exv10w3






Exhibit 10.3




AMENDMENT NO. 3

TO

LOAN AND SECURITY AGREEMENT



This Amendment No. 3 To Loan And Security Agreement (this
“Amendment”) is entered into December 13, 2010, by and between Conexant
CF,LLC, a Delaware limited liability company (“Borrower”), and
Silicon Valley Bank, (“Bank”). Capitalized terms used herein without definition
shall have the same meanings given them in the Loan Agreement (as defined below).




Recitals





	A.	 	Borrower and Bank have entered into that certain Loan and Security Agreement
dated as of December 22, 2009, as amended by that certain Amendment No. 1 to Loan and Security
Agreement dated as of March 3, 2010 and that certain Amendment No. 2 to Loan and Security
Agreement dated as of June 10, 2010 (as amended, restated, or modified from time to time, the
“Loan Agreement”), pursuant to which Bank has agreed to extend and make
available to Borrower certain advances of money.
	 
	C.	 	Subject to the representations and warranties of Borrower herein and upon
the terms and conditions set forth in this Amendment, Bank is willing to amend the Loan Agreement.






Agreement



NOW, THEREFORE, in consideration of the foregoing Recitals and intending to be
legally bound, the parties hereto agree as follows:





	1.	 	Amendments To Loan
Agreement.






	 	1.1	 	Section 2.5 (Payment of Interest). Subsections (a) and (f) of Section 2.5 of the Loan
Agreement are hereby amended in their entirety and replaced with the following:






             
       “(a) Interest
Rate; Advances. Subject to Section 2.5(b), the principal amount
outstanding under the Revolving Line shall accrue interest at a per annum rate equal to the number
of percentage points above the WSJ Prime Rate (the “Applicable Margin”) set forth
opposite the applicable Quick Ratio in the chart below, which interest shall be payable monthly.



	 	 	 	 	 
	Quick Ratio	 	Applicable Margin
	Greater than or equal to 1.50:1.00
	 	 	0.50	%
	Less than 1.50:1.00, but greater than 1.00:1.00
	 	 	1.00	%
	Less than 1.00:1.00
	 	 	2.00	%






 









 






          
          “(f) Minimum Monthly Interest. In the event the
aggregate amount of interest earned by
Bank in any month (exclusive of any collateral monitoring fees, or any other fees and charges
hereunder) is less than Four Thousand Dollars ($4,000) (the “Minimum Monthly
Interest”), Borrower shall pay Bank an amount, payable on the last day of such month, in an
amount equal to the (i) Minimum Monthly Interest minus (ii) the aggregate amount of all interest
earned by Bank (exclusive of any collateral monitoring fees or any other fees and charges
hereunder) in such month.”




	 	1.2	 	Section 2.6 (Fees). Subsections (a) and (b) of Section 2.6 of the Loan
Agreement are hereby amended in their entirety and replaced with the following:





          
          “(a) Commitment Fee. A fully earned, non-refundable
commitment fee of $50,000, on the
Third Amendment Effective Date and each anniversary of the Third Amendment Effective Date
thereafter;




                    
(b) Reserved.”




	 	1.3	 	Section 6.9 (Financial Covenants). Section 6.9 of the Loan Agreement is amended in
its entirety and replaced by the following:






           
         “Borrower shall maintain on a consolidated basis with respect to
 Borrower and
Parent:




                    
(a) Tangible Net Worth. A Tangible Net Worth of at least the amount set forth for each
period in the chart below, increasing by 50% of issuances of new equity or Borrower’s realization
of a net gain from the sale of land assets of Borrower after the Third Amendment Effective Date and
such increase shall be applied to the quarter that the equity is raised or the sale of land assets
is realized and all subsequent quarters; provided, that, any asset loss pertaining to Borrower’s
equity interest in the stock of Mindspeed Technologies, Inc. shall not effect the calculation of
Tangible Net Worth and Bank shall adjust the Tangible Net Worth covenant accordingly.



	 	 	 	 	 
	Fiscal Quarter Ending	 	Minimum Tangible Net Worth
	December 31, 2010
	 	$	(124,525,000	)
	April 1,2011
	 	$	(129,625,000	)
	July 1,2011
	 	$	(133,744,000	)
	September 30, 2011
	 	$	(137,994,000	)
	December 30, 2011
	 	$	(136,301,000	)





Quarterly thresholds through the Revolving Line Maturity Date
shall be established by Bank on an
annual basis based on Borrower’s future projections. On an annual basis, Bank will continue to
establish quarterly thresholds representing 85% of plan in the event future projections assume net
profits on a quarterly basis. Bank will reevaluate the methods of establishing thresholds in the
event projections assume net losses in a manner acceptable to Borrower and Bank. The threshold set
forth above for December 30, 2011 shall remain the baseline threshold until future thresholds are





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documented. As used in this paragraph, “plan” shall mean Borrower’s financial outlook provided to
Bank for the next 3 fiscal years within the term of this Agreement, provided that the plan is
subject to change based on the updated annual forecasts as provided in Section 6.2(v).




               
          (b) Liquidity Coverage. As of the last day of each fiscal month and on a consolidated
basis, a ratio of Parent’s Unrestricted Cash and Cash Equivalents plus net accounts receivable to
Obligations, exclusive of Obligations secured by cash maintained at Bank, of not less than
1.50:1.00.”




	 	1.4	 	Section 13.1 (Definitions). The following definitions in Section 13.1 of the Loan
Agreement are hereby amended and restated in their entirety with the following:






       
   ““Account Receivable” means an Obligee’s right to the payment of money from an
Account Debtor arising out of goods sold or to be sold, property leased or to be leased, and
services rendered or to be rendered, whether secured or unsecured, whether now existing or
hereafter arising, and whether or not specifically sold or purchased in connection with the Loan
Documents; provided that the parties hereto agree that each such right to payment evidenced by a
separate, discrete invoice shall constitute a separate Account Receivable hereunder; and further
provided that, the Account Receivables sold by Seller to Purchaser pursuant to Section 2.1 of the
Purchase Agreement shall include Posted Credit Balances.”




      
    ““Advance Rate” is eighty percent (80.0%) net of Posted Credit Balances, or such
other percentage as Bank establishes under Section 2.1.1.”




       
   ““Current Liabilities” are all obligations and liabilities of Credit Parties to
Bank, plus, without duplication, the aggregate amount of Credit Parties’ consolidated Total
Liabilities that mature within one (1) year; provided, that up to $11.2 million in Convertible Debt
shall not be included as a Current Liability.”




      
    ““Facility Amount” is an amount equal to Twenty Five Million Dollars
($25,000,000).”




       
   ““Minimum Balance” means (a) $1,575,000 until the expiration of the Policy in
December of 2011, and (b) thereafter, at any time of determination, an amount equal to the sum of
(A) the deductible then existing under the Policy, plus (B) the amount of any additional premiums
which, though not currently due and payable, have accrued for payment by Borrower at the conclusion
of the Policy’s term. Notwithstanding the foregoing, the Minimum Balance is only required if/when
Borrower obtains an Advance or at any times Advances are outstanding.”




       
   ““Program Termination Date” means the date on which the Obligations shall have
been finally paid in full and Bank’s commitment to make Advances has terminated, but not later
December 31, 2013.”




       
   ““Purchase Termination Date” means the earliest to occur of the following: (a) the
date on which the Policy is initially scheduled to expire (or, if the Policy is replaced,
substituted, extended, or amended, with Bank’s consent and approval, to provide a later expiration
date, then such later expiration date); and (b) the November 30, 2013.”



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    ““Revolving Line Maturity Date” is December 31, 2013.”




	 	1.5	 	Section 13.1 (Definitions). The definition of “Prime Rate” in Section 13.1 of the
Loan Agreement is hereby deleted in its entirety.
	 
	 	1.6	 	Omnibus Amendment. Each reference to “Prime Rate” in the Loan Agreement
shall hereinafter be a reference to “WSJ Prime Rate”.
	 
	 	1.7	 	Section 13.1 (Definitions). The following definitions are hereby added to Section
13.1 of the Loan Agreement in their appropriate alphabetical order:






       
   ““Posted Credit Balances” are customer weekly exercised rebates and other
miscellaneous credits.”




       
   ““Third Amendment Effective Date” is December 13, 2010.”




      
    ““WSJ Prime Rate” is the rate most recently announced as the “prime rate” in the
Money Rates section of The Wall Street Journal.”




	 	1.8	 	Exhibit B to Loan Agreement (Compliance Certificate). Exhibit B (“Compliance
Certificate”) of the Loan Agreement is amended in its entirety by deleting it and
replacing it with Exhibit A attached hereto.






	2.	 	Borrower’s Representations And Warranties.






	 	2.1	 	Borrower represents and warrants that:






	 	(a)	 	immediately upon giving effect to this Amendment (i) the representations and
warranties contained in the Loan Documents are true, accurate and complete in all material
respects as of the date hereof (except to the extent such representations and warranties
relate to an earlier date, in which case they are true and correct as of such date), and (ii)
no Event of Default has occurred and is continuing;
	 
	 	(b)	 	Borrower has the corporate power and authority to execute and deliver this
Amendment and to perform its obligations under the Loan Agreement, as amended by this
Amendment;
	 
	 	(c)	 	the articles of incorporation, bylaws and other organizational documents of
Borrower delivered to Bank in connection with the execution of the Loan Agreement, remain
true, accurate and complete and have not been amended, supplemented or restated and are and
continue to be in full force and effect;
	 
	 	(d)	 	the execution and delivery by Borrower of this Amendment and the performance by
Borrower of its obligations under the Loan Agreement, as amended by this Amendment, have been
duly authorized by all necessary corporate action on the part of Borrower;
	 
	 	(e)	 	this Amendment has been duly executed and delivered by Borrower and is the binding
obligation of Borrower, enforceable against it in accordance with its




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	 	 	 	terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization,
liquidation, moratorium or other similar laws of general application and equitable principles
relating to or affecting creditors’ rights; and
	 
	 	(f)	 	as of the date hereof, it has no defenses against the obligations to pay any amounts under
the Obligations. Borrower acknowledges that Bank has acted in good faith and has conducted in
a commercially reasonable manner its relationships with Borrower in connection with this
Amendment and in connection with the Loan Documents.






	 	2.2	 	Borrower understands and acknowledges that Bank is entering into this
Amendment in reliance upon, and in partial consideration for, the representations and
warranties in Section 3.1, and agrees that such reliance is reasonable and appropriate.






	3.	 	Limitation. The amendments in Section 2 shall be limited precisely
as written and shall not be deemed (a) to be a waiver or modification of any other term or
condition of any Loan Document or of any other instrument or agreement referred to therein or
to prejudice any right or remedy which Bank may now have or may have in the future under or in
connection with the Loan Documents or any instrument or agreement referred to therein; or (b)
to be a consent to any future amendment or modification or waiver to any instrument or
agreement the execution and delivery of which is consented to hereby, or to any waiver of any
of the provisions thereof. Except as expressly amended hereby, the Loan Agreement and the
other Loan Documents shall continue in full force and effect.
	 
	4.	 	Effectiveness. This Amendment shall become effective upon the
satisfaction of all the following conditions precedent:






	 	4.1	 	Amendment. Borrower and Bank shall have duly executed and delivered this
Amendment to Bank.
	 
	 	4.2	 	Reaffirmation of Loan Documents. Conexant Systems, Inc. shall have
executed the Reaffirmation of Loan Documents in the form of Exhibit B attached hereto.
	 
	 	4.3	 	Commitment Fee. Borrower shall have paid to Bank a fully earned,
non-refundable commitment fee of $50,000.
	 
	 	4.4	 	Bank Expenses. Borrower shall have paid all Bank Expenses incurred through
the date of this Amendment.






	5.	 	Counterparts. This Amendment may be signed in any number of
counterparts, and by different parties hereto in separate counterparts, with the same effect
as if the signatures to each such counterpart were upon a single instrument. All counterparts
shall be deemed an original of this Amendment.
	 
	6.	 	Integration. This Amendment and any documents executed in
connection herewith or pursuant hereto contain the entire agreement between the parties with
respect to the subject matter hereof and supersede all prior agreements, understandings,
offers and negotiations, oral or written, with respect thereto and no extrinsic evidence
whatsoever may be introduced




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	 	 	in any judicial or arbitration proceeding, if any, involving this Amendment; except that any
financing statements or other agreements or instruments filed by Bank with respect to Borrower
shall remain in full force and effect.
	 
	7.	 	Governing Law; Venue. THIS AMENDMENT SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA. Borrower and Bank each submit
to the exclusive jurisdiction of the State and Federal courts in Santa Clara County,
California.





[Remainder of page intentionally left blank — signature page follows.]





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IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 3 to
Loan and Security Agreement to be executed as of the date first written above.




	 	 	 	 	 
	 	Borrower:



Conexant CF, LLC,

a California limited liability company

 	 
	 	By:  	/s/ Jean Hu
 	 
	 	 	Printed Name:  	Jean Hu 	 
	 	 	Title:  	CFO & Sr. Vice President 	 
	 
	 	Bank:



Silicon Valley Bank

 	 
	 	By:  	/s/ Derek Hoyt
 	 
	 	 	Printed Name:  	Derek Hoyt 	 
	 	 	Title:  	Senior Relationship Manager 	 
	 




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EXHIBIT A TO AMENDMENT NO. 3




EXHIBIT B



			
	 	 	 
	TO: SILICON VALLEY BANK
	 	Date:                     
	FROM: CONEXANT CF, LLC	 	 





The undersigned authorized officer of Conexant CF, LLC (“Borrower”) certifies that under the
terms and conditions of the Loan and Security Agreement between Borrower and Bank (the
“Agreement”), (1) Borrower is in complete compliance for the period ending                      with
all required covenants
except as noted below, (2) there are no Events of Default, (3) all representations and warranties
in the Agreement are true and correct in all material respects on this date except as noted below;
provided, however, that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring to a specific date
shall be true, accurate and complete in all material respects as of such date, (4) Borrower, and
each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has
timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions
owed by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the
Agreement, and (5) no Liens have been levied or claims made against Borrower or any of its
Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously
provided written notification to Bank. Attached are the required documents supporting the
certification. The undersigned certifies that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an accompanying letter or
footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is 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. Capitalized terms used
but not otherwise defined herein shall have the meanings given them in the Agreement.



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




	 	 	 	 	 
	Reporting Covenant	 	Required	 	Complies
	Weekly Transaction Report,
reconciliations of A/R,
transaction reports and general
ledger

	 	Weekly
	 	Yes  No
	Monthly A/R agings and A/P agings

	 	Monthly within 30 days
	 	Yes  No
	Monthly unaudited financial
statements of Parent
(consolidated and consolidating
w/respect to Borrower) w/Compliance
Certificate

	 	Monthly within 30 days
	 	Yes  No
	Annual operating budgets of
Parent + annual financial
projections of Parent approved
by Board of Parent

	 	FYE of Parent within 90 days
	 	Yes  No
	10-Q, 10-K and 8-K

	 	Within 15 days after filing with SEC
	 	Yes  No
	Quarterly field examination audit

	 	Quarterly at Bank’s discretion
	 	Yes  No






	 	 	 	 	 	 	 	 	 	 	 	 	 
	Financial Covenant	 	Required	 	Actual	 	Complies
	Maintain on a Fiscal
Quarter Ending Basis
Minimum Tangible Net Worth
(see 6.9(a)):
	 	$	_______	 	 	$	_______	 	 	Yes  No
	Maintain on a Monthly
Basis Liquidity Coverage
of not less than 1.50:1:00
	 	 	1.50:1:00	 	 	 	_______	 	 	Yes  No






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     The following financial covenant analyses and information set forth in Schedule 1 attached
hereto are true and accurate as of the date of this Certificate.



     The following are the exceptions with respect to the certification above: (If no exceptions
exist, state “No exceptions to note.”)



      

 

 




	 	 	 	 	 	 	 	 	 	 	 	 	 

	CONEXANT CF, LLC	 	 	 	BANK USE ONLY  


	 	 	 	 	 	 	 	 	Received by: 	 	 	 	 
	By:	 	 	 	 	 	 	 	 	AUTHORIZED SIGNER	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	 	 	 	 	Date:	 	 	 	 
	 

	 	Title:	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Verified: 	 	 	 	 
	 	 	 	 	 	 	 	 	 	AUTHORIZED SIGNER	 
	 

	 	 	 	 	 	 	 	Date:	 	 	 	 
	 	 	 	 	 	 	 	 	
Compliance Status: Yes  No






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Schedule 1 to Compliance Certificate




Financial Covenants of Borrower




     In the event of a conflict between
this Schedule and the Loan Agreement, the terms of the Loan
Agreement shall govern.



Dated:         
            



I. Tangible Net Worth (Section 6.9(a))



Required: Maintain, Tangible Net Worth of at least the amount
set forth for each period in the
chart below,
increasing by 50% of issuances of new equity or Borrower’s realization of a net gain from the sale
of land assets of Borrower after the Third Amendment Effective Date and such increase shall be
applied to the quarter that the equity is raised or the sale of land assets is realized and all
subsequent quarters; provided, that, any asset loss pertaining to Borrower’s equity interest in the
stock of Mindspeed Technologies, Inc. shall not effect the calculation of Tangible Net Worth and
Bank shall adjust the Tangible Net Worth covenant accordingly. Quarterly thresholds through the
Revolving Line Maturity Date shall be established by Bank based on Borrower’s future projections.




	 	 	 	 	 
	Fiscal Quarter Ending	 	Minimum Tangible Net Worth
	December 31, 2010
	 	$	(124,525,000	)
	April 1,2011
	 	$	(129,625,000	)
	July 1,2011
	 	$	(133,744,000	)
	September 30, 2011
	 	$	(137,994,000	)
	December 30, 2011
	 	$	(136,301,000	)





Actual:




	 	 	 	 	 
	Fiscal Quarter Ending	 	Minimum Tangible Net Worth
	December 31, 2010
	 	 	 	 
	April 1,2011
	 	 	 	 
	July 1,2011
	 	 	 	 
	September 30, 2011
	 	 	 	 
	December 30, 2011
	 	 	 	 






	 	 	 

	___ No, not in compliance

	 	___ Yes, in compliance




III. Liquidity Coverage (Section 6.9(b))



Required: Maintain, as of the last day of each fiscal month and
on a consolidated basis, a ratio of Parent’s
Unrestricted Cash and Cash Equivalents plus net accounts receivable to Obligations, exclusive of
Obligations secured by cash maintained at Bank, of not less than 1.50:1.00.



Actual:





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	A.
	 	Parent’s Unrestricted Cash and Cash Equivalents

	$	 
	 	 	 

	 	 
	B.
	 	Net accounts receivables

	$	 
	 	 	 

	 	 
	C.
	 	Obligations

	$	 
	 	 	 

	 	 
	D
	 	Obligations secured by cash maintained at Bank

	$	 
	 	 	 

	 	 
	E.
	 	Liquidity Coverage (line A plus line B divided by line C minus line D)

	 	 
	 	 	 

	 	 




Is line E equal to or greater than 1.50:1:00?




	 	 	 

	                     No, not in compliance
	 	                     Yes, in compliance






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EXHIBIT B TO AMENDMENT NO. 3




REAFFIRMATION OF LOAN DOCUMENTS



          This Reaffirmation of Loan Documents is entered into as of December 13, 2010, by and
between Conexant Systems, Inc., a Delaware corporation
(“Parent”) and Conexant CF,
LLC, a Delaware limited liability company (“Borrower”).




          Whereas, Parent and Borrower entered into that certain Receivables Purchase Agreement
and that certain Servicing Agreement, each dated as of December 22, 2009 (collectively, the
“Loan Documents”), in connection with that certain Loan and Security Agreement by and
between Borrower and Bank, dated as of December 22, 2009 (as amended, and as may be further
amended, restated, supplemented or otherwise modified from time to time, the “Loan
Agreement”); and




          Whereas, Borrower and Bank are amending the Loan Agreement pursuant to that certain Amendment
No. 3 to Loan and Security Agreement, dated as of the date hereof (the “Amendment No.
3”), pursuant to which, among other things, Borrower and Bank have agreed to extend the maturity
date of the loan facility. Capitalized terms used herein without definition shall have the same
meanings given them in the Loan Agreement.




          Now therefore, for valuable consideration, receipt of which is acknowledged, Guarantor hereby
agrees as follows:




          1. Reaffirmation of Loan Documents. Parent and Borrower hereby ratify and reaffirm
their obligations under the Loan Documents and agree that none of the modifications or waivers to
the Loan Agreement as set forth in Amendment No. 3 shall impair either party’s obligations under
the Loan Documents.




          2. Continuing Effect and Absence of Defenses. Parent and Borrower acknowledge that
each the Loan Documents are still in full force and effect and that neither party has defenses to
enforcement of the Loan Documents. The parties hereto each waive any and all defenses to
enforcement of the Loan Documents that might otherwise be available as a result of the amendment of
the Loan Agreement.




	 	 	 	 	 
	 	Conexant CF, LLC

 	 
	 	By:  	/s/ Jean Hu
 	 
	 	 	Printed Name:  	Jean Hu 	 
	 	 	Title:  	CFO & Sr. Vice President 	 



 









 






	 	 	 	 	 



	 	 	 	 	 
	 	Conexant Systems, Inc.

 	 
	 	By:  	/s/ Jean Hu
 	 
	 	 	Printed Name:  	Jean Hu 	 
	 	 	Title:  	CFO & Sr. Vice President 	 
	 




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