9FINANCIAL CONDITION. Maintain Borrower’s financial condition as follows usinggenerally accepted accounting principles consistently applied and usedconsistently with prior practices (except to the extent modified by thedefinitions herein), with compliance determined commencing with Borrower’sfinancial statements for the period ending June 30, 2004:

 

(a) TangibleNet Worth not at any time less than $100,000,000.00, with “Tangible Net Worth”defined as the aggregate of total stockholders’ equity plus subordinated debtless any intangible assets.

 

(b) TotalLiabilities divided by Tangible Net Worth not at any time greater than .50 to1.0, with “Total Liabilities” defined as the aggregate of current liabilitiesand non-current liabilities less subordinated debt, and with “Tangible NetWorth” as defined above.

 

(c) QuickRatio not at any time less than 1.25 to 1.0, with “Quick Ratio” defined as theaggregate of unrestricted cash, unrestricted marketable securities andreceivables convertible into cash divided by the sum of total currentliabilities and Bank’s unfunded portion of the $5,000,000.00 commitment toBorrower.

 

(d) Pre-taxprofit not less than $1.00 on a quarterly basis, determined as of each fiscalquarter end.

 

(e) LiquidAssets with an aggregate fair market value not at any time less than$20,000,000.00, with Liquid Assets defined as cash, cash equivalents and/orpublicly/quoted marketable securities acceptable to Bank in its solediscretion.

 

(f) LiquidAssets held in Borrower’s Wells Capital Management Account not less than$10,000,000.00, determined at fiscal month end, with “Liquid Assets” as definedabove.

 

SECTION 4.10NOTICE TO BANK. Promptly (but in no event more than five (5) days afterthe occurrence of each such event or matter) give written notice to Bank in reasonabledetail of: (a) the occurrence of any Event of Default, or any condition,event or act which with the giving of notice or the passage of time or bothwould constitute an Event of Default; (b) any change in the name or theorganizational structure of Borrower; (c) the occurrence and nature of anyReportable Event or Prohibited Transaction, each as defined in ERISA, or anyfunding deficiency with respect to any Plan; or (d) any termination orcancellation of any insurance policy which Borrower is required to maintain, orany uninsured or partially uninsured loss through liability or property damage,or through fire, theft or any other cause affecting Borrower’s property.

 

ARTICLE V

NEGATIVE COVENANTS

 

Borrowerfurther covenants that so long as Bank remains committed to extend credit toBorrower pursuant hereto, or any liabilities (whether direct or contingent,liquidated or unliquidated) of Borrower to Bank under any of the Loan Documentsremain outstanding, and until payment in full of all obligations of Borrowersubject hereto, Borrower will not without Bank’s prior written consent:

 

SECTION 5.1USE OF FUNDS. Use any of the proceeds of any credit extended hereunder exceptfor the purposes stated in Article I hereof.

 

SECTION 5.2CAPITAL EXPENDITURES. Make any additional investment in fixed assets in anyfiscal year in excess of an aggregate of $4,500,000.00.

 

SECTION 5.3OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any indebtednessor liabilities resulting from borrowings, loans or advances, whether secured orunsecured, matured or unmatured, liquidated or unliquidated, joint or several,except (a) the liabilities of Borrower to Bank, and (b) any otherliabilities of Borrower existing as of, and disclosed to Bank prior to, thedate hereof.

 

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SECTION 5.4MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or consolidate with anyother entity; make any substantial change in the nature of Borrower’s businessas conducted as of the date hereof; acquire all or substantially all of theassets of any other entity; nor sell, lease, transfer or otherwise dispose ofall or a substantial or material portion of Borrower’s assets except in theordinary course of its business.

 

SECTION 5.5GUARANTIES. Guarantee or become liable in any way as surety, endorser (otherthan as endorser of negotiable instruments for deposit or collection in theordinary course of business), accommodation endorser or otherwise for, norpledge or hypothecate any assets of Borrower as security for, any liabilitiesor obligations of any other person or entity, except any of the foregoing infavor of Bank.

 

SECTION 5.6LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or investments inany person or entity, except any of the foregoing existing as of, and disclosedto Bank prior to, the date hereof.

 

SECTION 5.7DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or distribution either incash, stock or any other property on Borrower’s stock now or hereafteroutstanding, nor redeem, retire, repurchase or otherwise acquire any shares ofany class of Borrower’s stock now or hereafter outstanding.

 

SECTION 5.8PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a securityinterest in, or lien upon, all or any portion of Borrower’s assets now owned orhereafter acquired, except any of the foregoing in favor of Bank or which isexisting as of, and disclosed to Bank in writing prior to, the date hereof.

 

ARTICLE VI

EVENTS OF DEFAULT

 

SECTION 6.1The occurrence of any of the following shall constitute an “Event of Default”under this Agreement:

 

(a) Borrowershall fail to pay when due any principal, interest, fees or other amountspayable under any of the Loan Documents.

 

(b) Anyfinancial statement or certificate furnished to Bank in connection with, or anyrepresentation or warranty made by Borrower or any other party under thisAgreement or any other Loan Document shall prove to be incorrect, false ormisleading in any material respect when furnished or made.

 

(c) Anydefault in the performance of or compliance with any obligation, agreement orother provision contained herein or in any other Loan Document (other thanthose referred to in subsections (a) and (b) above), and with respectto any such default which by its nature can be cured, such default shallcontinue for a period of twenty (20) days from its occurrence.

 

(d) Anydefault in the payment or performance of any obligation, or any defined eventof default, under the terms of any contract or instrument (other than any ofthe Loan Documents) pursuant to which Borrower, any guarantor hereunder, or anygeneral partner or joint venturer in any Borrower which is a partnership or ajoint venture (with each such guarantor, general partner and/or joint venturerreferred to herein as a “Third Party Obligor”) has incurred any debt or otherliability to any person or entity, including Bank.

 

(e) Thefiling of a notice of judgment lien against Borrower or any Third PartyObligor, or the recording of any abstract of judgment against Borrower or anyThird Party Obligor in any county in which Borrower or any Third Party Obligorhas an interest in real property; or the service of a notice of levy and/or ofa writ of attachment or execution, or other like process, against the assets ofBorrower or any Third Party Obligor; or the entry of a judgment againstBorrower or any Third Party Obligor.

 

(f) Borroweror any Third Party Obligor shall become insolvent, or shall suffer or consentto or apply for the appointment of a receiver, trustee, custodian or liquidatorof itself or any of its property, or shall generally fail to pay its debts asthey become due, or shall make a general assignment for the benefit ofcreditors; Borrower or any Third Party Obligor shall file a voluntary petitionin bankruptcy, or seeking reorganization, in order to effect a plan or otherarrangement with creditors or any other relief under the Bankruptcy Reform Act,Title 11 of the United States Code, as amended or recodified from time to time(“Bankruptcy Code”), or under any state or federal law granting relief todebtors, whether now or hereafter in effect; or any involuntary petition orproceeding pursuant to the Bankruptcy Code or any other applicable state orfederal law relating to bankruptcy, reorganization or other relief for debtorsis filed or commenced against Borrower or any Third Party Obligor, or Borroweror any Third Party Obligor shall file an answer admitting the jurisdiction ofthe court and the material allegations of any involuntary petition; or Borroweror any Third Party Obligor shall be adjudicated a bankrupt, or an order forrelief shall be entered against Borrower or any Third Party Obligor by anycourt of competent jurisdiction under the Bankruptcy Code or any otherapplicable state or federal law relating to bankruptcy, reorganization or otherrelief for debtors.

 

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(g) Thereshall exist or occur any event or condition which Bank in good faith believesimpairs, or is substantially likely to impair, the prospect of payment orperformance by Borrower of its obligations under any of the Loan Documents.

 

(h) Thedeath or incapacity of any individual Borrower or Third Party Obligor. Thedissolution or liquidation of any Borrower or Third Party Obligor which is acorporation, partnership, joint venture or other type of entity; or any suchBorrower or Third Party Obligor, or any of its directors, stockholders ormembers, shall take action seeking to effect the dissolution or liquidation ofsuch Borrower or Third Party Obligor.

 

(i) Anychange in ownership of an aggregate of twenty-five percent (25%) or more of thecommon stock in Borrower.

 

SECTION 6.2REMEDIES. Upon the occurrence of any Event of Default: (a) allindebtedness of Borrower under each of the Loan Documents, any term thereof tothe contrary notwithstanding, shall at Bank’s option and without notice becomeimmediately due and payable without presentment, demand, protest or notice ofdishonor, all of which are hereby expressly waived by each Borrower; (b) theobligation, if any, of Bank to extend any further credit under any of the LoanDocuments shall immediately cease and terminate; and (c) Bank shall haveall rights, powers and remedies available under each of the Loan Documents, oraccorded by law, including without limitation the right to resort to any or allsecurity for any credit subject hereto and to exercise any or all of the rightsof a beneficiary or secured party pursuant to applicable law. All rights,powers and remedies of Bank may be exercised at any time by Bank and from timeto time after the occurrence of an Event of Default, are cumulative and notexclusive, and shall be in addition to any other rights, powers or remediesprovided by law or equity.

 

ARTICLE VII

MISCELLANEOUS

 

SECTION 7.1NO WAIVER. No delay, failure or discontinuance of Bank in exercising any right,power or remedy under any of the Loan Documents shall affect or operate as awaiver of such right, power or remedy; nor shall any single or partial exerciseof any such right, power or remedy preclude, waive or otherwise affect anyother or further exercise thereof or the exercise of any other right, power orremedy. Any waiver, permit, consent or approval of any kind by Bank of anybreach of or default under any of the Loan Documents must be in writing andshall be effective only to the extent set forth in such writing.

 

SECTION 7.2NOTICES. All notices, requests and demands which any party is required or maydesire to give to any other party under any provision of this Agreement must bein writing delivered to each party at the following address:

 
| BORROWER: |   | SYMMETRICOM,  INC.  2300 Orchard Parkway  San Jose, CA 95131                                                               |
|-----------|--------|----------------------------------------------------------------------------------------------------------------------------|
|      |   |                                                                                                                       |
| BANK:     |   | WELLS  FARGO BANK, NATIONAL ASSOCIATION  Santa Clara Technology RCBO  121 Park Center Plaza, 3rd Floor  San Jose, CA 95113 |

 

orto such other address as any party may designate by written notice to all otherparties. Each such notice, request and demand shall be deemed given or made asfollows: (a) if sent by hand delivery, upon delivery; (b) if sent bymail, upon the earlier of the date of receipt or three (3) days afterdeposit in the U.S. mail, first class and postage prepaid; and (c) if sentby telecopy, upon receipt.

 

SECTION 7.3COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower shall pay to Bank immediatelyupon demand the full amount of all payments, advances, charges, costs andexpenses, including reasonable attorneys’ fees (to include outside counsel feesand all allocated costs of Bank’s in-house counsel), expended or incurred byBank in connection with (a) the negotiation and preparation of thisAgreement and the other Loan Documents, Bank’s continued administration hereofand thereof, and the preparation of any amendments and waivers hereto andthereto, (b) the enforcement of Bank’s rights and/or the collection of anyamounts which become due to Bank under any of the Loan Documents, and (c) theprosecution or defense of any action in any way related to any of the LoanDocuments, including without limitation, any action for declaratory relief,whether incurred at the trial or appellate level, in an arbitration proceedingor otherwise, and including any of the foregoing incurred in connection withany bankruptcy proceeding (including without limitation, any adversaryproceeding, contested matter or motion brought by Bank or any other person)relating to any Borrower or any other person or entity.

 

SECTION 7.4SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and inure to thebenefit of the heirs, executors, administrators, legal representatives,successors and assigns of the parties; provided however, that Borrower may notassign or transfer its interest hereunder without Bank’s prior written consent.Bank reserves the right to sell, assign, transfer, negotiate or grantparticipations in all or any part of, or any interest in, Bank’s rights andbenefits under each of the Loan Documents. In connection therewith, Bank maydisclose all documents and information which Bank now has or may hereafteracquire relating to any credit subject hereto, Borrower or its business, or anycollateral required hereunder.

 

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SECTION 7.5ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan Documentsconstitute the entire agreement between Borrower and Bank with respect to eachcredit subject hereto and supersede all prior negotiations, communications,discussions and correspondence concerning the subject matter hereof. ThisAgreement may be amended or modified only in writing signed by each party hereto.

 

SECTION 7.6NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into for thesole protection and benefit of the parties hereto and their respectivepermitted successors and assigns, and no other person or entity shall be athird party beneficiary of, or have any direct or indirect cause of action orclaim in connection with, this Agreement or any other of the Loan Documents towhich it is not a party.

 

SECTION 7.7TIME. Time is of the essence of each and every provision of this Agreement andeach other of the Loan Documents.

 

SECTION 7.8SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall beprohibited by or invalid under applicable law, such provision shall beineffective only to the extent of such prohibition or invalidity withoutinvalidating the remainder of such provision or any remaining provisions ofthis Agreement.

 

SECTION 7.9COUNTERPARTS. This Agreement may be executed in any number of counterparts,each of which when executed and delivered shall be deemed to be an original,and all of which when taken together shall constitute one and the sameAgreement.

 

SECTION 7.10GOVERNING LAW. This Agreement shall be governed by and construed in accordancewith the laws of the State of California.

 

SECTION 7.11ARBITRATION.

 

(a) Arbitration.The parties hereto agree, upon demand by any party, to submit to bindingarbitration all claims, disputes and controversies between or among them (andtheir respective employees, officers, directors, attorneys, and other agents),whether in tort, contract or otherwise arising out of or relating to in any way(i) the loan and related Loan Documents which are the subject of thisAgreement and its negotiation, execution, collateralization, administration,repayment, modification, extension, substitution, formation, inducement,enforcement, default or termination; or (ii) requests for additionalcredit.

 

(b) GoverningRules. Any arbitration proceeding will (i) proceed in a location inCalifornia selected by the American Arbitration Association (“AAA”); (ii) begoverned by the Federal Arbitration Act (Title 9 of the United States Code),notwithstanding any conflicting choice of law provision in any of the documentsbetween the parties; and (iii) be conducted by the AAA, or such otheradministrator as the parties shall mutually agree upon, in accordance with theAAA’s commercial dispute resolution procedures, unless the claim orcounterclaim is at least $1,000,000.00 exclusive of claimed interest,arbitration fees and costs in which case the arbitration shall be conducted inaccordance with the AAA’s optional procedures for large, complex commercialdisputes (the commercial dispute resolution procedures or the optionalprocedures for large, complex commercial disputes to be referred to, asapplicable, as the “Rules”). If there is any inconsistency between the termshereof and the Rules, the terms and procedures set forth herein shall control.Any party who fails or refuses to submit to arbitration following a demand byany other party shall bear all costs and expenses incurred by such other partyin compelling arbitration of any dispute. Nothing contained herein shall bedeemed to be a waiver by any party that is a bank of the protections affordedto it under 12 U.S.C. §91 or any similar applicable state law.

 

(c) NoWaiver of Provisional Remedies, Self-Help and Foreclosure. The arbitrationrequirement does not limit the right of any party to (i) foreclose againstreal or personal property collateral; (ii) exercise self-help remediesrelating to collateral or proceeds of collateral such as setoff orrepossession; or (iii) obtain provisional or ancillary remedies such asreplevin, injunctive relief, attachment or the appointment of a receiver,before during or after the pendency of any arbitration proceeding. Thisexclusion does not constitute a waiver of the right or obligation of any partyto submit any dispute to arbitration or reference hereunder, including thosearising from the exercise of the actions detailed in sections (i), (ii) and(iii) of this paragraph.

 

(d) ArbitratorQualifications and Powers. Any arbitration proceeding in which the amountin controversy is $5,000,000.00 or less will be decided by a single arbitratorselected according to the Rules, and who shall not render an award of greaterthan $5,000,000.00. Any dispute in which the amount in controversy exceeds$5,000,000.00 shall be decided by majority vote of a panel of threearbitrators; provided however, that all three arbitrators must activelyparticipate in all hearings and deliberations. The arbitrator will be a neutralattorney licensed in the State of California or a neutral retired judge of thestate or federal judiciary of California, in either case with a minimum of tenyears experience in the substantive law applicable to the subject matter of thedispute to be arbitrated. The arbitrator will determine whether or not an issueis arbitratable and will give effect to the statutes of limitation indetermining any claim. In any arbitration proceeding the arbitrator will decide(by documents only or with a hearing at the arbitrator’s discretion) anypre-hearing motions, which are similar to motions to dismiss for failure tostate a claim or motions for summary adjudication. The arbitrator shall resolveall disputes in accordance with the substantive law of California and may grantany remedy or relief that a court

 

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ofsuch state could order or grant within the scope hereof and such ancillaryrelief as is necessary to make effective any award. The arbitrator shall alsohave the power to award recovery of all costs and fees, to impose sanctions andto take such other action as the arbitrator deems necessary to the same extenta judge could pursuant to the Federal Rules of Civil Procedure, theCalifornia Rules of Civil Procedure or other applicable law. Judgment uponthe award rendered by the arbitrator may be entered in any court havingjurisdiction. The institution and maintenance of an action for judicial reliefor pursuit of a provisional or ancillary remedy shall not constitute a waiverof the right of any party, including the plaintiff, to submit the controversyor claim to arbitration if any other party contests such action for judicialrelief.

 

(e) Discovery.In any arbitration proceeding discovery will be permitted in accordance withthe Rules. All discovery shall be expressly limited to matters directlyrelevant to the dispute being arbitrated and must be completed no later than 20days before the hearing date and within 180 days of the filing of the disputewith the AAA. Any requests for an extension of the discovery periods, or anydiscovery disputes, will be subject to final determination by the arbitratorupon a showing that the request for discovery is essential for the party’spresentation and that no alternative means for obtaining information isavailable.

 

(f) Class Proceedingsand Consolidations. The resolution of any dispute arising pursuant to theterms of this Agreement shall be determined by a separate arbitration proceedingand such dispute shall not be consolidated with other disputes or included inany class proceeding.

 

(g) PaymentOf Arbitration Costs And Fees. The arbitrator shall award all costs andexpenses of the arbitration proceeding.

 

(h) RealProperty Collateral; Judicial Reference. Notwithstanding anything herein tothe contrary, no dispute shall be submitted to arbitration if the disputeconcerns indebtedness secured directly or indirectly, in whole or in part, byany real property unless (i) the holder of the mortgage, lien or securityinterest specifically elects in writing to proceed with the arbitration, or (ii) allparties to the arbitration waive any rights or benefits that might accrue tothem by virtue of the single action rule statute of California, therebyagreeing that all indebtedness and obligations of the parties, and allmortgages, liens and security interests securing such indebtedness andobligations, shall remain fully valid and enforceable. If any such dispute isnot submitted to arbitration, the dispute shall be referred to a referee inaccordance with California Code of Civil Procedure Section 638 et seq.,and this general reference agreement is intended to be specifically enforceablein accordance with said Section 638. A referee with the qualificationsrequired herein for arbitrators shall be selected pursuant to the AAA’sselection procedures. Judgment upon the decision rendered by a referee shall beentered in the court in which such proceeding was commenced in accordance withCalifornia Code of Civil Procedure Sections 644 and 645.

 

(i) Miscellaneous.To the maximum extent practicable, the AAA, the arbitrators and the partiesshall take all action required to conclude any arbitration proceeding within180 days of the filing of the dispute with the AAA. No arbitrator or otherparty to an arbitration proceeding may disclose the existence, content orresults thereof, except for disclosures of information by a party required inthe ordinary course of its business or by applicable law or regulation. If morethan one agreement for arbitration by or between the parties potentiallyapplies to a dispute, the arbitration provision most directly related to theLoan Documents or the subject matter of the dispute shall control. Thisarbitration provision shall survive termination, amendment or expiration of anyof the Loan Documents or any relationship between the parties.

 

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INWITNESS WHEREOF, the parties hereto have caused this Agreement to be executedas of the day and year first written above.

 
| SYMMETRICOM,  INC.                       |
|------------------------------------------|
|                                     |   |
| By:                                      | /s/  William Slater |   |
|                                     | William  Slater, Chief Financial Officer |
|                                     |   |
| WELLS  FARGO BANK, NATIONAL  ASSOCIATION |
|                                     |
| By:                                      | /s/  Kevin Herr |   |
|                                     | Kevin  Herr, Vice President |
|                                          |  |  |  |  |

 

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