Document:

Exhibit 10.1

 

AGREEMENT

 

This Agreement (this “Agreement”) is made and
entered into as of October 8, 2009, by and among Spencer Capital
Management, LLC, Spencer Capital Partners, LLC, Value Fund Advisors, LLC,
Boston Avenue Capital, LLC, Yorktown Avenue Capital, LLC and Spencer Capital
Opportunity Fund, LP, Charles M. Gillman, Michael J. McConnell and Kenneth H.
Shubin Stein (collectively “Value Investors for Change”), and MRV
Communications, Inc., a Delaware corporation (the “Company”).

 

RECITALS

 

A.            The Company’s 2009 Annual Meeting (the “2009 Annual
Meeting”) is scheduled to be held on November 11, 2009.

 

B.            Boston Avenue Capital, LLC and Spencer Capital
Opportunity Fund, LP beneficially own in the aggregate 1,937,860 (the “Dissident
Shares”) of the Company’s common stock, par value $0.0017 per share (“Shares”)
and have, together with the other members of Value Investors for Change and
five additional director nominees, filed a definitive proxy statement with the
Securities and Exchange Commission (the “SEC”) on October 7, 2009 to
nominate eight directors at the 2009 Annual Meeting (the “Dissident Proxy
Statement”).

 

C.            Value Investors for Change and the Company (each a “Party,”
and collectively, the “Parties”) hereto agree that it is in the best interests of
all stockholders of the Company to come to an amicable agreement with respect
to the 2009 Annual Meeting.

 

NOW THEREFORE, the parties hereby agree as follows:

 

1.                  The Company
agrees, and represents and warrants that the Board of Directors of the Company
(the “Board”) has agreed, that Charles M. Gillman, Michael J. McConnell and
Kenneth H. Shubin Stein (the “Designated Directors”) will be nominated as
directors of the Company, together with Baruch Fischer, Joan Herman, Michael
Keane, Noam Lotan, Shlomo Margalit, Igal Shidlovsky and Philippe Tartavull
(collectively, the “2009 Nominees”), for election at the 2009 Annual
Meeting.  The Company shall use all
reasonable best efforts to ensure that the Designated Directors are elected at
the 2009 Annual Meeting, including, without limitation, recommending that the
Company’s stockholders vote in favor of the election of the Designated
Directors and causing all proxies received by the Company to be voted in favor
of the Designated Directors, unless the proxy provides otherwise.  The Company further agrees, and represents
and warrants that the Board has agreed, that no later than 30 calendar days
following the 2009 Annual Meeting, the Board will select from amongst Joan
Herman, Michael Keane, Philippe Tartavull and the Designated Directors (the “New
Independent Directors”), the Chairman of the Board.

 

2.                  If for any
reason, any of the 2009 Nominees are not elected at the 2009 Annual Meeting,
the Parties agree, and the Company represents and warrants that the Board has agreed,
that following the 2009 Annual Meeting, the Board will be reconstituted, to the
extent permitted by law to include only the 2009 Nominees, which shall be
effected, to the extent necessary, by the resignation of any directors who hold
over in office under Delaware law who are not 2009 Nominees and the appointment
of any 2009 Nominees who were not elected at the 2009 Annual Meeting.  If additional persons who are not 2009
Nominees are elected at the 2009 Annual Meeting, the Parties agree to
renegotiate this 

 

 

Agreement
in good faith, including Sections 5, 6 and 7 hereof, to effectuate the intent
of this Agreement.  If, during the period
of time beginning on the 2009 Annual Meeting date and running to the 2010
Annual Meeting, any or all of the Designated Directors (i) resign or are
otherwise unable or unwilling to serve as a director of the Company or (ii) are
removed in accordance with the Company’s Amended and Restated Certificate of
Incorporation or Bylaws (each as may be subsequently amended and restated),
Value Investors for Change shall be entitled to nominate an individual or
individuals reasonably deemed to be qualified by the Board (after taking into
consideration the Company’s criteria for the selection of directors, but in no
event may the Company veto more than two recommendations from the five
remaining director nominees from the Dissident Proxy Statement) to serve on the
Board in his or their place (each, a “Replacement Nominee”) and the Board shall
promptly appoint each Replacement Nominee to the Board to serve for the
remainder of the applicable term.  Such
Replacement Nominee will be considered a Designated Director for purposes of
this Agreement.

 

3.                  The Company
represents and warrants that it has received the irrevocable resignations of
Harold Furchtgott-Roth, Guenter Jaensch and Daniel Tsui, effective immediately
prior to the 2009 Annual Meeting.  The
Company agrees, and represents and warrants that the Board has agreed, that if
any of the Designated Directors become unable to serve prior to the 2009 Annual
Meeting, Value Investors for Change shall be entitled to designate an
individual reasonably deemed to be qualified by the Board (after taking into
consideration the Company’s criteria for the selection of directors, but in no
event may the Company veto more than two recommendations from the five
remaining director nominees from the Dissident Proxy Statement) that the Board
will then nominate for election or elect to fill such vacancy.

 

4.                  Following (i) the
Board’s nomination of the Designated Directors to the Board no later than (5) days
following the date of this Agreement, (ii) the filing by the Company of
its Annual Report on Form 10-K for the year ended December 31, 2008
and (iii) the payment of the fees specified in paragraph 8 of this
Agreement, Value Investors for Change agrees to withdraw its nominations with
respect to the 2009 Annual Meeting and not to solicit proxies or make any other
proposals at the 2009 Annual Meeting. 
The Company agrees not to make any other proposals at the 2009 Annual
Meeting other than the ratification of the selection of the registered public
accounting firm. Value Investors for Change agrees to vote all of the Dissident
Shares at the 2009 Annual Meeting for the Designated Directors and the
foregoing proposal.  The Company
represents and warrants that the Company’s officers and directors have agreed
to vote all of their Shares for the Designated Directors.

 

5.                  The Company
agrees, and represents and warrants that the Board has agreed, that Messrs. Gillman
and Shubin Stein will become members of the Audit Committee of the Board which
will be comprised of a total of four members, Mr. Shubin Stein will become
a member of the Nomination and Governance Committee of the Board which will be
comprised of a total of three members, and Mr. Gillman will become a
member of the Compensation Committee of the Board which will be comprised of a
total of three members.  The number of
members of each of these committees will be set at the number specified above
until the 2011 Annual Meeting unless at least eight members of the Board
approve an increase. With respect to the Chairman positions of the Audit
Committee and Compensation Committee, one of the New Independent Directors will
be appointed as Chairman to each of these committees at the first Board meeting
following the 2009 Annual Meeting.

 

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6.                  If at any time subsequent to the date of
this Agreement until the 2011 Annual Meeting, the Board creates an additional
committee of the Board or a subcommittee of an existing committee (each an “Additional
Committee”), the Board, or applicable Committee, shall appoint to the
Additional Committee that number of Designated Directors, provided that there
are Designated Directors on the Board, necessary such that the appointed
Designated Directors will constitute not less than one-third of the members of
the Additional Committee.  The Designated
Directors shall be entitled to determine which Designated Director(s) shall
serve on any Additional Committee. 
Provided that there are enough Designated Directors on the Board, the proportion
of Designated Directors in each of the Additional Committees will be set at the
proportion specified above until the 2011 Annual Meeting unless at least eight
members of the Board approve a decrease. 
To the extent
that an Executive Committee is in existence as of the date of this Agreement,
the Company agrees, and represents and warrants that the Board has agreed, that
Messrs. Gillman and Shubin Stein will become members of the Executive
Committee of the Board which will be comprised of no more than five members until the 2011
Annual Meeting unless at least eight members of the Board approve an increase.

 

7.                  The Company
agrees, and represents and warrants that the Board has agreed, that until the
2011 Annual Meeting of the Company, the size of the Board will not be increased
beyond ten members unless at least eight members of the Board approve the
increase.

 

8.                  Within two (2) business
days after the date hereof, the Company shall reimburse Spencer Capital
Management, LLC, on behalf of Value Investors for Change, for its reasonable
and documented out-of-pocket expenses incurred prior to the execution hereof in
connection with the Delaware litigation concerning the 2009 Annual Meeting, the
nominations, the negotiation of this Agreement, and with regards to the
Dissident Proxy Statement, (i) the preparation and filing of all filings
required by the Securities Exchange Act of 1934, and the rules and
regulations promulgated thereunder, (ii) the printing expenses of the
Dissident Proxy Statement and related materials, (iii) the expenses
incurred by Okapi Partners, LLC, the proxy solicitor, (iv) the public
relations costs and (v) the fees and expenses of Dewey & LeBoeuf
LLP and Abrams & Bayliss LLP, up to $1,000,000.

 

9.                  The parties
hereto agree to issue a joint press release in a form mutually agreed to by the
parties.  The parties hereto agree not to
say anything disparaging about each other in connection with the matters
contained herein or the negotiations leading up to this Agreement.

 

10.                The Company
agrees that as promptly as practicable following the date hereof, the Company
shall take all steps reasonably necessary to amend and refile as amended with
the SEC, the Proxy Statement on Schedule 14A filed by the Company with the SEC
on October 2, 2009 (the “Company Proxy”) to include the Designated
Directors as “director nominees” (as used in the Company Proxy)
thereunder.  The Company and the Board
agree that the Company Proxy (as amended pursuant to the terms of this
Agreement) and all other solicitation materials to be delivered to stockholders
in connection with the 2009 Annual Meeting shall be prepared in accordance
with, and in furtherance of, this Agreement.  The Company will provide Value Investors for
Change with copies of any 

 

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proxy
materials or other solicitation materials to be delivered to stockholders in
connection with the 2009 Annual Meeting at least one business day, in the case
of proxy statements, and at least one business day, in the case of other
solicitation materials, in advance of filing such materials with the SEC or
disseminating the same in order to permit Value Investors for Change a reasonable
opportunity to review and comment on such materials.  Value Investors for Change will provide, as
promptly as reasonably practicable, all information relating to the Designated
Directors (and other information, if any) to the extent required under applicable
law to be included in the Company Proxy (as amended in accordance with the
terms of this Agreement) and any other solicitation materials to be delivered
to stockholders in connection with the 2009 Annual Meeting. The Company Proxy,
as amended pursuant to the terms of this Agreement, shall contain the same type
of information concerning the Designated Directors as provided for the
incumbent director nominees.

 

11.                Each of Spencer
Capital Management, LLC, Spencer Capital Partners, LLC, Value Fund Advisors,
LLC, Boston Avenue Capital, LLC, Yorktown Avenue Capital, LLC and Spencer
Capital Opportunity Find, LP shall keep confidential all Confidential
Information learned through Board participation of the Designated Directors
unless disclosure is required by applicable laws or regulations or by a
regulator having jurisdiction over such party. 
The term “Confidential Information” shall mean any information that is
confidential to the Company; provided that Confidential Information will not
include information which (i) becomes lawfully available to the public
other than as a result of a disclosure by such party or its representatives, (ii) was
lawfully available to such party on a non-confidential basis prior to its
disclosure by the Company or its representatives or (iii) lawfully becomes
available to such party on a non-confidential basis from a source other than
the Company or the Company’s representatives or agents, provided that such
source is not bound by a confidentiality agreement with the Company of which
such party has been made aware.

 

12.                The parties
hereto agree that irreparable damage would occur if any provision of this
Agreement were not strictly performed in accordance with its terms and that
each party to this Agreement shall be entitled to an injunction to prevent
breaches of this Agreement and to enforce specifically the performance of the
provisions hereof, in addition to any other remedy to which any party may be
entitled at law or in equity.  In addition,
the nonperforming party shall pay the costs and expenses of the other party in
obtaining such injunction and/or specific performance, including, without
limitation, attorneys’ fees.

 

13.                The validity,
interpretation, performance and enforcement of this Agreement shall be governed
by the laws of the State of Delaware (without giving effect to any choice or
conflict of law provision).  The Parties
hereby irrevocably and unconditionally consent to the exclusive jurisdiction of
the courts of the State of Delaware located in Wilmington, Delaware for any
action, suit or proceeding arising out of or relating to this Agreement.  The Parties further hereby irrevocably and
unconditionally waive any objection to the laying of venue of any action, suit
or proceeding arising out of or relating to this Agreement in such courts and
hereby further irrevocably and unconditionally waive and agree not to plead or
claim in any such court that any such action, suit or proceeding brought in any
such court has been brought in an inconvenient forum.

 

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14.                All notices,
demands and other communications to be given or delivered under or by reason of
the provisions of this Agreement shall be in writing and shall be deemed to
have been given (a) when delivered by hand (with written confirmation of
receipt), (b) upon sending if sent by electronic mail or facsimile, with
electronic confirmation of sending, (c) one (1) day after being sent
by nationally recognized overnight carrier to the addresses set forth below or (d) when
actually delivered if sent by any other method that results in delivery (with
written confirmation of receipt):

 

If to the Company:

 

MRV Communications, Inc.

20415 Nordhoff Street

Chatsworth, California 91311

Attn:   Jennifer H. Painter

Facsimile: (818) 407-5867

 

with a copy to:

 

Sullivan & Cromwell LLP

1701 Pennsylvania Ave. N.W., Suite 700

Washington, D.C. 20006

Attn:  Janet T. Geldzahler

Facsimile: (202) 293-6330

 

If to Value Investors for Change:

 

Spencer Capital Management, LLC:

1995 Broadway, Suite 1801

New York, New York 10023

Attn:  Dr. Kenneth
Shubin Stein

Facsimile: 
(646) 349-9642

 

with a copy to:

 

Dewey & LeBoeuf LLP

1301 Avenue of the Americas

New York, New York 10019

Attn:  John Altorelli, Esq.

Facsimile: (212) 259-6580

 

in each case, or to such other address as the Person to whom notice is
given may have previously furnished to the others in writing in the manner set
forth above.

 

15.                This Agreement
sets forth the complete and exclusive statement of the terms of the Agreement
between the Parties hereto and fully supersedes any and all prior agreements or
understandings between the Parties hereto pertaining to the subject matter
hereof.

 

16.                Should any
part, term or provision of this Agreement be declared or determined by any
court to be illegal, invalid or otherwise unenforceable, the legality, validity
and enforceability of the remaining parts, terms or provisions hereof shall be 

 

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deemed
not to be affected, and the Agreement shall be interpreted and enforced as if
such illegal, invalid or unenforceable part, term or provision, to the extent
possible, is not contained herein.

 

17.                The Parties
acknowledge and agree that they participated jointly in the negotiation and
drafting of this Agreement and the rule of construction that ambiguities
are construed against the drafter is hereby waived.

 

18.                This Agreement
may not be modified, amended, supplemented, or terminated except by a written
instrument executed by the Parties hereto.

 

19.                All the terms and
provisions of this Agreement shall inure to the benefit of and shall be
enforceable by the successors and permitted assigns of the parties hereto.  No Party shall assign this Agreement or any
rights or obligations hereunder without the prior written consent of the other
Parties hereto.

 

20.                This Agreement may be executed in one or
more counterparts, each of which shall be an original, and all of which
together shall be deemed to be one and the same Agreement. Executed
counterparts may be delivered via e-mail in Portable Document Format (.pdf) or
via facsimile transmission.

 

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IN WITNESS WHEREOF, the Parties hereto have executed
this Agreement as of the day and year first above written.

 

	
   

  	
   

  	
  MRV
  COMMUNICATIONS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Noam Lotan

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Noam Lotan

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SPENCER CAPITAL
  MANAGEMENT, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Dr. Kenneth Shubin Stein

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Dr. Kenneth Shubin
  Stein

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Managing Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SPENCER CAPITAL PARTNERS,
  LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Dr. Kenneth Shubin Stein

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Dr. Kenneth Shubin
  Stein

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Managing Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SPENCER CAPITAL
  OPPORTUNITY FUND, LP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  SPENCER CAPITAL PARTNERS,
  LLC

  
	
   

  	
   

  	
   

  	
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Dr. Kenneth Shubin Stein

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Dr. Kenneth Shubin
  Stein

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Managing Member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/
  Dr. Kenneth Shubin Stein

  
	
   

  	
   

  	
  DR. KENNETH SHUBIN STEIN

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BOSTON AVENUE CAPITAL LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Stephen J. Heyman

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Stephen J. Heyman

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  YORKTOWN AVENUE CAPITAL,
  LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Stephen J. Heyman

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Stephen J. Heyman

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Manager

  

 

 

	
   

  	
   

  	
  VALUE FUND ADVISORS, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Charles M. Gillman

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Charles M. Gillman

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Manager

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/ Charles M. Gillman

  
	
   

  	
   

  	
   

  	
  CHARLES M. GILLMAN

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  /s/ Michael McConnell

  
	
   

  	
   

  	
   

  	
  MICHAEL MCCONNELLExhibit 10.1

 

Execution Version

 

FORBEARANCE AGREEMENT

 

THIS
FORBEARANCE AGREEMENT (this “Agreement”) is
entered into as of October 9, 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,
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.

 

 

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) 12:00 noon (EST) on October 16, 2009 (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 the Specified Defaults, but only
to the extent that such rights and remedies arise solely as a result of the
occurrence and continuation of the Specified 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 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 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.

 

2

 

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,
payable semi-annually in arrears (the “Forbearance Interest”),
beginning on October 1, 2009 and ending on the earlier of (a) the
payment in full in cash of the Repurchase Price and (b) the date on which
the Noteholder Transaction (as defined below) is actually consummated; provided
however, that (i) if the Issuer delivers to counsel to the
Forbearing Holders an irrevocable written notice on or prior to 5 p.m.
(EST) on October 14, 2009 that the Issuer will exclusively pursue an
exchange of the Forbearing Notes (the “Noteholder Transaction”)
and (ii) the Issuer and each Forbearing Holder executes definitive documents in
connection with the Noteholder Transaction on or prior to October 16,
2009, such Forbearing Holder shall be deemed to have waived the Forbearance
Interest from the period beginning October 1, 2009 through the end of the
Forbearance Period.  For the avoidance of
doubt, in the event the conditions above are not satisfied, Forbearance
Interest shall not be waived for any period and shall continue to accrue until such
time as the Repurchase Price is repaid in full in cash or the Noteholder
Transaction is actually consummated.

 

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.

 

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(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 and (ii) customary
liens incurred in the ordinary course of business.

 

(d)         The Issuer shall not breach
its obligation to exclusively pursue the Noteholder Transaction after delivery
of the written notice provided pursuant to Section 5 above.

 

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; and

 

(b)         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.

 

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.

 

4

 

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 with the Company, 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.

 

5

 

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:

  

 

6

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