Document:

Exhibit 10.39

 

CREDIT AGREEMENT

 

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

 

RECITALS

 

Borrower
has requested that Bank extend or continue credit to Borrower as described
below, and Bank has agreed to provide such credit to Borrower on the terms and
conditions contained herein.

 

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

 

ARTICLE I

CREDIT TERMS

 

SECTION 1.1
LINE OF CREDIT.

 

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

 

(b) Letter
of Credit Subfeature. As a subfeature under the Line of Credit, Bank agrees
from time to time during the term thereof to issue or cause an affiliate to
issue standby letters of credit for the account of Borrower (each, a “Letter of
Credit” and collectively, “Letters of Credit”); provided however, that the
aggregate undrawn amount of all outstanding Letters of Credit shall not at any
time exceed Five Million Dollars ($5,000,000.00). The form and substance of
each Letter of Credit shall be subject to approval by Bank, in its sole
discretion. 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 the
Line of Credit and shall not be available for borrowings thereunder. Each
Letter of Credit shall be subject to the additional terms and conditions of the
Letter of Credit agreements, applications and any related documents required by
Bank in connection with the issuance thereof. Each drawing paid under a Letter
of Credit shall be deemed an advance under the Line of Credit and shall be
repaid by Borrower in accordance with the terms and conditions of this
Agreement applicable to such advances; provided however, that if advances under
the Line of Credit are not available, for any reason, at the time any drawing
is 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 date
such amount is fully repaid by Borrower, at the rate of interest applicable to
advances under the Line of Credit. In such event Borrower agrees that Bank, in
its sole discretion, may debit any account maintained by Borrower with Bank for
the amount of any such drawing.

 

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

 

SECTION 1.2
INTEREST/FEES.

 

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

 

(b) Computation
and 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 forth
in each promissory note or other instrument or document required hereby.

 

(c) Commitment
Fee. Borrower shall pay to Bank a non-refundable commitment fee for the
Line of Credit equal to $25,000.00, which fee shall be due and payable in full
upon execution of this Agreement.

 

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

 

1

 

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

 

SECTION 1.3
COLLATERAL.

 

As
security for all indebtedness of Borrower to Bank subject hereto, Borrower
hereby grants to Bank security interests of first priority in (a) all
Borrower’s accounts receivable and other rights to payment, general
intangibles, inventory and equipment, (b) Borrower’s Wells Capital
Management account no. 16096400 maintained at Bank.

 

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

 

ARTICLE II

REPRESENTATIONS AND
WARRANTIES

 

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

 

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

 

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

 

SECTION 2.3
NO VIOLATION. The execution, delivery and performance by Borrower of each of
the Loan Documents do not violate any provision of any law or regulation, or
contravene any provision of the Articles of Incorporation or By-Laws of
Borrower, 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 Borrower
may be bound.

 

SECTION 2.4
LITIGATION. There are no pending, or to the best of Borrower’s knowledge
threatened, actions, claims, investigations, suits or proceedings by or before
any governmental authority, arbitrator, court or administrative agency which
could have a material adverse effect on the financial condition or operation of
Borrower other than those disclosed by Borrower to Bank in writing prior to the
date hereof.

 

SECTION 2.5
CORRECTNESS 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 the
date hereof, (a) is complete and correct and presents fairly the financial
condition of Borrower, (b) discloses all liabilities of Borrower that are
required to be reflected or reserved against under generally accepted
accounting principles, whether liquidated or unliquidated, fixed or contingent,
and (c) has been prepared in accordance with generally accepted accounting
principles consistently applied. Since the date of such financial statement
there has been no material adverse change in the financial condition of
Borrower, nor has Borrower mortgaged, pledged, granted a security interest in
or otherwise encumbered any of its assets or properties except in favor of Bank
or as otherwise permitted by Bank in writing.

 

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

 

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

 

2

 

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

 

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

 

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

 

SECTION 2.11
ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Bank in writing prior
to the date hereof, Borrower is in compliance in all material respects with all
applicable federal or state environmental, hazardous waste, health and safety
statutes, and any rules or regulations adopted pursuant thereto, which
govern or affect any of Borrower’s operations and/or properties, including
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Superfund Amendments and Reauthorization Act of
1986, the Federal Resource Conservation and Recovery Act of 1976, and the
Federal Toxic Substances Control Act, as any of the same may be amended,
modified or supplemented from time to time. None of the operations of Borrower
is the subject of any federal or state investigation evaluating whether any remedial
action involving a material expenditure is needed to respond to a release of
any toxic or hazardous waste or substance into the environment. Borrower has no
material contingent liability in connection with any release of any toxic or
hazardous waste or substance into the environment.

 

ARTICLE III

CONDITIONS

 

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

 

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

 

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

 

(i)                  This
Agreement and each promissory note or other instrument or document required
hereby.

 

(ii)               Corporate
Resolution: Borrowing.

 

(iii)            Certificate
of Incumbency.

 

(iv)           Continuing
Security Agreement: Rights to Payment and Inventory.

 

(v)              Security
Agreement: Equipment.

 

(vi)           Security
Agreement: Securities Account and Addendum thereto.

 

(vii)        Securities
Account Control Agreement.

 

(viii)     Statement
of Purpose (U-1).

 

(ix)             Such
other documents as Bank may require under any other Section of this
Agreement.

 

(c) Financial
Condition. There shall have been no material adverse change, as determined
by Bank, in the financial condition or business of Borrower, nor any material
decline, as determined by Bank, in the market value of any collateral required
hereunder or a substantial or material portion of the assets of Borrower.

 

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

 

3

 

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

 

(a) Compliance.
The representations and warranties contained herein and in each of the other
Loan Documents shall be true on and as of the date of the signing of this
Agreement and on the date of each extension of credit by Bank pursuant hereto,
with the same effect as though such representations and warranties had been
made on and as of each such date, and on each such date, no Event of Default as
defined herein, and no condition, event or act which with the giving of notice
or the passage of time or both would constitute such an Event of Default, shall
have occurred and be continuing or shall exist.

 

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

 

ARTICLE IV

AFFIRMATIVE COVENANTS

 

Borrower
covenants that so long as Bank remains committed to extend credit to Borrower
pursuant hereto, or any liabilities (whether direct or contingent, liquidated
or unliquidated) of Borrower to Bank under any of the Loan Documents remain
outstanding, and until payment in full of all obligations of Borrower subject
hereto, Borrower shall, unless Bank otherwise consents in writing:

 

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

 

SECTION 4.2
ACCOUNTING RECORDS. Maintain adequate books and records in accordance with
generally accepted accounting principles consistently applied, and permit any
representative of Bank, at any reasonable time, to inspect, audit and examine
such books and records, to make copies of the same, and to inspect the
properties of Borrower.

 

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

 

(a) not
later than 90 days after and as of the end of each fiscal year, a consolidated
audited and unqualified financial statement of Borrower, prepared by a
certified public accountant acceptable to Bank, to include balance sheet,
income statement, statement of cash flows, management report, auditor’s report
and all supporting schedules;

 

(b) not
later than 45 days after and as of the end of each quarter, a consolidated copy
of the 10Q report of Borrower filed with the Securities Exchange Commission,
prepared by a certified public accountant acceptable to Bank, to include
balance sheet, income statement and statement of cash flows;

 

(c) not
later than 20 days after and as of the end of each month, a financial statement
of Borrower, prepared by Borrower, to include balance sheet and income
statement;

 

(d) not
later than 20 days after and as of the end of each month, a copy of Borrower’s
Wells Capital Management securities portfolio statement;

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

(a) Tangible
Net 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 debt
less any intangible assets.

 

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

 

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

 

(d) Pre-tax
profit not less than $1.00 on a quarterly basis, determined as of each fiscal
quarter end.

 

(e) Liquid
Assets 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/or
publicly/quoted marketable securities acceptable to Bank in its sole
discretion.

 

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

 

SECTION 4.10
NOTICE TO BANK. Promptly (but in no event more than five (5) days after
the occurrence of each such event or matter) give written notice to Bank in reasonable
detail 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 both
would constitute an Event of Default; (b) any change in the name or the
organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; or (d) any termination or
cancellation of any insurance policy which Borrower is required to maintain, or
any 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

 

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

 

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

 

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

 

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

 

5

 

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

 

SECTION 5.5
GUARANTIES. Guarantee or become liable in any way as surety, endorser (other
than as endorser of negotiable instruments for deposit or collection in the
ordinary course of business), accommodation endorser or otherwise for, nor
pledge or hypothecate any assets of Borrower as security for, any liabilities
or obligations of any other person or entity, except any of the foregoing in
favor of Bank.

 

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

 

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

 

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

 

ARTICLE VI

EVENTS OF DEFAULT

 

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

 

(a) Borrower
shall fail to pay when due any principal, interest, fees or other amounts
payable under any of the Loan Documents.

 

(b) Any
financial statement or certificate furnished to Bank in connection with, or any
representation or warranty made by Borrower or any other party under this
Agreement or any other Loan Document shall prove to be incorrect, false or
misleading in any material respect when furnished or made.

 

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

 

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

 

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

 

(f) Borrower
or any Third Party Obligor shall become insolvent, or shall suffer or consent
to or apply for the appointment of a receiver, trustee, custodian or liquidator
of itself or any of its property, or shall generally fail to pay its debts as
they become due, or shall make a general assignment for the benefit of
creditors; Borrower or any Third Party Obligor shall file a voluntary petition
in bankruptcy, or seeking reorganization, in order to effect a plan or other
arrangement 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 to
debtors, whether now or hereafter in effect; or any involuntary petition or
proceeding pursuant to the Bankruptcy Code or any other applicable state or
federal law relating to bankruptcy, reorganization or other relief for debtors
is filed or commenced against Borrower or any Third Party Obligor, or Borrower
or any Third Party Obligor shall file an answer admitting the jurisdiction of
the court and the material allegations of any involuntary petition; or Borrower
or any Third Party Obligor shall be adjudicated a bankrupt, or an order for
relief shall be entered against Borrower or any Third Party Obligor by any
court of competent jurisdiction under the Bankruptcy Code or any other
applicable state or federal law relating to bankruptcy, reorganization or other
relief for debtors.

 

6

 

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

 

(h) The
death or incapacity of any individual Borrower or Third Party Obligor. The
dissolution or liquidation of any Borrower or Third Party Obligor which is a
corporation, partnership, joint venture or other type of entity; or any such
Borrower or Third Party Obligor, or any of its directors, stockholders or
members, shall take action seeking to effect the dissolution or liquidation of
such Borrower or Third Party Obligor.

 

(i) Any
change in ownership of an aggregate of twenty-five percent (25%) or more of the
common stock in Borrower.

 

SECTION 6.2
REMEDIES. Upon the occurrence of any Event of Default: (a) all
indebtedness of Borrower under each of the Loan Documents, any term thereof to
the contrary notwithstanding, shall at Bank’s option and without notice become
immediately due and payable without presentment, demand, protest or notice of
dishonor, all of which are hereby expressly waived by each Borrower; (b) the
obligation, if any, of Bank to extend any further credit under any of the Loan
Documents shall immediately cease and terminate; and (c) Bank shall have
all rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any credit subject hereto and to exercise any or all of the rights
of 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 time
to time after the occurrence of an Event of Default, are cumulative and not
exclusive, and shall be in addition to any other rights, powers or remedies
provided by law or equity.

 

ARTICLE VII

MISCELLANEOUS

 

SECTION 7.1
NO 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 a
waiver of such right, power or remedy; nor shall any single or partial exercise
of any such right, power or remedy preclude, waive or otherwise affect any
other or further exercise thereof or the exercise of any other right, power or
remedy. Any waiver, permit, consent or approval of any kind by Bank of any
breach of or default under any of the Loan Documents must be in writing and
shall be effective only to the extent set forth in such writing.

 

SECTION 7.2
NOTICES. All notices, requests and demands which any party is required or may
desire to give to any other party under any provision of this Agreement must be
in 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

  

 

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

 

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

 

SECTION 7.4
SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of the parties; provided however, that Borrower may not
assign or transfer its interest hereunder without Bank’s prior written consent.
Bank reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Bank’s rights and
benefits under each of the Loan Documents. In connection therewith, Bank may
disclose all documents and information which Bank now has or may hereafter
acquire relating to any credit subject hereto, Borrower or its business, or any
collateral required hereunder.

 

7

 

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

 

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

 

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

 

SECTION 7.8
SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of
this Agreement.

 

SECTION 7.9
COUNTERPARTS. 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 same
Agreement.

 

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

 

SECTION 7.11
ARBITRATION.

 

(a) Arbitration.
The parties hereto agree, upon demand by any party, to submit to binding
arbitration all claims, disputes and controversies between or among them (and
their 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 this
Agreement and its negotiation, execution, collateralization, administration,
repayment, modification, extension, substitution, formation, inducement,
enforcement, default or termination; or (ii) requests for additional
credit.

 

(b) Governing
Rules. Any arbitration proceeding will (i) proceed in a location in
California selected by the American Arbitration Association (“AAA”); (ii) be
governed by the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the documents
between the parties; and (iii) be conducted by the AAA, or such other
administrator as the parties shall mutually agree upon, in accordance with the
AAA’s commercial dispute resolution procedures, unless the claim or
counterclaim is at least $1,000,000.00 exclusive of claimed interest,
arbitration fees and costs in which case the arbitration shall be conducted in
accordance with the AAA’s optional procedures for large, complex commercial
disputes (the commercial dispute resolution procedures or the optional
procedures for large, complex commercial disputes to be referred to, as
applicable, as the “Rules”). If there is any inconsistency between the terms
hereof 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 by
any other party shall bear all costs and expenses incurred by such other party
in compelling arbitration of any dispute. Nothing contained herein shall be
deemed to be a waiver by any party that is a bank of the protections afforded
to it under 12 U.S.C. §91 or any similar applicable state law.

 

(c) No
Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration
requirement does not limit the right of any party to (i) foreclose against
real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or
repossession; or (iii) obtain provisional or ancillary remedies such as
replevin, injunctive relief, attachment or the appointment of a receiver,
before during or after the pendency of any arbitration proceeding. This
exclusion does not constitute a waiver of the right or obligation of any party
to submit any dispute to arbitration or reference hereunder, including those
arising from the exercise of the actions detailed in sections (i), (ii) and
(iii) of this paragraph.

 

(d) Arbitrator
Qualifications and Powers. Any arbitration proceeding in which the amount
in controversy is $5,000,000.00 or less will be decided by a single arbitrator
selected according to the Rules, and who shall not render an award of greater
than $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 three
arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of California or a neutral retired judge of the
state or federal judiciary of California, in either case with a minimum of ten
years experience in the substantive law applicable to the subject matter of the
dispute to be arbitrated. The arbitrator will determine whether or not an issue
is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator’s discretion) any
pre-hearing motions, which are similar to motions to dismiss for failure to
state a claim or motions for summary adjudication. The arbitrator shall resolve
all disputes in accordance with the substantive law of California and may grant
any remedy or relief that a court

 

8

 

of
such state could order or grant within the scope hereof and such ancillary
relief as is necessary to make effective any award. The arbitrator shall also
have the power to award recovery of all costs and fees, to impose sanctions and
to take such other action as the arbitrator deems necessary to the same extent
a judge could pursuant to the Federal Rules of Civil Procedure, the
California Rules of Civil Procedure or other applicable law. Judgment upon
the award rendered by the arbitrator may be entered in any court having
jurisdiction. The institution and maintenance of an action for judicial relief
or pursuit of a provisional or ancillary remedy shall not constitute a waiver
of the right of any party, including the plaintiff, to submit the controversy
or claim to arbitration if any other party contests such action for judicial
relief.

 

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

 

(f) Class Proceedings
and Consolidations. The resolution of any dispute arising pursuant to the
terms of this Agreement shall be determined by a separate arbitration proceeding
and such dispute shall not be consolidated with other disputes or included in
any class proceeding.

 

(g) Payment
Of Arbitration Costs And Fees. The arbitrator shall award all costs and
expenses of the arbitration proceeding.

 

(h) Real
Property Collateral; Judicial Reference. Notwithstanding anything herein to
the contrary, no dispute shall be submitted to arbitration if the dispute
concerns indebtedness secured directly or indirectly, in whole or in part, by
any real property unless (i) the holder of the mortgage, lien or security
interest specifically elects in writing to proceed with the arbitration, or (ii) all
parties to the arbitration waive any rights or benefits that might accrue to
them by virtue of the single action rule statute of California, thereby
agreeing that all indebtedness and obligations of the parties, and all
mortgages, liens and security interests securing such indebtedness and
obligations, shall remain fully valid and enforceable. If any such dispute is
not submitted to arbitration, the dispute shall be referred to a referee in
accordance with California Code of Civil Procedure Section 638 et seq.,
and this general reference agreement is intended to be specifically enforceable
in accordance with said Section 638. A referee with the qualifications
required herein for arbitrators shall be selected pursuant to the AAA’s
selection procedures. Judgment upon the decision rendered by a referee shall be
entered in the court in which such proceeding was commenced in accordance with
California Code of Civil Procedure Sections 644 and 645.

 

(i) Miscellaneous.
To the maximum extent practicable, the AAA, the arbitrators and the parties
shall take all action required to conclude any arbitration proceeding within
180 days of the filing of the dispute with the AAA. No arbitrator or other
party to an arbitration proceeding may disclose the existence, content or
results thereof, except for disclosures of information by a party required in
the ordinary course of its business or by applicable law or regulation. If more
than one agreement for arbitration by or between the parties potentially
applies to a dispute, the arbitration provision most directly related to the
Loan Documents or the subject matter of the dispute shall control. This
arbitration provision shall survive termination, amendment or expiration of any
of the Loan Documents or any relationship between the parties.

 

9

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as 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

  
					

 

10Exhibit 10.40

 

	
  WELLS FARGO

  	
   

  	
  REVOLVING LINE OF CREDIT NOTE

  
	
  $10,000,000.00

  	
   

  	
  San Jose, California

  
	
   

  	
   

  	
  June 1, 2005

  

 

FOR
VALUE RECEIVED, the undersigned SYMMETRICOM, INC. (“Borrower”) promises to pay
to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) at its office
at Santa Clara Technology RCBO, 121 Park Center Plaza, 3rd Floor, San Jose, CA
95113, or at such other place as the holder hereof may designate, in lawful
money of the United States of America and in immediately available funds, the
principal sum of $10,000,000.00, or so much thereof as may be advanced and be
outstanding, with interest thereon, to be computed on each advance from the
date of its disbursement as set forth herein.

 

1.             DEFINITIONS:

 

As used herein, the
following terms shall have the meanings set forth after each, and any other
term defined in this Note shall have the meaning set forth at the place
defined:

 

1.1 “Business Day” means any day except a Saturday,
Sunday or any other day on which commercial banks in California are authorized
or required by law to close.

 

1.2 “Fixed Rate Term” means a period commencing on a
Business Day and continuing for 1, 2 or 3
months, as designated by Borrower, during which all or a portion of
the outstanding principal balance of this Note bears interest determined in
relation to LIBOR; provided however, that no Fixed Rate Term may be selected
for a principal amount less than $100,000.00;
and provided further, that no Fixed Rate Term shall extend beyond
the scheduled maturity date hereof. If any Fixed Rate Term would end on a day
which is not a Business Day, then such Fixed Rate Term shall be extended to the
next succeeding Business Day.

 

1.3 “LIBOR” means the rate per annum (rounded
upward, if necessary, to the nearest whole 1/8 of 1%) determined by dividing
Base LIBOR by a percentage equal to 100% less any LIBOR Reserve Percentage.

 

(a) “Base
LIBOR” means the rate per annum for United States dollar deposits quoted by
Bank as the Inter-Bank Market Offered Rate, with the understanding that such
rate is quoted by Bank for the purpose of calculating effective rates of
interest for loans making reference thereto, on the first day of a Fixed Rate
Term for delivery of funds on said date for a period of time approximately
equal to the number of days in such Fixed Rate Term and in an amount
approximately equal to the principal amount to which such Fixed Rate Term
applies. Borrower understands and agrees that Bank may base its quotation of
the Inter-Bank Market Offered Rate upon such offers or other market indicators
of the Inter-Bank Market as Bank in its discretion deems appropriate including,
but not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.

 

(b) “LIBOR
Reserve Percentage” means the reserve percentage prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for “Eurocurrency
Liabilities” (as defined in Regulation D of the Federal Reserve Board, as
amended), adjusted by Bank for expected changes in such reserve percentage
during the applicable Fixed Rate Term.

 

1.4 “Prime Rate” means at any time the rate of
interest most recently announced within Bank at its principal office as its
Prime Rate, with the understanding that the Prime Rate is one of Bank’s base
rates and serves as the basis upon which effective rates of interest are
calculated for those loans making reference thereto, and is evidenced by the
recording thereof after its announcement in such internal publication or
publications as Bank may designate.

 

2.                                       INTEREST:

 

2.1 Interest. The outstanding principal
balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) either (a) at
a fluctuating rate per annum equal to the
Prime Rate in effect from time to time, or (b) at a fixed rate per annum
determined by Bank to be 1.75000% above
LIBOR in effect on the first day of the applicable Fixed Rate Term. When
interest is determined in relation to the Prime Rate, each change in the rate
of interest hereunder shall become effective on the date each Prime Rate change
is announced within Bank. With respect to each LIBOR selection option selected
hereunder, Bank is hereby authorized to note the date, principal amount,
interest rate and Fixed Rate Term applicable thereto and any payments made
thereon on Bank’s books and records (either manually or by electronic entry)
and/or on any schedule attached to this Note, which notations shall be
prima facie evidence of the accuracy of the information noted.

 

1

 

2.2 Selection of Interest Rate Options. At
any time any portion of this Note bears interest determined in relation to
LIBOR, it may be continued by Borrower at the end of the Fixed Rate Term
applicable thereto so that all or a portion thereof bears interest determined
in relation to the Prime Rate or to LIBOR for a new Fixed Rate Term designated
by Borrower. At any time any portion of this Note bears interest determined in
relation to the Prime Rate, Borrower may convert all or a portion thereof so
that it bears interest determined in relation to LIBOR for a Fixed Rate Term
designated by Borrower. At such time as Borrower requests an advance hereunder
or wishes to select a LIBOR option for all or a portion of the outstanding
principal balance hereof, and at the end of each Fixed Rate Term, Borrower
shall give Bank notice specifying: (a) the interest rate option selected
by Borrower; (b) the principal amount subject thereto; and (c) for
each LIBOR selection, the length of the applicable Fixed Rate Term. Any such
notice may be given by telephone (or such other electronic method as Bank may
permit) so long as, with respect to each LIBOR selection, (i) if requested
by Bank, Borrower provides to Bank written confirmation thereof not later than
3 Business Days after such notice is given, and (ii) such notice is given
to Bank prior to 10:00 a.m. on the first day of the Fixed Rate Term, or at
a later time during any Business Day if Bank, at it’s sole option but without
obligation to do so, accepts Borrower’s notice and quotes a fixed rate to
Borrower. If Borrower does not immediately accept a fixed rate when quoted by
Bank, the quoted rate shall expire and any subsequent LIBOR request from
Borrower shall be subject to a redetermination by Bank of the applicable fixed
rate. If no specific designation of interest is made at the time any advance is
requested hereunder or at the end of any Fixed Rate Term, Borrower shall be
deemed to have made a Prime Rate interest selection for such advance or the
principal amount to which such Fixed Rate Term applied.

 

2.3 Taxes and Regulatory Costs. Borrower
shall pay to Bank immediately upon demand, in addition to any other amounts due
or to become due hereunder, any and all (a) withholdings, interest
equalization taxes, stamp taxes or other taxes (except income and franchise
taxes) imposed by any domestic or foreign governmental authority and related in
any manner to LIBOR, and (b) future, supplemental, emergency or other
changes in the LIBOR Reserve Percentage, assessment rates imposed by the
Federal Deposit Insurance Corporation, or similar requirements or costs imposed
by any domestic or foreign governmental authority or resulting from compliance
by Bank with any request or directive (whether or not having the force of law)
from any central bank or other governmental authority and related in any manner
to LIBOR to the extent they are not included in the calculation of LIBOR. In
determining which of the foregoing are attributable to any LIBOR option
available to Borrower hereunder, any reasonable allocation made by Bank among
its operations shall be conclusive and binding upon Borrower.

 

2.4 Payment of Interest. Interest accrued on
this Note shall be payable on the 1st day
of each month, commencing July 1, 2005.

 

2.5 Default Interest. From and after the
maturity date of this Note, or such earlier date as all principal owing
hereunder becomes due and payable by acceleration or otherwise, the outstanding
principal balance of this Note shall bear interest until paid in full at an
increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to 4% above the rate
of interest from time to time applicable to this Note.

 

3.                                       BORROWING AND REPAYMENT:

 

3.1 Borrowing and Repayment. Borrower may
from time to time during the term of this Note borrow, partially or wholly
repay its outstanding borrowings, and reborrow, subject to all of the
limitations, terms and conditions of this Note and of the Credit Agreement
between Borrower and Bank defined below; provided however, that the total
outstanding borrowings under this Note shall not at any time exceed the
principal amount stated above. The unpaid principal balance of this obligation
at any time shall be the total amounts advanced hereunder by the holder hereof
less the amount of principal payments made hereon by or for any Borrower, which
balance may be endorsed hereon from time to time by the holder. The outstanding
principal balance of this Note shall be due and payable in full on November 1, 2006.

 

3.2 Advances. Advances hereunder, to the
total amount of the principal sum available hereunder, may be made by the
holder at the oral or written request of (a) William Slater, any one acting alone, who are authorized to
request advances and direct the disposition of any advances until written
notice of the revocation of such authority is received by the holder at the
office designated above, or (b) any person, with respect to advances
deposited to the credit of any deposit account of any Borrower, which advances,
when so deposited, shall be conclusively presumed to have been made to or for
the benefit of each Borrower regardless of the fact that persons other than
those authorized to request advances may have authority to draw against such
account. The holder shall have no obligation to determine whether any person
requesting an advance is or has been authorized by any Borrower.

 

3.3 Application of Payments. Each payment
made on this Note shall be credited first, to any interest then due and second,
to the outstanding principal balance hereof. All payments credited to principal
shall be applied first, to the outstanding principal balance of this Note which
bears interest determined in relation to the Prime Rate, if any, and second, to
the outstanding principal balance of this Note which bears interest determined
in relation to LIBOR, with such payments applied to the oldest Fixed Rate Term
first.

 

2

 

4.                                       PREPAYMENT:

 

4.1 Prime Rate. Borrower may prepay principal
on any portion of this Note which bears interest determined in relation to the
Prime Rate at any time, in any amount and without penalty.

 

4.2 LIBOR. Borrower may prepay principal on
any portion of this Note which bears interest determined in relation to LIBOR
at any time and in the minimum amount of $100,000.00;
provided however, that if the outstanding principal balance of such
portion of this Note is less than said amount, the minimum prepayment amount
shall be the entire outstanding principal balance thereof. In consideration of
Bank providing this prepayment option to Borrower, or if any such portion of
this Note shall become due and payable at any time prior to the last day of the
Fixed Rate Term applicable thereto by acceleration or otherwise, Borrower shall
pay to Bank immediately upon demand a fee which is the sum of the discounted
monthly differences for each month from the month of prepayment through the
month in which such Fixed Rate Term matures, calculated as follows for each
such month:

 

(a) Determine
the amount of interest which would have accrued each month on the amount
prepaid at the interest rate applicable to such amount had it remained
outstanding until the last day of the Fixed Rate Term applicable thereto.

 

(b) Subtract
from the amount determined in (a) above the amount of interest which would
have accrued for the same month on the amount prepaid for the remaining term of
such Fixed Rate Term at LIBOR in effect on the date of prepayment for new loans
made for such term and in a principal amount equal to the amount prepaid.

 

(c) If
the result obtained in (b) for any month is greater than zero, discount
that difference by LIBOR used in (b) above.

 

Each Borrower acknowledges that prepayment of such
amount may result in Bank incurring additional costs; expenses and/or liabilities,
and that it is difficult to ascertain the full extent of such costs, expenses
and/or liabilities. Each Borrower, therefore, agrees to pay the above-described
prepayment fee and agrees that said amount represents a reasonable estimate of
the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to
pay any prepayment fee when due, the amount of such prepayment fee shall
thereafter bear interest until paid at a rate per annum 2.000% above the Prime Rate in effect from
time to time (computed on the basis of a 360-day
year, actual days elapsed). Each change in the rate of interest on any such
past due prepayment fee shall become effective on the date each Prime Rate
change is announced within Bank.

 

5.                                       EVENTS OF DEFAULT:

 

This Note is made pursuant
to and is subject to the terms and conditions of that certain Credit Agreement
between Borrower and Bank dated as of May 1,
2004, as amended from time to time (the “Credit Agreement”). Any
default in the payment or performance of any obligation under this Note, or any
defined event of default under the Credit Agreement, shall constitute an “Event
of Default” under this Note.

 

6.                                       MISCELLANEOUS:

 

6.1 Remedies. Upon the occurrence of any
Event of Default, the holder of this Note, at the holder’s option, may declare
all sums of principal and interest outstanding hereunder to be immediately due
and payable without presentment, demand, notice of nonperformance, notice of
protest, protest or notice of dishonor, all of which are expressly waived by each
Borrower, and the obligation, if any, of the holder to extend any further
credit hereunder shall immediately cease and terminate. Each Borrower shall pay
to the holder immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys’ fees (to
include outside counsel fees and all allocated costs of the holder’s in-house
counsel), expended or incurred by the holder in connection with the enforcement
of the holder’s rights and/or the collection of any amounts which become due to
the holder under this Note, and the prosecution or defense of any action in any
way related to this Note, including without limitation, any action for
declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing
incurred in connection with any bankruptcy proceeding (including without
limitation, any adversary proceeding, contested matter or motion brought by
Bank or any other person) relating to any Borrower or any other person or
entity.

 

6.2 Obligations Joint and Several. Should
more than one person or entity sign this Note as a Borrower, the obligations of
each such Borrower shall be joint and several.

 

6.3 Governing Law. This Note shall be
governed by and construed in accordance with the laws of the State of
California.

 

IN WITNESS WHEREOF, the undersigned has executed
this Note as of the date first written above.

 

	
  SYMMETRICOM, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ William Slater

  	
   

  
	
   

  	
  William Slater, Chief Financial Officer

  

 

3

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