8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (date of earliest event reported): July 1, 2003 (June 27, 2003)

CONEXANT SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State of Incorporation) 000-24923
(Commission File Number) 25-1799439
(I.R.S. Employer Identification No.)

4311 Jamboree Road
Newport Beach, California 92660-3095
(Address of principal executive offices) (Zip code)

(949) 483-4600
(Registrant’s telephone number, including area code)

TABLE OF CONTENTS

	Item 2. Acquisition or Disposition of Assets
	Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
SIGNATURE
EXHIBIT INDEX
EXHIBIT 2.1
EXHIBIT 2.2
EXHIBIT 2.3
EXHIBIT 2.4
EXHIBIT 2.5

Item 2. Acquisition or Disposition of Assets

     On June 27, 2003, Conexant Systems, Inc. (“Conexant” or the “Company”) completed the spin-off of its Mindspeed Technologies business by means of the distribution (the “Distribution”) of all 90,333,445 outstanding shares of common stock, par value $.01 per share, of Mindspeed Technologies, Inc., then a wholly owned subsidiary of Conexant (“Mindspeed”), including the associated preferred share purchase rights (collectively, “Mindspeed Common Stock”), to holders of common stock, par value $.01 per share, of Conexant (“Conexant Common Stock”). Mindspeed thereafter began operations as an independent, separately traded, publicly held company.

     The Distribution was made without the payment of any consideration or the exchange of any shares by Conexant shareholders. In the Distribution, Conexant shareholders received one share of Mindspeed Common Stock for every three shares of Conexant Common Stock held of record as of the close of business on June 20, 2003 and cash for any fractional shares of Mindspeed Common Stock. Ownership of Mindspeed Common Stock was registered in book-entry form and each shareholder of Conexant will receive a stock distribution statement indicating the number of shares of Mindspeed Common Stock that has been credited to the shareholder.

     In connection with the Distribution, on June 27, 2003 Mindspeed and Conexant entered into a Distribution Agreement, an Employee Matters Agreement, a Tax Allocation Agreement and a Sublease, which are filed herewith as Exhibits 2.1, 2.2, 2.3 and 2.4, respectively. Prior to the Distribution, Conexant contributed to Mindspeed cash in an amount such that at the time of the Distribution Mindspeed’s cash balance was $100 million and Mindspeed issued a warrant to Conexant to purchase 30 million shares of Mindspeed Common Stock, exercisable for a period of ten years after the Distribution. In addition, Mindspeed, the subsidiaries of Mindspeed from time to time parties thereto and Conexant entered into a Credit Agreement, which is filed herewith as Exhibit 2.5, pursuant to which Mindspeed may borrow up to $50 million for working capital and general corporate purposes.

     In connection with the Distribution, Mindspeed Common Stock was registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended. “When-issued” trading in Mindspeed Common Stock began on the American Stock Exchange on June 23, 2003 under the trading symbol “MND.WI”. Mindspeed Common Stock began trading “regular way” on the American Stock Exchange on June 30, 2003 under the trading symbol “MND”.

     Conexant is not aware of any material relationship between Mindspeed and Conexant or any of its affiliates, any director or officer of Conexant or any associate of any such director or officer that existed at the date of the Distribution, except as disclosed herein and in Mindspeed’s Registration Statement on Form 10, as amended (File No. 1-31650), and except that (i) Mr. D. W. Decker, Chairman of the Board and Chief Executive Officer of Conexant, is non-executive Chairman of the Board of Mindspeed, (ii) Messrs. D. R. Beall and J. L. Stead, directors of Conexant, are directors of Mindspeed, (iii) Mr. H. Eslambolchi, who resigned as a director of Conexant effective prior to the Distribution, is a director of Mindspeed, (iv) Mr. B. S. Iyer, a director of Conexant, is an employee of Mindspeed and (v) in connection with the Credit Agreement with Conexant, Mindspeed issued a warrant to Conexant to purchase up to approximately 8.3 million shares of Mindspeed Common Stock.

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits

(b) Pro Forma Financial Information

Unaudited Pro Forma Condensed Consolidated Financial Information of Conexant is included at pages F-1 through F-7 of this report.

(c) Exhibits

2.1	Distribution Agreement dated as of June 27, 2003 by and between Conexant Systems, Inc. and Mindspeed Technologies, Inc.
2.2	Employee Matters Agreement dated as of June 27, 2003 by and between Conexant Systems, Inc. and Mindspeed Technologies, Inc.

2

2.3	Tax Allocation Agreement dated as of June 27, 2003 by and between Conexant Systems, Inc. and Mindspeed Technologies, Inc.
2.4	Sublease dated as of June 27, 2003 by and between Conexant Systems, Inc. and Mindspeed Technologies, Inc.
2.5	Credit Agreement dated as of June 27, 2003 by and among Mindspeed Technologies, Inc., the subsidiaries of Mindspeed Technologies, Inc. from time to time parties thereto and Conexant Systems, Inc.

3

SIGNATURE

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

CONEXANT SYSTEMS, INC.    (Registrant)
By	/s/ J. Scott Blouin
	J. Scott Blouin Senior Vice President and Chief Financial Officer

Date: July 1, 2003

4

Conexant Systems, Inc.
Unaudited Pro Forma Condensed Consolidated
Financial Information

On June 27, 2003, Conexant Systems, Inc. (“Conexant” or the “Company”) completed the distribution to Conexant shareowners of all outstanding shares of Mindspeed Technologies, Inc. (“Mindspeed”), a wholly owned subsidiary of Conexant, to which Conexant contributed its Mindspeed business (together, the “Spin-off Transaction”). Prior to the Spin-off Transaction, Conexant also contributed to Mindspeed cash in an amount such that at the time of the Spin-off Transaction Mindspeed’s cash balance was $100 million. Mindspeed entered into a senior secured revolving credit facility with Conexant, pursuant to which Mindspeed may borrow up to $50 million for working capital and general corporate purposes. Mindspeed also issued to Conexant warrants to purchase 30 million shares of Mindspeed common stock, exercisable for a period of ten years after the distribution.

The following Unaudited Pro Forma Condensed Consolidated Financial Information of Conexant gives effect to the Spin-off Transaction. The historical financial information of Conexant set forth below has been derived from the historical audited and unaudited consolidated financial statements of Conexant included in its annual report on Form 10-K for the year ended September 30, 2002 and its quarterly report on Form 10-Q for the quarter ended March 31, 2003. The Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March 31, 2003 includes pro forma adjustments giving effect to the Spin-off Transaction as if it had occurred on that date. The Unaudited Pro Forma Condensed Consolidated Statements of Operations for the years ended September 30, 2000, 2001 and 2002 and for the six months ended March 31, 2003 include pro forma adjustments giving effect to the Spin-off Transaction as if it had occurred as of October 1, 1999.

The Unaudited Pro Forma Condensed Consolidated Financial Information is provided for informational purposes only and does not purport to present the consolidated financial position or results of operations of Conexant had the Spin-off Transaction occurred on the dates specified, nor is it necessarily indicative of the consolidated financial position or results of operations of Conexant that may be expected in the future. The Unaudited Pro Forma Condensed Consolidated Financial Information should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto included in Conexant’s annual report on Form 10-K for the year ended September 30, 2002 and its quarterly report on Form 10-Q for the quarter ended March 31, 2003.

F- 1

Conexant Systems, Inc.
Unaudited Pro Forma Condensed Consolidated Balance Sheet
March 31, 2003
(in thousands)

			Historical			Pro forma					Pro forma
			Conexant			adjustments					Conexant
ASSETS
Current assets:
	Cash and cash equivalents		$	159,153		$	(100,000	)	(1	)	$	59,153
	Short-term investments			154,432			52,200		(2	)		206,632
	Receivables, net			73,402			(12,019	)	(1	)		61,383
	Inventories			58,090			(6,135	)	(1	)		51,955
	Deferred income taxes			32,266			—					32,266
	Other current assets			47,661			(4,610	)	(1	)		43,051
		Total current assets		525,004			(70,564	)				454,440
Property, plant and equipment, net				75,181			(34,386	)	(1	)		40,795
Goodwill				47,059			—					47,059
Intangible assets, net				105,875			(93,836	)	(1	)		12,039
Deferred income taxes				224,555			—					224,555
Other assets				122,254			(1,053	)	(1	)		121,201
		Total assets	$	1,099,928		$	(199,839	)			$	900,089
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
	Accounts payable		$	75,555		$	(13,128	)	(1	)	$	62,427
	Deferred revenue			6,792			(5,843	)	(1	)		949
	Accrued compensation and benefits			38,130			(11,387	)	(1	)		26,743
	Other current liabilities			62,842			(20,739	)	(1	)		42,103
		Total current liabilities		183,319			(51,097	)				132,222
Convertible subordinated notes				601,658			—					601,658
Other long-term liabilities				53,544			(1,309	)	(1	)		52,235
		Total liabilities		838,521			(52,406	)				786,115
Shareholders’ equity:
	Preferred and junior preferred stock			—			—					—
	Common stock			2,674			—					2,674
	Additional paid-in capital			3,484,998			—					3,484,998
	Accumulated deficit			(3,200,804	)		(217,462	)	(1	)		(3,366,066	)
							52,200		(2	)
	Accumulated other comprehensive loss			(25,156	)		17,617		(1	)		(7,539	)
	Unearned compensation			(305	)		212		(1	)		(93	)
		Total shareholders’ equity		261,407			(147,433	)				113,974
		Total liabilities and shareholders’ equity	$	1,099,928		$	(199,839	)			$	900,089

     See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Information.

F- 2

Conexant Systems, Inc.

Unaudited Pro Forma Condensed Consolidated Statements of Operations
Six Months Ended March 31, 2003
(in thousands, except per share amounts)

			Historical			Pro forma					Pro forma
			Conexant			adjustments					Conexant
Net revenues			$	322,890		$	(38,566	)	(3	)	$	284,324
Cost of goods sold				171,365			(11,796	)	(3	)		159,569
Gross margin				151,525			(26,770	)				124,755
Operating expenses:
	Research and development			136,398			(57,420	)	(3	)		78,978
	Selling, general and administrative			72,010			(25,454	)	(3	)		46,556
	Amortization of intangible assets			28,120			(26,522	)	(3	)		1,598
	Special charges			27,412			(19,238	)	(3	)		7,059
							(1,115	)	(4	)
		Total operating expenses		263,940			(129,749	)				134,191
Operating loss				(112,415	)		102,979					(9,436	)
Gain on debt extinguishment				34,645			—					34,645
Other expense, net				(41,486	)		157		(3	)		(41,329	)
Loss before income taxes				(119,256	)		103,136					(16,120	)
Provision for income taxes				957			(260	)	(3	)		697
Loss before cumulative effect of accounting change			$	(120,213	)	$	103,396				$	(16,817	)
Loss before cumulative effect of accounting change per share, basic and diluted			$	(0.45	)						$	(0.06	)
Number of shares used in per share computation				266,129								266,129

     See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Information.

F- 3

Conexant Systems, Inc.

Unaudited Pro Forma Condensed Consolidated Statements of Operations
Year Ended September 30, 2002
(in thousands, except per share amounts)

			Historical			Pro forma					Pro forma
			Conexant			adjustments					Conexant
Net revenues			$	601,762		$	(80,036	)	(3	)	$	521,726
Cost of goods sold				347,331			(29,410	)	(3	)		317,921
Gross margin				254,431			(50,626	)				203,805
Operating expenses:
	Research and development			323,811			(167,461	)	(3	)		156,350
	Selling, general and administrative			165,250			(69,500	)	(3	)		95,750
	Amortization of intangible assets			331,877			(312,388	)	(3	)		19,489
	Special charges			199,365			(168,866	)	(3	)		30,499
		Total operating expenses		1,020,303			(718,215	)				302,088
Operating loss				(765,872	)		667,589					(98,283	)
Debt conversion costs				(10,435	)		—					(10,435	)
Other expense, net				(37,168	)		298		(3	)		(36,870	)
Loss before income taxes				(813,475	)		667,887					(145,588	)
Income tax benefit				(1,139	)		(699	)	(3	)		(1,838	)
Loss from continuing operations			$	(812,336	)	$	668,586				$	(143,750	)
Loss from continuing operations per share, basic and diluted			$	(3.14	)						$	(0.56	)
Number of shares used in per share computation				258,998								258,998

     See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Information.

F- 4

Conexant Systems, Inc.

Unaudited Pro Forma Condensed Consolidated Statements of Operations
Year Ended September 30, 2001
(in thousands, except per share amounts)

			Historical			Pro forma					Pro forma
			Conexant			adjustments					Conexant
Net revenues			$	847,056		$	(305,368	)	(3	)	$	541,688
Cost of goods sold				751,554			(228,994	)	(3	)		522,560
Gross margin				95,502			(76,374	)				19,128
Operating expenses:
	Research and development			371,942			(196,916	)	(3	)		175,026
	Selling, general and administrative			250,808			(109,532	)	(3	)		141,276
	Amortization of intangible assets			324,805			(304,991	)	(3	)		19,814
	Special charges			389,616			(7,665	)	(3	)		369,258
							(12,693	)	(4	)
		Total operating expenses		1,337,171			(631,797	)				705,374
Operating loss				(1,241,669	)		555,423					(686,246	)
Debt conversion and debt extinguishment (5)				(30,874	)		—					(30,874	)
Other income, net				389			448		(3	)		837
Loss before income taxes				(1,272,154	)		555,871					(716,283	)
Income tax benefit (5)				(101,884	)		46,511		(3	)		(55,373	)
Loss from continuing operations			$	(1,170,270	)	$	509,360				$	(660,910	)
Loss from continuing operations per share, basic and diluted			$	(4.78	)						$	(2.70	)
Number of shares used in per share computation				244,711								244,711

     See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Information.

F- 5

Conexant Systems, Inc.

Unaudited Pro Forma Condensed Consolidated Statements of Operations
Year Ended September 30, 2000
(in thousands, except per share amounts)

			Historical			Pro forma					Pro forma
			Conexant			adjustments					Conexant
Net revenues			$	1,790,616		$	(579,206	)	(3	)	$	1,211,410
Cost of goods sold				926,197			(233,646	)	(3	)		692,551
Gross margin				864,419			(345,560	)				518,859
Operating expenses:
	Research and development			322,855			(136,237	)	(3	)		186,618
	Selling, general and administrative			236,989			(81,997	)	(3	)		154,992
	Amortization of intangible assets			154,679			(143,171	)	(3	)		11,508
	Special charges			35,000			—					35,000
	Purchased in-process research and development			191,348			(191,348	)	(3	)		—
		Total operating expenses		940,871			(552,753	)				388,118
Operating income (loss)				(76,452	)		207,193					130,741
Other income, net				6,329			(1,433	)	(3	)		4,896
Income (loss) before income taxes				(70,123	)		205,760					135,637
Provision for income taxes				63,036			(27,051	)	(3	)		35,985
Income (loss) from continuing operations			$	(133,159	)	$	232,811				$	99,652
Income (loss) from continuing operations per share: Basic			$	(0.63	)						$	0.47
Income (loss) from continuing operations per share: Diluted			$	(0.63	)						$	0.43
Number of shares used in per share computation: Basic				211,840								211,840
Number of shares used in per share computation: Diluted				211,840								229,817

     See accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Information.

F- 6

Notes to Unaudited Pro Forma Condensed Consolidated Financial Information

Pro forma adjustments for the unaudited pro forma condensed consolidated financial information are as follows:

(1)  Reflects Conexant’s contribution of the assets and liabilities of the Mindspeed business and $100 million in cash to its wholly owned subsidiary Mindspeed and the distribution of all outstanding shares of Mindspeed common stock to Conexant’s shareholders.

(2)  Reflects the receipt of warrants to purchase 30 million shares of Mindspeed common stock exercisable for a period of ten years after the distribution at a price per share equal to the fair market value of Mindspeed common stock at the time of the distribution. The estimated fair value of the warrants was determined by management using the Black-Scholes option pricing model (assuming volatility of 90%, a risk-free interest rate of 3.5% and no dividend yield). The estimated fair value of the warrants assumes an exercise price of $2.00 per share. The actual exercise price of the warrants will be determined based upon the volume weighted average price per share of Mindspeed common stock for the ten consecutive trading days immediately following the distribution date. In the event the exercise price of the warrants were to increase or decrease by $0.20 per share, the estimated fair value of the warrants would increase or decrease by approximately $5.2 million.

(3)  Reflects the historical results of operations of the Mindspeed business contributed to Mindspeed by Conexant. Such historical results of operations include allocations of certain operating expenses, determined on bases which management considers to be reasonable reflections of the utilization of services provided to, or the benefit received by, the Mindspeed business.

(4)  Reflects separation costs incurred by Conexant in connection with the Spin-off Transaction, which will be included in loss from discontinued operations in Conexant’s historical consolidated statements of operations.

(5)  As required by Statement of Financial Accounting Standards No. 145, which the Company adopted as of the beginning of fiscal 2003, a fiscal 2001 gain of $11.7 million and related income tax provision of $4.4 million (previously presented as an extraordinary gain on extinguishment of debt, net of income taxes) were reclassified to “Debt Conversion and Debt Extinguishment” and “Income Tax Benefit”, respectively, in the unaudited pro forma condensed consolidated statements of operations.

F- 7

EXHIBIT INDEX

		Sequentially
Exhibit Number	Description	Numbered Page
2.1	Distribution Agreement dated as of June 27, 2003 by and between Conexant Systems, Inc. and Mindspeed Technologies, Inc.
2.2	Employee Matters Agreement dated as of June 27, 2003 by and between Conexant Systems, Inc. and Mindspeed Technologies, Inc.
2.3	Tax Allocation Agreement dated as of June 27, 2003 by and between Conexant Systems, Inc. and Mindspeed Technologies, Inc.
2.4	Sublease dated as of June 27, 2003 by and between Conexant Systems, Inc. and Mindspeed Technologies, Inc.
2.5	Credit Agreement dated as of June 27, 2003 by and among Mindspeed Technologies, Inc., the subsidiaries of Mindspeed Technologies, Inc. from time to time parties thereto and Conexant Systems, Inc.

EX-2.1 3 a91233exv2w1.txt EXHIBIT 2.1 Exhibit 2.1 ================================================================================ DISTRIBUTION AGREEMENT by and between CONEXANT SYSTEMS, INC. and MINDSPEED TECHNOLOGIES, INC. ================================================================================ June 27, 2003 TABLE OF CONTENTS

Page ---- ARTICLE I DEFINITIONS..................................................................................... 1 Section 1.01 General........................................................................... 1 ARTICLE II THE CONTRIBUTION............................................................................... 18 Section 2.01 Intercorporate Reorganization..................................................... 18 Section 2.02 Financial Instruments............................................................. 21 Section 2.03 Intercompany Accounts and Arrangements............................................ 22 Section 2.04 Cash Management................................................................... 23 Section 2.05 The Mindspeed Board............................................................... 24 Section 2.06 Resignations; Transfer of Stock Held as Nominee................................... 24 Section 2.07 Mindspeed Certificate of Incorporation and Bylaws; Rights Plan.................... 25 Section 2.08 Consents.......................................................................... 25 ARTICLE III THE DISTRIBUTION.............................................................................. 26 Section 3.01 The Distribution.................................................................. 26 Section 3.02 Fractional Shares................................................................. 26 Section 3.03 Cooperation Prior to the Distribution............................................. 27 Section 3.04 Conexant Board Action; Conditions to the Distribution............................. 27 Section 3.05 Waiver of Conditions.............................................................. 28 ARTICLE IV MUTUAL RELEASE; INDEMNIFICATION; EXPENSES...................................................... 29 Section 4.01 Mutual Release.................................................................... 29 Section 4.02 Indemnification by Conexant....................................................... 30 Section 4.03 Indemnification by Mindspeed...................................................... 30 Section 4.04 Limitations on Indemnification Obligations........................................ 31 Section 4.05 Procedures Relating to Indemnification............................................ 32 Section 4.06 Remedies Cumulative............................................................... 34 Section 4.07 Indemnification under Tax Allocation Agreement.................................... 34 Section 4.08 Expenses.......................................................................... 34 ARTICLE V CERTAIN OTHER MATTERS........................................................................... 35 Section 5.01 Insurance......................................................................... 35 Section 5.02 Use of Names, Trademarks, etc..................................................... 38 Section 5.03 License of Intellectual Property.................................................. 41 Section 5.04 Jazz Warrant...................................................................... 51 Section 5.05 Charitable Funds.................................................................. 51 ARTICLE VI ACCESS TO INFORMATION.......................................................................... 51 Section 6.01 Provision of Corporate Records.................................................... 51 Section 6.02 Access to Information............................................................. 52

i Section 6.03 Production of Witnesses........................................................... 53 Section 6.04 Retention of Records.............................................................. 53 Section 6.05 Confidentiality................................................................... 54 ARTICLE VII MISCELLANEOUS................................................................................. 54 Section 7.01 Entire Agreement; Construction.................................................... 54 Section 7.02 Survival of Agreements............................................................ 55 Section 7.03 Governing Law..................................................................... 55 Section 7.04 Notices........................................................................... 55 Section 7.05 Dispute Resolution................................................................ 56 Section 7.06 Consent to Jurisdiction........................................................... 57 Section 7.07 Amendments........................................................................ 57 Section 7.08 Assignment........................................................................ 57 Section 7.09 Captions; Currency................................................................ 58 Section 7.10 Severability...................................................................... 58 Section 7.11 Parties in Interest............................................................... 58 Section 7.12 Schedules......................................................................... 58 Section 7.13 Termination....................................................................... 58 Section 7.14 Waivers; Remedies................................................................. 58 Section 7.15 Further Assurances................................................................ 59 Section 7.16 Counterparts...................................................................... 59 Section 7.17 Performance....................................................................... 59 Section 7.18 Currency Calculations............................................................. 59 Section 7.19 Interpretation.................................................................... 59 ii SCHEDULES Schedule 1.01(a) - Conexant Former Businesses Schedule 1.01(b) - Amended Bylaws Schedule 1.01(c) - Restated Certificate of Incorporation Schedule 1.01(d) - Mindspeed Patents and Trademarks Schedule 1.01(e) - Mindspeed Former Businesses Schedule 1.01(f) - Mindspeed Company Codes Schedule 1.01(g) - Mindspeed Financial Instruments Schedule 1.01(h) - Mindspeed Specified Liabilities Schedule 1.01(i) - Mindspeed Real Property Schedule 1.01(j) - Mindspeed Subsidiaries Schedule 1.01(k) - Certain IT Assets Schedule 2.01(c) - Reorganization Transactions Schedule 2.03(a) - Intercompany Accounts Schedule 2.03(b)(ii) - Intercompany Agreements Schedule 2.05 - Mindspeed Directors Schedule 2.06 - Continuing Directors and Officers Schedule 4.02(b) - Certain Form 10 Sections iii DISTRIBUTION AGREEMENT This DISTRIBUTION AGREEMENT (this "Agreement") is dated as of June 27, 2003 by and between CONEXANT SYSTEMS, INC., a Delaware corporation ("Conexant"), and MINDSPEED TECHNOLOGIES, INC., a Delaware corporation and a wholly-owned subsidiary of Conexant ("Mindspeed"). Capitalized terms used in this Agreement shall have the meanings set forth in Section 1.01. WHEREAS, the Conexant Board has determined that it is appropriate and desirable to distribute all outstanding shares of Mindspeed Common Stock on a pro rata basis to the holders of Conexant Common Stock; and WHEREAS, subject to the terms and conditions contained herein, immediately prior to the Distribution, Conexant and the Conexant Subsidiaries will transfer the Mindspeed Assets and the Mindspeed Subsidiaries to Mindspeed or one of the Mindspeed Subsidiaries and Mindspeed and the Mindspeed Subsidiaries will assume the Mindspeed Liabilities, all as more fully described in this Agreement (the "Contribution"); and WHEREAS, Conexant and Mindspeed have determined that it is appropriate and desirable to set forth the principal corporate transactions required to effect the Contribution and the Distribution and certain other agreements that will govern certain matters relating to the Contribution and the Distribution and the relationship of Conexant, Mindspeed and the respective members of the Conexant Group and the Mindspeed Group following the Contribution and the Distribution. NOW, THEREFORE, in consideration of the premises and of the respective agreements and covenants contained in this Agreement, the parties hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01 General. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined): "Accounts Receivable" means accounts, loans and notes receivable (whether current or not current), including receivables due from employees, and all proceeds thereof and rights to payment with respect thereto. "Action" means, with respect to any Person, any actual or threatened or future action, suit, arbitration, inquiry, proceeding or investigation by or before any Governmental Entity or any claims or other legal matters that have been or may be asserted by or against, or otherwise affect, such Person. "Affiliate" means, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person; provided, however, that for purposes of the Separation Agreements, following the Time of Distribution, neither Conexant nor any Conexant Subsidiary shall be deemed to be an Affiliate of any member of the Mindspeed Group and neither Mindspeed nor any Mindspeed Subsidiary shall be deemed to be an Affiliate of any member of the Conexant Group. For purposes of the immediately preceding sentence, the term "control" (including, with correlative meanings, the terms "controlled by" and "under common control with"), as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise. "Agreement" shall have the meaning set forth in the preamble. "American Stock Exchange" means the American Stock Exchange LLC. "Asset/Liability Allocation Matter" shall have the meaning set forth in Section 2.01(b). "Assets" means any and all assets, properties and rights, whether tangible or intangible, real, personal or mixed, fixed, contingent or otherwise, and wherever located (other than ownership interests in Subsidiaries), including the following: (a) Real Property; (b) Machinery and Equipment; (c) Inventories; (d) bank accounts; (e) cash (including cash in bank accounts), cash on hand, cash equivalents, funds, certificates of deposit, similar instruments, travelers checks and cash deposits held by third parties securing or otherwise collateralizing obligations; (f) Accounts Receivable; (g) advances, performance and surety bonds, and interests as beneficiary under letters of credit and other similar instruments and all proceeds thereof; (h) Securities; (i) Hedging Arrangements; (j) Data and Records; 2 (k) Patents and Trademarks; (l) Trade Secrets; (m) Contracts; (n) credits, prepayments and prepaid expenses; (o) claims, causes of action, rights under express or implied warranties, guarantees and indemnities and similar rights, rights of recovery, rights of set-off, rights of subrogation and all other rights of any kind (including the right to receive mail and other communications); (p) Permits; (q) goodwill and going concern value; and (r) other intangible assets not otherwise included in clauses (a) through (q) of this definition. "Assigning Party" shall have the meaning set forth in Section 2.08. "Broadband Business" means (a) the businesses and operations engaged in prior to the Time of Distribution by the members of the Pre-Distribution Group (but with respect to each such member who has ceased to be an Affiliate of Conexant or its predecessors, only businesses engaged in prior to the time that such member of the Pre-Distribution Group ceased to be an Affiliate of Conexant or its predecessors) of researching, developing, designing, engineering, manufacturing, having manufactured, assembling, having assembled, selling, distributing, installing, modifying, repairing, servicing and supporting semiconductor products and systems for communications electronics markets such as personal computers, personal imaging devices, network access products, digital information and entertainment products, and activities related thereto, (b) Former Businesses set forth on Schedule 1.01(a), (c) other Former Business related primarily to any of the foregoing, and (d) activities related primarily to the foregoing, other than, in the case of each of the foregoing clauses (a), (b), (c) and (d), any businesses, operations or activities included in the Mindspeed Business. "Business Day" means any day other than a Saturday, Sunday or other day when banks are authorized or required by law to be closed in California or New York. "Bylaws" means Mindspeed's amended Bylaws in the form attached hereto as Schedule 1.01(b). "Certificate of Incorporation" means Mindspeed's restated certificate of incorporation in the form attached hereto as Schedule 1.01(c). 3 "Claims Administration" means the processing of claims made under Policies, including the reporting of claims to the insurance carrier, management and defense of claims, and providing for appropriate releases upon settlement of claims. "Claims Made Policies" shall have the meaning set forth in Section 5.01(b)(ii). "Code" means the Internal Revenue Code of 1986, as amended, or any successor legislation. "Commission" means the Securities and Exchange Commission. "Conexant" shall have the meaning set forth in the preamble. "Conexant Assets" means the following: (a) all rights of any member of the Conexant Group under any Separation Agreement to which it is or becomes a party; (b) all Assets which are expressly allocated to any member of the Conexant Group pursuant to the Employee Matters Agreement or the Tax Allocation Agreement; (c) the following specifically enumerated Assets which immediately prior to the Time of Distribution are owned by Conexant or any of its Subsidiaries (including members of the Mindspeed Group), in each case whether or not such Assets are used in or relate to the Broadband Business or the Mindspeed Business: (i) all Conexant Bank Accounts; (ii) all Conexant Cash; (iii) all Accounts Receivable other than Mindspeed Accounts Receivable; (iv) all Inventories other than Mindspeed Inventories; (v) all Securities; (vi) all Hedging Arrangements; (vii) all Machinery and Equipment other than Mindspeed Machinery and Equipment; (viii) all Real Property other than Mindspeed Real Property; (ix) all Patents and Trademarks other than those set forth on Schedule 1.01(d); 4 (x) all rights in, and to the use of, the Conexant Marks, other than as provided for in Section 5.02; (xi) all Policies and all rights, benefits and privileges thereunder and related thereto (including the right to receive any and all return premiums with respect thereto), other than rights with respect to Policies to the extent provided in Sections 5.01(b) and 5.01(c); and (xii) all information technology Assets identified in Schedule 1.01(k) as Conexant's; (d) all other Assets which immediately prior to the Time of Distribution are owned by Conexant or any of its Subsidiaries (including members of the Mindspeed Group) that are not Mindspeed Assets; and (e) all rights, causes of action and claims of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) to the extent relating to any asset described in clauses (a) through (d) above. Anything contained herein to the contrary notwithstanding, assets described in paragraphs (b) and (c) of the definition of "Mindspeed Assets" will not be included in Conexant Assets. "Conexant Bank Accounts" means all bank accounts of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) immediately prior to the Time of Distribution, other than Mindspeed Bank Accounts. "Conexant Board" means the Board of Directors of Conexant or a duly authorized committee thereof. "Conexant Cash" means all (i) cash (including cash in bank accounts), cash on hand, cash equivalents, funds, certificates of deposit, similar instruments and travelers checks held by Conexant or any of its Subsidiaries and Affiliates (including members of the Mindspeed Group) immediately prior to the Time of Distribution and (ii) cash deposits held by third parties securing or otherwise collateralizing obligations of Conexant or any of its Subsidiaries or Affiliates (including members of Mindspeed Group) immediately prior to the Time of Distribution, other than, in the case of each of the foregoing clauses (i) and (ii), Mindspeed Cash. "Conexant Common Stock" means the common stock, par value $.01 per share, of Conexant. "Conexant Expenses" means all out-of-pocket fees, costs and expenses of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) incurred prior to the Time of Distribution in connection with effecting the Contribution, the Distribution, the preparation, execution and delivery of the Separation Agreements and the consummation of the Contribution and the Distribution, other than Mindspeed Expenses. 5 "Conexant Group" means Conexant and the Conexant Subsidiaries. "Conexant Indemnitees" mean each member of the Conexant Group and each of their respective Representatives and Affiliates and each of the heirs, executors, successors and permitted assigns of any of the foregoing. "Conexant Liabilities" means the following: (a) all Liabilities of any member of the Conexant Group under any Separation Agreement to which it is or becomes a party; (b) all Liabilities for which any member of the Conexant Group is expressly made responsible pursuant to the Employee Matters Agreement or the Tax Allocation Agreement; (c) the following specifically enumerated Liabilities of Conexant or any of its Subsidiaries (including members of the Mindspeed Group), in each case whether or not such Liabilities relate to the Broadband Business, the Conexant Assets, the Mindspeed Business or the Mindspeed Assets: (i) all Liabilities in respect of the Convertible Notes; and (d) all other Liabilities of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) in respect of operations engaged in prior to the Time of Distribution that are not Mindspeed Liabilities. Anything contained herein to the contrary notwithstanding, Liabilities described in paragraphs (b) and (c) of the definition of "Mindspeed Liabilities" will not be included in Conexant Liabilities. "Conexant Marks" means the names, trademarks, trade names, domain names and service marks "Conexant", "Conexant Systems" and "Conexant Systems, Inc." and all corporate symbols and logos related thereto and all names, trademarks, trade names, domain names and service marks which include the words "Conexant", "Conexant Systems" or "Conexant Systems, Inc." or any derivative thereof and any other name, mark or symbol connoting "Conexant" or which constitutes a formative thereof. "Conexant Subsidiary" means each Subsidiary of Conexant other than Mindspeed and the Mindspeed Subsidiaries. "Consents" means consents, approvals, waivers, clearances, exemptions, allowances, novations, authorizations, filings, registrations and notifications. "Contracts" means all agreements, personal property leases, contracts (including employee contracts), licenses, memoranda of understanding, letters of intent, sales orders, purchase orders, open bids and other commitments, including in each case, all 6 amendments, modifications and supplements thereto and waivers and consents thereunder, but excluding real property leases. "Contribution" shall have the meaning set forth in the recitals. "Convertible Notes" means Conexant's (a) 4-1/4% convertible subordinated notes due May 1, 2006 issued under the Indenture dated as of May 12, 1999 between Conexant and The First National Bank of Chicago, as trustee and (b) 4% convertible subordinated notes due February 1, 2007 issued under the Indenture dated as of February 1, 2000 between Conexant and Bank One Trust Company, National Association, as trustee. "Conveyance and Assumption Instruments" means, collectively, the various agreements, bills of sale, stock powers, certificates of title, instruments of conveyance and assignment, instruments of assumption and other instruments and documents to be entered into to effect the transfer of Assets and Subsidiaries and the assumption of Liabilities contemplated by the transactions described in Sections 2.01(b) and (c). "Credit Agreement" means the senior secured revolving credit agreement dated as of the date hereof entered into prior to the Time of Distribution by and between Conexant and Mindspeed under which Mindspeed may borrow up to $50 million, subject to the terms set forth therein, together with any related security documents and ancillary agreements. "Data and Records" means financial, accounting, corporate, operating, design, manufacturing, test and other data and records (in each case, in whatever form or medium, including electronic media), including books, records, notes, sales and sales promotional material and data, advertising materials, credit information, cost and pricing information, customer, supplier and agent lists, other records pertaining to customers, business plans, reference catalogs, payroll and personnel records and procedures, blue-prints, research and development files, data and laboratory books, sales order files, litigation files, minute books, stock ledgers, stock transfer records and other similar data and records. "Dispute" shall have the meaning set forth in Section 7.05. "Distribution" means the distribution, on the basis provided for in Section 3.01, to the holders of Conexant Common Stock of the shares of Mindspeed Common Stock owned by Conexant on the Distribution Date. "Distribution Agent" means the distribution agent selected by Conexant to distribute Mindspeed Common Stock in connection with the Distribution. "Distribution Date" means the date determined by the Conexant Board in accordance with Section 3.01 as the date as of which the Distribution will be effected. "Employee Matters Agreement" means the Employee Matters Agreement dated as of the date hereof entered into prior to the Time of Distribution by and between Conexant and Mindspeed. 7 "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Financing Agreements" means the Credit Agreement, the Initial Warrants, the Financing Warrants, the Registration Rights Agreements, and each other agreement, instrument or document expressly contemplated thereby to be entered into by any party thereto. "Financing Warrants" means warrants to purchase shares of Mindspeed Common Stock to be issued by Mindspeed to Conexant in connection with borrowings under the Credit Agreement. "Form 10" means the registration statement on Form 10 filed by Mindspeed with the Commission to effect the registration of the Mindspeed Common Stock pursuant to the Exchange Act, including all amendments thereto filed by Mindspeed with the Commission prior to the Time of Distribution. "Former Business" means any corporation, partnership, entity, division, business unit, business, assets, plants, product line, operations or contract (including any assets and liabilities comprising the same) that has been sold, conveyed, assigned, transferred or otherwise disposed of or divested (in whole or in part) by any member of the Pre-Distribution Group or the operations, activities or production of which has been discontinued, abandoned, completed or otherwise terminated (in whole or in part) by any member of the Pre-Distribution Group. "Governmental Entity" means any government or any court, arbitral tribunal, administrative agency or commission or other governmental or regulatory authority or agency, federal, state, local, domestic, foreign or international. "Group" means the Conexant Group or the Mindspeed Group, as applicable. "Hedging Arrangements" means swaps, collars, caps, forward contracts and other hedging arrangements of any kind. "Indemnifiable Losses" means any and all losses, Liabilities, claims, damages, deficiencies, obligations, fines, payments, Taxes, Liens, costs and expenses, matured or unmatured, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, known or unknown, whenever arising and whether or not resulting from Third Party Claims (including the costs and expenses of any and all Actions; all amounts paid in connection with any demands, assessments, judgments, settlements and compromises relating thereto; interest and penalties with respect thereto; out-of-pocket expenses and reasonable attorneys', accountants' and other experts' fees and expenses reasonably incurred in investigating, preparing for or defending against any such Actions or in asserting, preserving or enforcing an Indemnitee's rights hereunder; and any losses that may result from the granting of injunctive relief as a result of any such Actions). "Indemnifying Party" shall have the meaning set forth in Section 4.04(a). 8 "Indemnitee" means any of the Conexant Indemnitees or the Mindspeed Indemnitees who or which is entitled to seek indemnification under this Agreement. "Indemnity Reduction Amounts" shall have the meaning set forth in Section 4.04(a). "Information" means all records, books, contracts, instruments, computer data and other data and information (in each case, in whatever form or medium, including electronic media). "Information Statement" means the information statement with respect to Mindspeed, which is part of the Form 10, sent to holders of Conexant Common Stock in connection with the Distribution. "Initial Warrants" mean warrants to purchase shares of Mindspeed Common Stock dated as of the date hereof issued by Mindspeed to Conexant prior to the Time of Distribution. "Insurance Proceeds" means monies (a) received by an insured from an insurance carrier, (b) paid by an insurance carrier on behalf of an insured or (c) received from any third party in the nature of insurance, contribution or indemnification in respect of any Liability. "Intellectual Property" means all Patents and Trademarks, Trade Secrets, and other intellectual property rights existing as of the Time of Distribution. "Inventories" means inventories, including raw materials, work-in-process, materials, components, finished goods, parts, accessories and supplies. "Jazz" means Jazz Semiconductor, Inc. (formerly named Specialtysemi, Inc.), a Delaware corporation. "Jazz Contribution Agreement" means the Contribution Agreement dated February 23, 2002 among Jazz, Conexant and Carlyle Capital Investors, L.L.C., as amended by the First Amendment to Contribution Agreement dated March 12, 2002. "Jazz Warrant" means the warrant to purchase 2.9 million shares of Conexant Common Stock issued by Conexant to Jazz dated March 12, 2002, as it may be adjusted from time to time. "Liabilities" means any and all claims, debts, liabilities, commitments and obligations of whatever nature, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated, accrued or not accrued, known or unknown, due or to become due, whenever or however arising and whether or not the same would be required by generally accepted accounting principles to be reflected as a liability in financial statements or disclosed in the notes thereto, including all costs and expenses relating thereto and those claims, debts, liabilities, commitments and obligations: 9 (a) based upon, arising out of or relating to any law, statute, rule, regulation, judgment, order, decision or consent decree of any Governmental Entity or any noncompliance therewith or breach or violation of any thereof; (b) in respect of accounts payable; (c) in respect of outstanding checks; (d) based upon, arising out of or relating to workers' compensation, automobile liability, general liability, product liability, intellectual property liability and other claims and matters (whether direct or for indemnification of any Person or otherwise, and whether insured or uninsured); (e) based upon, arising out of or relating to Actions or any award of any arbitrator of any kind; (f) in respect of salary, bonuses, incentive payments, severance payments and other compensation payments and all Taxes and withholdings related thereto; (g) in respect of employee welfare and fringe benefits (including claims for medical and disability benefits); (h) based upon, arising out of or relating to environmental matters (including the presence, release or threatened release of hazardous materials or any other environmental conditions or the violation of any environmental laws), including all removal, remediation and cleanup costs, investigatory costs, settlement costs, governmental response costs, natural resources damages, property damages, personal injury damages and all other costs and damages; (i) based upon, arising out of or relating to Contracts; (j) based upon, arising out of or relating to torts (whether based on negligence, strict liability or otherwise) or infringements; and (k) in respect of products and services, including warranty liabilities, deferred revenues, product liability claims and liabilities in respect of the return, repair or replacement of products. "License and Assignment Agreement" means the License and Assignment Agreement dated as of June 26, 2003 by and between Conexant and Mindspeed. "Lien" means any lien, security interest, pledge, mortgage, charge, restriction, retention of title agreement or other encumbrance of whatever nature. "Machinery and Equipment" means machinery, equipment, tooling, vehicles, furniture and fixtures (other than real property fixtures), leasehold improvements, repair parts, tools, plant, laboratory and office equipment and supplies, computer hardware and software, 10 computer networking equipment, engineering and design equipment, test equipment and other tangible personal property (other than tangible personal property included in other categories of assets in the definition of "Assets"), together with any rights or claims arising out of maintenance or service contracts relating thereto or the breach of any express or implied warranty by the manufacturers or sellers of any of such assets or any component part thereof. "Mindspeed" shall have the meaning set forth in the preamble. "Mindspeed Accounting Ledgers" means the general ledgers and other subsidiary ledgers of Conexant for each of the Mindspeed Company Codes. "Mindspeed Accounts Receivable" mean the Accounts Receivable set forth on the Mindspeed Accounting Ledgers immediately prior to the Time of Distribution. "Mindspeed Assets" means the following: (a) all rights of any member of the Mindspeed Group under any Separation Agreement to which it is or becomes a party; (b) all Assets which are expressly allocated to any member of the Mindspeed Group pursuant to the Employee Matters Agreement or the Tax Allocation Agreement; (c) the following specifically enumerated Assets which immediately prior to the Time of Distribution are owned by Conexant or any of its Subsidiaries (including members of the Mindspeed Group): (i) the Mindspeed Bank Accounts; (ii) the Mindspeed Cash (subject to Section 2.04(b)); (iii) the Mindspeed Accounts Receivable; (iv) the Mindspeed Inventories; (v) the Mindspeed Machinery and Equipment; (vi) the Mindspeed Real Property; (vii) the Patents and Trademarks set forth on Schedule 1.01(d); (viii) rights to the extent relating to the Mindspeed Business to receive indemnification from Rockwell pursuant to the Rockwell Distribution Agreement; (ix) rights to the extent relating to the Mindspeed Business to receive indemnification from Skyworks pursuant to the Skyworks Distribution Agreement; 11 (x) rights to the extent relating to the Mindspeed Business to receive indemnification from Jazz pursuant to the Jazz Contribution Agreement; (xi) one-third of the amount pre-paid by Conexant to ARM Limited, or $580,909, pursuant to the Agreement dated June 14, 2002 between Conexant and ARM Limited; and (xii) all information technology Assets identified in Schedule 1.01(k) as Mindspeed's; (d) the following Assets (other than those described in paragraphs (b) and (c) of the definition of "Conexant Assets") which immediately prior to the Time of Distribution are owned by Conexant or any of its Subsidiaries (including members of the Mindspeed Group) and which are used exclusively in or relate exclusively to the Mindspeed Business, as the same shall exist as of such time: (i) Contracts; (ii) advances, performance and surety bonds, and interests as beneficiary under letters of credit and other similar instruments and all proceeds thereof; (iii) Permits; (iv) credits, prepayments and prepaid expenses; (v) claims, causes of action, rights under express or implied warranties, guarantees and indemnities and similar rights, rights of recovery, rights of set-off, rights of subrogation and all other rights of any kind (including the right to receive mail and other communications); and (vi) goodwill, going concern value and other intangible assets not otherwise included in clauses (a) through (q) of the definition of "Assets"; (e) the following Assets (other than those described in paragraphs (b) and (c) of the definition of "Conexant Assets") which immediately prior to the Time of Distribution are owned by Conexant or any of its Subsidiaries (including members of the Mindspeed Group) and which are used 75% or more in or relate 75% or more to the Mindspeed Business, as the same shall exist as of such time: (i) Data and Records; and (ii) Trade Secrets; and 12 (f) all rights, causes of action and claims of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) to the extent relating to any asset described in clauses (a) through (e) above. Anything contained herein to the contrary notwithstanding, assets described in paragraphs (b) and (c) of the definition of "Conexant Assets" will not be included in Mindspeed Assets. "Mindspeed Bank Accounts" means all bank accounts which are solely in the name of one or more members of the Mindspeed Group immediately prior to the Time of Distribution. "Mindspeed Board" means the Board of Directors of Mindspeed. "Mindspeed Business" means (a) the business and operations engaged in prior to the Time of Distribution by the members of the Pre-Distribution Group (but with respect to each such member who has ceased to be an Affiliate of Conexant or its predecessors, only businesses engaged in prior to the time that such member of the Pre-Distribution Group ceased to be an Affiliate of Conexant or its predecessors) of researching, developing, designing, engineering, manufacturing, having manufactured, assembling, having assembled, selling, distributing, installing, modifying, repairing, servicing and supporting semiconductor networking products for communications applications in enterprise, access, metropolitan and wide-area networks and activities related thereto, (b) Former Businesses set forth on Schedule 1.01(e), (c) other Former Businesses related primarily to any of the foregoing and (d) activities related primarily to the foregoing. "Mindspeed Cash" means (i) the following to the extent set forth on the Mindspeed Accounting Ledgers immediately prior to the Time of Distribution or located at locations of the Mindspeed Business at the Time of Distribution: cash in Mindspeed Bank Accounts, cash on hand, cash equivalents, funds, certificates of deposits, similar instruments and travelers checks and (ii) cash deposits held by third parties securing or otherwise collateralizing obligations relating to the Mindspeed Business immediately prior to the Time of Distribution. "Mindspeed Common Stock" means the common stock, par value $.01 per share, of Mindspeed. "Mindspeed Company Codes" means the Mindspeed company codes set forth on Schedule 1.01(f). "Mindspeed Expenses" means the following out-of-pocket fees, costs and expenses of Conexant or any of its Subsidiaries (including members of the Mindspeed Group), in each case, whether incurred and/or paid before, at or after the Time of Distribution: (a) all out-of-pocket fees, costs, and expenses (including legal fees and expenses) of and related to the Credit Agreement, the credit facility established thereby and the Financing Warrants; and 13 (b) all out-of-pocket fees, costs and expenses of the transfer agent and registrar for the Mindspeed Common Stock. "Mindspeed Financial Instruments" means those credit facilities, guaranties, foreign currency forward exchange contracts, comfort letters, letters of credit and similar instruments related to the Mindspeed Business under which any member of the Conexant Group has any primary, secondary, contingent, joint, several or other Liability, including those set forth on Schedule 1.01(g). "Mindspeed Group" means Mindspeed and the Mindspeed Subsidiaries. "Mindspeed Indemnitees" means each member of the Mindspeed Group and each of their respective Representatives and Affiliates and each of the heirs, executors, successors and permitted assigns of any of the foregoing. "Mindspeed Inventories" means the Inventories set forth on the Mindspeed Accounting Ledgers immediately prior to Time of Distribution. "Mindspeed Liabilities" means the following: (a) all Liabilities of any member of the Mindspeed Group under any Separation Agreement to which it is or becomes a party; (b) all Liabilities for which any member of the Mindspeed Group is expressly made responsible pursuant to the Employee Matters Agreement or the Tax Allocation Agreement; (c) the following specifically enumerated Liabilities of Conexant or any of its Subsidiaries (including members of the Mindspeed Group), in each case whether or not such Liabilities relate to the Broadband Business, the Conexant Assets, the Mindspeed Business or the Mindspeed Assets: (i) all Liabilities set forth on the Mindspeed Accounting Ledgers immediately prior to the Time of Distribution; and (ii) all Liabilities set forth on Schedule 1.01(h); and (d) all Liabilities (other than those described in paragraphs (b) and (c) of the definition of "Conexant Liabilities") of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) to the extent based upon, arising out of or relating to the Mindspeed Assets or the Mindspeed Business, including: (i) all Liabilities (including Liabilities arising out of any breaches or violations) to the extent relating to the Mindspeed Business based upon, arising out of or relating to Contracts (whether or not such Contracts constitute Mindspeed Assets) (including any primary, secondary, contingent or other obligations, such as under guaranties or indemnities, in respect of such 14 Contracts), including (A) all Liabilities to the extent relating to the Mindspeed Assets or the Mindspeed Business for which Conexant has agreed to indemnify Rockwell and certain other Persons pursuant to the Rockwell Distribution Agreement, (B) all Liabilities to the extent relating to the Mindspeed Assets or the Mindspeed Business for which Conexant has agreed to indemnify Skyworks and certain other Persons pursuant to the Skyworks Distribution Agreement and (C) all Liabilities to the extent relating to the Mindspeed Assets or the Mindspeed Business for which Conexant has agreed to indemnify Jazz and certain other Persons pursuant to the Jazz Contribution Agreement; and (ii) the Actions set forth in paragraph E of Schedule 1.01(h). Anything contained herein to the contrary notwithstanding, Liabilities described in paragraphs (b) and (c) of the definition of "Conexant Liabilities" will not be included in Mindspeed Liabilities. "Mindspeed Machinery and Equipment" means the Machinery and Equipment set forth on the Mindspeed Accounting Ledgers immediately prior to the Time of Distribution. "Mindspeed Real Property" means the Real Property set forth on Schedule 1.01(i). "Mindspeed Subsidiary" means each Person listed on Schedule 1.01(j). "New Jazz-Mindspeed Warrant" shall have the meaning set forth in Section 5.04. "Occurrence Basis Policies" shall have the meaning set forth in Section 5.01(b)(i). "Patents and Trademarks" means (a) all patents (including utility and design patents, industrial designs and utility models), patent applications and patent and invention disclosures, together with all reissuances, continuations, continuations-in-part, divisions, revisions, supplementary protection certificates, extensions and re-examinations thereof, and any other U.S. or foreign patent rights entitled to the same priority claim (in whole or in part) as any of the foregoing, (b) trademarks, service marks, trade names, trade dress, logos, Internet domain names, business and product names and slogans and all registrations and applications for registration of any of the foregoing, (c) copyrights and all applications, registrations and renewals in connection therewith and (d) mask work and semiconductor chip right applications, registrations and renewals in connection therewith. "Patent License Agreement" means the Patent License Agreement dated as of the date hereof by and between Conexant and Mindspeed. 15 "Permits" means licenses, permits, authorizations, Consents, certificates, registrations, variances, franchises and other approvals from any Governmental Entity, including those relating to environmental matters. "Person" means any individual, partnership, joint venture, corporation, limited liability entity, trust, unincorporated organization or other entity (including a Governmental Entity). "Policies" means all insurance policies, insurance contracts and claim administration contracts of any kind of Conexant and its Subsidiaries (including members of the Mindspeed Group) and their predecessors which were or are in effect at any time at or prior to the Time of Distribution (other than insurance policies, insurance contracts and claim administration contracts established in contemplation of the Distribution to cover only Mindspeed and its Subsidiaries after the Time of Distribution), including the Property Policy, primary, excess and umbrella, commercial general liability, fiduciary liability, product liability, automobile, aircraft, property and casualty, business interruption, directors and officers liability, employment practices liability, workers' compensation, crime, errors and omissions, special accident, cargo and employee dishonesty insurance policies and captive insurance company arrangements, together with all rights, benefits and privileges thereunder. "Pre-Distribution Group" means (a) each of Conexant, the Subsidiaries of Conexant existing immediately prior to the Time of Distribution (including members of the Mindspeed Group) and Persons that have ceased to be Subsidiaries of Conexant prior to the Time of Distribution, (b) each of the predecessors of each of the foregoing (including Rockwell) and (c) each of the Persons that have ceased to be Subsidiaries and other Affiliates of each of the foregoing and their predecessors prior to the Time of Distribution. Notwithstanding the foregoing, (i) Boeing North American, Inc. and Persons who are Affiliates of Boeing North American, Inc. after December 6, 1996 will not constitute members of the Pre-Distribution Group for periods after December 6, 1996, (ii) Rockwell and Persons who are Affiliates of Rockwell after December 31, 1998 will not constitute members of the Pre-Distribution Group for periods after December 31, 1998 and (iii) Washington and Persons who are Affiliates of Washington or its successor after June 25, 2002 will not constitute members of the Pre-Distribution Group for periods after June 25, 2002. "Privileged Information" means, with respect to a Group, Information regarding a member of such Group, or any of its operations, employees, Assets or Liabilities (whether in documents or stored in any other form or known to its employees or agents) that is or may be protected from disclosure pursuant to the attorney-client privilege, the work product doctrine or other applicable privileges, that a member of the other Group has or may come into possession of or has obtained or may obtain access to pursuant to this Agreement or otherwise. "Property Policy" means the Conexant property insurance policies for the policy year July 1, 2002 through June 30, 2003. 16 "Real Property" means real property (including land, plants, buildings, real property fixtures and improvements) and real property interests (including real property leases, easements and rights of way, occupancy or use). "Recipient Party" shall have the meaning set forth in Section 2.08. "Record Date" means the close of business on June 20, 2003. "Registration Rights Agreements" means the two Registration Rights Agreements dated as of the date hereof entered into prior to the Time of Distribution by and between Conexant and Mindspeed, one each relating to (i) the Initial Warrants and (ii) the Financing Warrants. "Representative" means, with respect to any Person, any of such Person's directors, officers, employees, agents, consultants, advisors, accountants, attorneys and representatives. "Rights" means the Rights to be issued pursuant to the Rights Plan. "Rights Plan" means the rights agreement dated as of June 26, 2003 by and between Mindspeed and Mellon Investor Services LLC, as rights agent. "Rockwell" means Rockwell Automation, Inc. (formerly named Rockwell International Corporation), a Delaware corporation. "Rockwell Distribution Agreement" means the Distribution Agreement dated as of December 31, 1998 between Conexant and Rockwell. "Securities" means all short-term and long-term investments, banker's acceptances, shares of stock, notes, bonds, debentures, evidences of indebtedness, certificates of interest or participation in profit-sharing agreements, collateral-trust certificates, preorganization certificates or subscriptions, transferable shares, puts, calls, straddles, options, investment contracts, voting trusts and certificates and other securities of any kind (other than ownership interests in Subsidiaries). "Separation Agreements" means, collectively, this Agreement, the Employee Matters Agreement, the Tax Allocation Agreement, the Transition Agreement, the Conveyance and Assumption Instruments, the Sublease and any other agreement entered into between Conexant and Mindspeed in connection with the Contribution and the Distribution (other than the Financing Agreements). "Skyworks" means Skyworks Solutions, Inc., a Delaware corporation (formerly named Alpha Industries, Inc.) and successor by merger to Washington. "Skyworks Distribution Agreement" means the Contribution and Distribution Agreement dated as of December 16, 2001, as amended as of June 25, 2002, by and between Conexant and Washington. 17 "Sublease" means the Sublease dated as of the date hereof entered into prior to the Time of Distribution by and between Conexant and Mindspeed relating to premises at 4000 MacArthur Boulevard, Newport Beach, California 92660-3095. "Subsidiary" means, with respect to any Person, any corporation or other organization, whether incorporated or unincorporated, of which such Person or any Subsidiaries of such Person controls or owns, directly or indirectly, more than 50% of the stock or other equity interest, or more than 50% of the voting power entitled to vote on the election of members to the board of directors or similar governing body. "Tax" and "Taxes" shall have the meaning set forth in the Tax Allocation Agreement. "Tax Allocation Agreement" means the Tax Allocation Agreement dated as of the date hereof entered into prior to the Time of Distribution by and between Conexant and Mindspeed. "Third Party Claim" shall have the meaning set forth in Section 4.05(a). "Time of Distribution" means the close of business on the Distribution Date. "Trade Secrets" means (a) trade secrets and confidential business and technical information (including ideas, research and development, know-how, formulas, technology, compositions, manufacturing and production processes and techniques, technical data, engineering, production and other designs, drawings, engineering notebooks, industrial models, mask works, semiconductor chip topographies, software and specifications and any other information meeting the definition of a trade secret under the Uniform Trade Secrets Act); (b) computer and electronic data processing programs and software, both source code and object code (including data and related documentation, flow charts, diagrams, descriptive texts and programs, computer print-outs, underlying tapes, computer databases and similar items), computer applications and operating programs; and (c) all copies and tangible embodiments of any or all of the foregoing (in whatever form or medium, including electronic media). "Transition Agreement" means the Transition Services Agreement dated as of the date hereof entered into prior to the Time of Distribution by and between Conexant and Mindspeed. "Washington" means Washington Sub, Inc., a Delaware corporation. ARTICLE II THE CONTRIBUTION Section 2.01 Intercorporate Reorganization. (a) Prior to the Time of Distribution, Conexant and Mindspeed will take all actions necessary to increase the 18 outstanding shares of Mindspeed Common Stock so that, immediately prior to the Distribution, Conexant will hold a number of shares of Mindspeed Common Stock (rounded down to the nearest whole share) equal to the aggregate number of shares of Conexant Common Stock (excluding treasury shares held by Conexant) issued and outstanding as of the Record Date divided by three. (b) Subject to Section 2.08, prior to the Time of Distribution: (i) Conexant and each Conexant Subsidiary shall convey, assign and transfer, or cause to be conveyed, assigned and transferred, to Mindspeed or a Mindspeed Subsidiary, as appropriate, any and all right, title and interest of Conexant and each of the Conexant Subsidiaries in the Mindspeed Subsidiaries; (ii) Mindspeed and each Mindspeed Subsidiary shall convey, assign and transfer, or cause to be conveyed, assigned and transferred, to Conexant or a Conexant Subsidiary, as appropriate, any and all right, title and interest of Mindspeed and each of the Mindspeed Subsidiaries in the Conexant Subsidiaries; (iii) Conexant and each Conexant Subsidiary shall convey, assign and transfer, or cause to be conveyed, assigned and transferred, to Mindspeed or a Mindspeed Subsidiary, as appropriate, any and all right, title and interest of Conexant and each of the Conexant Subsidiaries in the Mindspeed Assets; (iv) Mindspeed and each Mindspeed Subsidiary shall convey, assign and transfer, or cause to be conveyed, assigned and transferred, to Conexant or a Conexant Subsidiary, as appropriate, any and all right, title and interest of Mindspeed and each of the Mindspeed Subsidiaries in the Conexant Assets; (v) Conexant or a Conexant Subsidiary, as appropriate, shall unconditionally assume and undertake to pay, perform and discharge, in a timely manner and in accordance with the terms thereof, all Liabilities of Mindspeed and the Mindspeed Subsidiaries that are Conexant Liabilities; and (vi) Mindspeed or a Mindspeed Subsidiary, as appropriate, shall unconditionally assume and undertake to pay, perform and discharge, in a timely manner and in accordance with the terms thereof, all Liabilities of Conexant and the Conexant Subsidiaries that are Mindspeed Liabilities. In the event that at any time or from time to time (whether at or after the Time of Distribution) any member of the Conexant Group shall receive or otherwise possess any Mindspeed Asset or interest in a Mindspeed Subsidiary, such member will promptly convey, assign and transfer, or cause to be conveyed, assigned and transferred, such Mindspeed Asset or interest in a Mindspeed Subsidiary to Mindspeed. In the event that at any time or from time to time (whether at or after the Time of Distribution) any member of the Mindspeed Group shall receive or otherwise possess any Conexant Asset or interest in a Conexant Subsidiary, such member will promptly convey, assign and transfer, or cause to be conveyed, 19 assigned and transferred, such Conexant Asset or interest in a Conexant Subsidiary to Conexant. Prior to any such transfer, the Person receiving or possessing such Asset or interest in a Subsidiary will hold such Asset or interest in a Subsidiary in trust for the benefit of the Person entitled thereto (at the expense of the Person entitled thereto). In the event that at any time or from time to time (whether at or after the Time of Distribution) either Conexant or Mindspeed determines that the other party (or any member of such other party's respective Group) shall not have unconditionally assumed any Liabilities that are allocated to such other party (or a member of such other party's respective Group) pursuant to this Agreement, the Employee Matters Agreement or the Tax Allocation Agreement, such other party will promptly execute and deliver, or cause to be executed and delivered, all such documents and instruments and will take, or cause to be taken, all such actions as the requesting party may reasonably request to unconditionally assume, or cause to be unconditionally assumed, such Liabilities. Solely for purposes of implementing the terms of this Agreement, during the period beginning on the date of this Agreement and ending six months after the Distribution Date, Conexant and Mindspeed agree to discuss the allocation of any Asset or Liability of Conexant and its Subsidiaries (including members of the Mindspeed Group) that either of them reasonably believes should be or should have been allocated differently than pursuant to the terms of this Agreement (an "Asset/Liability Allocation Matter"). The Conexant Chief Executive Officer will designate an employee of Conexant and the Mindspeed Chief Executive Officer will designate an employee of Mindspeed who will discuss an appropriate resolution of any Asset/Liability Allocation Matter. If within thirty days of the receipt of the notification of an Asset/Liability Allocation Matter by either Conexant or Mindspeed pursuant to this paragraph, or such other time as Conexant and Mindspeed may agree, the designees have not reached a mutually acceptable resolution of the Asset/Liability Allocation Matter, the matter will be referred for discussion to the Conexant Chief Executive Officer and the Mindspeed Chief Executive Officer. Should a mutually acceptable resolution of the Asset/Liability Allocation Matter not be reached within thirty days following the referral to them, the terms and conditions of this Agreement shall remain in full force and effect, unamended, unmodified and unsupplemented. In no event shall the terms and conditions of this Agreement be amended, modified or supplemented other than in accordance with the provisions of Section 7.07. Nothing in this paragraph shall affect the right of any party to resort to the dispute resolution provisions of Section 7.05 in respect of any dispute, claim or controversy arising out of an alleged breach of any provision of this Agreement. (c) Subject to Section 2.08, Conexant and Mindspeed will take, or cause to be taken, the actions described on Schedule 2.01(c) in connection with United States and international operations of the Broadband Business and the Mindspeed Business. (d) In connection with the transfers of Subsidiaries and Assets and the assumptions of Liabilities contemplated by subsections (b) and (c) of this Section 2.01, Conexant and Mindspeed will execute or cause to be executed by the appropriate entities the Conveyance and Assumption Instruments. The transfer of capital stock contemplated by such subsections will be effected by means of delivery of stock certificates duly endorsed or 20 accompanied by duly executed stock powers and notation on the stock record books of the corporation or other legal entities involved and, to the extent required by applicable law, by notation on appropriate registries. (e) Each of Conexant (on behalf of itself and each other member of the Conexant Group) and Mindspeed (on behalf of itself and each other member of the Mindspeed Group) understands and agrees that, except as expressly set forth in any Separation Agreement, any Financing Agreement or any other agreement or document contemplated by any Separation Agreement or Financing Agreement, no party to any Separation Agreement, Financing Agreement or any other agreement or document contemplated by any Separation Agreement or Financing Agreement either has or is, in such agreement or otherwise, representing or warranting in any way as to the Assets, Subsidiaries, businesses or Liabilities retained, conveyed, assigned, transferred or assumed as contemplated hereby or thereby, as to any consents or approvals required in connection with the transactions contemplated by the Separation Agreements or the Financing Agreements, as to the value or freedom from any Lien of, or any other matter concerning, any Assets, Liabilities or Subsidiaries of such party, or as to the absence of any defenses or rights of setoff or freedom from counterclaim with respect to any claim or other Assets or Subsidiaries of any party, or as to the legal sufficiency of any assignment, document or instrument delivered hereunder or thereunder to convey title to any Asset or Subsidiary or thing of value upon the execution, delivery or filing thereof. Except as may expressly be set forth in any Separation Agreement, all Assets and Subsidiaries being transferred or retained as contemplated by any Separation Agreement are being transferred, or are being retained, on an "as is", "where is" basis (and, in the case of the transfer of any Real Property, by means of a quitclaim or similar form deed or conveyance for title and an assignment for leasehold or other rights not subject to the Sublease) and the respective transferees shall bear the economic and legal risks that any conveyance shall prove to be insufficient or that the title to any Asset or Subsidiary shall be other than good and marketable and free and clear of any Lien. (f) It is the intention of the parties that payments made by the parties to each other after the Time of Distribution pursuant to this Agreement, the Employee Matters Agreement or the Tax Allocation Agreement are to be treated as relating back to the transactions occurring prior to the Time of Distribution pursuant to this Section 2.01 as an adjustment to the transfers of Assets, Subsidiaries and Liabilities contemplated by this Section 2.01, and Conexant and Mindspeed will, and will cause the Conexant Subsidiaries and the Mindspeed Subsidiaries, respectively, to, take positions consistent with such intention with any Tax authority, unless with respect to any payment any party receives an opinion of counsel reasonably acceptable to the other party to the effect that there is no substantial authority for such a position. Section 2.02 Financial Instruments. (a) Mindspeed will (from and after the Time of Distribution, at its expense) take or cause to be taken all actions, and enter into (or cause the Mindspeed Subsidiaries to enter into) such agreements and arrangements, as shall be necessary to effect the release of and substitution for each member of the Conexant Group, effective as of the Time of Distribution, from all primary, secondary, contingent, joint, several 21 and other Liabilities in respect of Mindspeed Financial Instruments (it being understood that all Liabilities in respect of Mindspeed Financial Instruments are Mindspeed Liabilities). (b) Mindspeed's obligations under Section 2.02(a) will continue to be applicable to all Mindspeed Financial Instruments identified at any time by Conexant, whether before, at or after the Time of Distribution. Section 2.03 Intercompany Accounts and Arrangements. (a) Elimination of Intercompany Accounts. (i) Except as set forth in Section 2.03(a)(ii) or on Schedule 2.03(a), Conexant, on behalf of itself and each other member of the Conexant Group, on the one hand, and Mindspeed, on behalf of itself and each other member of the Mindspeed Group, on the other hand, hereby settle and eliminate, by cancellation or transfer to a member of the other Group (whether to cancel or transfer and the manner thereof will be determined by Conexant), effective as of the Time of Distribution, all intercompany receivables, payables and other balances (including intercompany cash management balances) existing immediately prior to the Time of Distribution between Conexant and/or any Conexant Subsidiary, on the one hand, and Mindspeed and/or any Mindspeed Subsidiary, on the other hand. (ii) The provisions of Section 2.03(a)(i) will not apply to any intercompany receivables, payables and other balances arising under any Separation Agreement, including those arising under Section 2.04 or incurred in connection with the payment by any party of any expenses which are required to be paid or reimbursed by the other party pursuant to Section 4.08. (b) Intercompany Agreements. (i) Except as set forth in Section 2.03(b)(ii), in furtherance of the releases and other provisions of Section 4.01, Mindspeed, on behalf of itself and each other member of the Mindspeed Group, and Conexant, on behalf of itself and each other member of the Conexant Group, hereby terminate any and all agreements, arrangements, commitments or understandings in existence as of the Time of Distribution, whether or not in writing, between or among Mindspeed and/or any Mindspeed Subsidiary, on the one hand, and Conexant and/or any Conexant Subsidiary, on the other hand. No such terminated agreement, arrangement, commitment or understanding (including any provision thereof which purports to survive termination) shall be of any further force or effect after the Time of Distribution. (ii) The provisions of Section 2.03(b)(i) will not apply to any of the following agreements, arrangements, commitments or understandings (or to any of the provisions thereof): (A) the Separation Agreements, the Financing Agreements, the License and Assignment Agreement and the Patent License Agreement (and each 22 other agreement, instrument or document expressly contemplated by any Separation Agreement or Financing Agreement to be entered into by any party hereto or any of the members of their respective Groups); (B) any agreements, arrangements, commitments or understandings listed or described on Schedule 2.03(b)(ii); (C) any agreements, arrangements, commitments or understandings to which any Person other than the parties hereto and their respective Affiliates is a party; and (D) any other agreements, arrangements, commitments or understandings that any Separation Agreement or Financing Agreement expressly contemplates will survive the Time of Distribution. Section 2.04 Cash Management. (a) Pre-Distribution Cash Contribution. At least one Business Day prior to the Time of Distribution, Conexant shall contribute to Mindspeed (by wire transfer to Mindspeed's Bank Account at Comerica Bank, Account No. 1850968197, A.B.A. Routing Number 072000096) an amount in cash equal to $97 million. (b) Cash Balances at the Time of Distribution. In the event the amount of Mindspeed Cash (after giving effect to the contribution described in Section 2.04(a)) (x) exceeds $100 million, Mindspeed will pay to Conexant (by wire transfer to Conexant's bank account at Comerica Bank, Account No. 1850967629, A.B.A. Routing Number 072000096), within five Business Days after the Distribution, an amount equal to such excess or (y) is less than $100 million, Conexant will pay to Mindspeed, within five Business Days after the Distribution Date, an amount equal to such deficit. (c) Funding of Outstanding Checks. (i) Mindspeed or a Mindspeed Subsidiary will fund all amounts in respect of checks that are outstanding immediately prior to the Time of Distribution and presented for payment at or after the Time of Distribution in Mindspeed Bank Accounts. (ii) Conexant or a Conexant Subsidiary will fund all amounts in respect of checks that are outstanding immediately prior to the Time of Distribution and presented for payment at or after the Time of Distribution in Conexant Bank Accounts. (iii) The provisions of this Section 2.04(c) with respect to funding of outstanding checks will not affect in any way, and will be subject to, all other provisions of this Agreement providing for the reimbursement of any amounts or the allocation of any Liabilities, including Section 4.08. (d) Customer Payments. (i) Mindspeed will, and will cause the Mindspeed Subsidiaries to, forward to Conexant (for the account of Conexant or the applicable Conexant Subsidiary) any customer payments in respect of accounts receivable constituting Conexant Assets 23 received by Mindspeed or any of the Mindspeed Subsidiaries after the Time of Distribution, whether received in lock boxes, via wire transfer or otherwise, by the first Business Day of the week after the week during which such payment is received. Such amounts will be forwarded by wire transfer (to Conexant's bank account at Comerica Bank, Account No. 1850967629, A.B.A. Routing Number 072000096) in the case of customer payments received within thirty days after the Time of Distribution and by check in the case of customer payments received thereafter. (ii) Conexant will, and will cause the Conexant Subsidiaries to, forward to Mindspeed (for the account of Mindspeed or the applicable Mindspeed Subsidiary) any customer payments in respect of accounts receivable constituting Mindspeed Assets received by Conexant or any of the Conexant Subsidiaries after the Time of Distribution, whether received in lock boxes, via wire transfer or otherwise, by the first business day of the week after the week during which such payment is received. Such amounts will be forwarded by wire transfer (to Mindspeed's bank account at Comerica Bank, Account No. 1850968197, A.B.A. Routing Number 072000096) in the case of customer payments received within thirty days after the Time of Distribution and by check in the case of customer payments received thereafter. Section 2.05 The Mindspeed Board. Prior to the Time of Distribution, Mindspeed and Conexant will take all actions which may be required to elect or otherwise appoint as directors of Mindspeed the persons named on Schedule 2.05 to constitute the board of directors of Mindspeed at the Time of Distribution. Section 2.06 Resignations; Transfer of Stock Held as Nominee. (a) Conexant will cause all of its employees and directors and all of the employees and directors of each other member of the Conexant Group to resign, effective not later than the Time of Distribution, from all boards of directors or similar governing bodies of Mindspeed or any other member of the Mindspeed Group on which they serve, and from all positions as officers of Mindspeed or any other member of the Mindspeed Group in which they serve, except as otherwise specified on Schedule 2.06. Mindspeed will cause all of its employees and directors and all of the employees and directors of each other member of the Mindspeed Group to resign, effective not later than the Time of Distribution, from all boards of directors or similar governing bodies of Conexant or any other member of the Conexant Group on which they serve, and from all positions as officers of Conexant or any other member of the Conexant Group in which they serve, except as otherwise specified on Schedule 2.06. (b) Conexant will cause each of its employees, and each of the employees of the other members of the Conexant Group, who holds stock or similar evidence of ownership of any Mindspeed Group entity as nominee for such entity pursuant to the laws of the country in which such entity is located to transfer such stock or similar evidence of ownership to the Person so designated by Mindspeed to be such nominee as of and after the Time of Distribution. Mindspeed will cause each of its employees, and each of the employees of the other members of the Mindspeed Group, who holds stock or similar evidence of ownership of any Conexant Group entity as nominee for such entity pursuant to the laws of the country in which such entity is located to transfer such stock or similar evidence of 24 ownership to the Person so designated by Conexant to be such nominee as of and after the Time of Distribution. (c) Conexant will cause each of its employees and each of the employees of the other members of the Conexant Group to revoke or withdraw their express written authority, if any, to act on behalf of any Mindspeed Group entity as an agent or representative therefor after the Time of Distribution. Mindspeed will cause each of its employees and each of the employees of the other members of the Mindspeed Group to revoke or withdraw their express written authority, if any, to act on behalf of any Conexant Group entity as an agent or representative therefor after the Time of Distribution. Section 2.07 Mindspeed Certificate of Incorporation and Bylaws; Rights Plan. Prior to the Time of Distribution, (a) the Mindspeed Board will (i) approve the Certificate of Incorporation and will cause the same to be filed with the Secretary of State of the State of Delaware and (ii) adopt the Bylaws, and (b) Conexant, as sole shareholder of Mindspeed, will approve the Certificate of Incorporation. Prior to the Time of Distribution, the Mindspeed Board will adopt the Rights Plan and declare a dividend of the Rights so that each share of Mindspeed Common Stock issued and outstanding as of the Time of Distribution will initially have one Right attached thereto. Section 2.08 Consents. Prior to and after the Distribution Date, Conexant and Mindspeed will, and will cause the Conexant Subsidiaries and the Mindspeed Subsidiaries, respectively, to, use their commercially reasonable efforts (as requested by the other party) to obtain, or to cause to be obtained, all Consents necessary for the transfer of all Assets, Subsidiaries and Liabilities contemplated to be transferred pursuant to this Article II; provided, however, that none of Conexant (or any of the Conexant Subsidiaries) or Mindspeed (or any of the Mindspeed Subsidiaries) shall be obligated to pay any consideration or offer or grant any financial accommodation in connection therewith. Anything contained herein to the contrary notwithstanding, this Agreement shall not constitute an agreement to assign any Contract or Permit if an assignment or attempted assignment of the same without the Consent of any other party or parties thereto or other required Consent would constitute a breach thereof or of any applicable law or in any way impair the rights of any member of the Conexant Group or the Mindspeed Group thereunder. If any such Consent is not obtained or if an attempted assignment would be ineffective or would impair any rights of any member of either Group under any such Contract or Permit so that the contemplated assignee hereunder (the "Recipient Party") would not receive all such rights, then after the Time of Distribution (x) the party contemplated hereunder to assign such Contract or Permit (the "Assigning Party") will use commercially reasonable efforts (it being understood that such efforts shall not include any requirement of the Assigning Party to pay any consideration or offer or grant any financial accommodation) to provide or cause to be provided to the Recipient Party the benefits of any such Contract or Permit and the Assigning Party will promptly pay or cause to be paid to the Recipient Party when received all moneys and properties received by the Assigning Party with respect to any such Contract or Permit and (y) the Recipient Party will pay, perform and discharge on behalf of the Assigning Party all of the Assigning Party's Liabilities thereunder in a timely manner and in accordance with the terms thereof. If and when such Consents are obtained, the transfer of the applicable Contract or Permit shall be 25 effected as promptly following the Time of Distribution as shall be practicable in accordance with the terms of this Agreement. To the extent that any transfers and assumptions contemplated by this Article II shall not have been consummated on or prior to the Time of Distribution, the parties shall cooperate to effect such transfers as promptly following the Time of Distribution as shall be practicable, it nonetheless being agreed and understood by the parties that no party shall be liable in any manner to any other party for any failure of any of the transfers contemplated by this Article II to be consummated prior to the Time of Distribution. ARTICLE III THE DISTRIBUTION Section 3.01 The Distribution. (a) Subject to Section 3.04, prior to the Time of Distribution, Conexant will deliver to the Distribution Agent, for the benefit of holders of record of Conexant Common Stock as of the Record Date, a number of shares of Mindspeed Common Stock (rounded down to the nearest whole share) equal to the number of shares of Conexant Common Stock issued and outstanding as of the Record Date (excluding treasury shares held by Conexant) divided by three, and Conexant will instruct the Distribution Agent to make book-entry credits on the Distribution Date or as soon thereafter as practicable for each holder of record of Conexant Common Stock as of the Record Date, or the designated transferee or transferees of such holder, for a number of shares of Mindspeed Common Stock (rounded down to the nearest whole share) equal to the number of shares of Conexant Common Stock so held by such holder of record as of the Record Date (excluding treasury shares held by Conexant) divided by three. The Distribution will be effective as of the Time of Distribution. (b) Conexant and Mindspeed each will provide to the Distribution Agent all information (including information necessary to make appropriate book-entry credits) and share certificates, in each case, as may be required in order to complete the Distribution on the basis of one share of Mindspeed Common Stock for every three shares of Conexant Common Stock (excluding treasury shares held by Conexant). Section 3.02 Fractional Shares. Anything contained herein to the contrary notwithstanding, no fractional shares of Mindspeed Common Stock will be distributed to holders of Conexant Common Stock in the Distribution. Holders that are otherwise entitled to receive less than one whole share of Mindspeed Common Stock in the Distribution will receive cash in lieu of such fractional share as contemplated hereby. As soon as practicable after the Distribution Date, Conexant will direct the Distribution Agent to determine in accordance with its customary practice the number of fractional shares of Mindspeed Common Stock otherwise allocable to holders of record or beneficial owners of Conexant Common Stock as of the Record Date, to aggregate all such fractional shares and sell as soon as practicable the whole shares obtained by aggregating such fractional shares either in open market transactions or otherwise, in each case at then prevailing trading prices, and to cause to be distributed to each such holder or for the benefit of each such beneficial owner, in lieu of 26 any fractional share, such holder's or owner's ratable share of the proceeds of such sale, after making appropriate deductions of the amount required to be withheld for federal income tax purposes and after deducting an amount equal to all brokerage charges, commissions and transfer taxes attributed to such sale. Conexant will direct the Distribution Agent to seek to aggregate the shares of Conexant Common Stock that may be held by any such beneficial owner thereof through more than one account in determining the fractional share allocable to such beneficial owner. Section 3.03 Cooperation Prior to the Distribution. Prior to the Distribution: (a) Conexant and Mindspeed will prepare the Information Statement which will include appropriate disclosure concerning Mindspeed, its business, operations and management, the Contribution, the Distribution and such other matters as Conexant and Mindspeed may determine and as may be required by law. Conexant and Mindspeed will prepare, and Mindspeed will file with the Commission, the Form 10, which will include or incorporate by reference the Information Statement. Mindspeed will use its commercially reasonable efforts to cause the Form 10 to become effective under the Exchange Act as soon as practicable following the filing thereof. Promptly after effectiveness of the Form 10 and completion of the Information Statement included therein, and prior to the Distribution, Conexant will mail to the holders of Conexant Common Stock the Information Statement. (b) Conexant and Mindspeed will cooperate in preparing, filing with the Commission and causing to become effective any registration statements or amendments thereof which are required to reflect the establishment of, or amendments to, any employee benefit and other plans contemplated by the Employee Matters Agreement. (c) Conexant and Mindspeed will take all such action as may be necessary or appropriate under the securities or "blue sky" laws of the states or other political subdivisions of the United States and the securities laws of any applicable foreign countries or other political subdivisions thereof in connection with the transactions contemplated by this Agreement. (d) Conexant and Mindspeed will cause to be prepared, and Mindspeed will file and use its commercially reasonable efforts to have approved, an application for the listing on the American Stock Exchange of the Mindspeed Common Stock to be distributed in the Distribution. Section 3.04 Conexant Board Action; Conditions to the Distribution. The Conexant Board will in its discretion establish the Record Date and the Distribution Date and all appropriate procedures in connection with the Distribution, but in no event will the Distribution occur prior to such time as each of the following conditions shall have been satisfied or shall have been waived by the Conexant Board in accordance with Section 3.05: (a) the Conexant Board shall be reasonably satisfied that (i) Conexant will have sufficient surplus under Section 170 of the Delaware General Corporation Law to permit the Distribution and (ii) after giving effect to the Contribution and the Distribution, each of 27 Conexant and Mindspeed will not be insolvent and will not have unreasonably small capital with which to engage in its respective businesses; (b) the Conexant Board shall have given final approval of the Distribution; (c) the Conexant Board shall have received a favorable opinion issued by Chadbourne & Parke LLP confirming that the Distribution should qualify as a tax-free reorganization within the meaning of Section 368(a)(i)(d) of the Code; (d) all material Consents which are required to effect the Contribution and the Distribution shall have been obtained and shall be in full force and effect; (e) the Form 10 shall have become effective under the Exchange Act; (f) the Certificate of Incorporation, the Bylaws and the Rights Plan each shall have been adopted and be in effect; (g) the Mindspeed Common Stock shall have been approved for listing upon notice of issuance on the American Stock Exchange; (h) the transactions contemplated by Section 2.01, Section 2.02 and Section 2.04(a) shall have been consummated in all material respects; (i) Conexant and Mindspeed shall have entered into each of the Separation Agreements and the Financing Agreements to which they are parties and each such agreement shall be in full force and effect; (j) no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Contribution or the Distribution shall be in effect; (k) no suit, action or proceeding by or before any court of competent jurisdiction or other Governmental Entity shall have been commenced and be pending to restrain or challenge the Contribution or Distribution, and no inquiry shall have been received that in the reasonable judgment of the Conexant Board may lead to such a suit, action or proceeding; and (l) Mindspeed shall have issued to Conexant the Initial Warrants; provided, that the satisfaction of such conditions will not create any obligation on the part of Conexant to effect or seek to effect the Contribution or the Distribution or in any way limit Conexant's right to terminate this Agreement set forth in Section 7.13 or alter the consequences of any such termination from those specified in Section 7.13. Section 3.05 Waiver of Conditions. Any or all of the conditions set forth in Section 3.04 may be waived, in whole or in part, in the sole discretion of the Conexant Board. The conditions set forth in Section 3.04 are for the sole benefit of Conexant and shall not give 28 rise to or create any duty on the part of Conexant or the Conexant Board to waive or not waive any such conditions. ARTICLE IV MUTUAL RELEASE; INDEMNIFICATION; EXPENSES Section 4.01 Mutual Release. Effective as of the Time of Distribution and except as otherwise specifically set forth in the Separation Agreements and Financing Agreements, each of Conexant, on behalf of itself and each other member of the Conexant Group, on the one hand, and Mindspeed, on behalf of itself and each other member of the Mindspeed Group, on the other hand, hereby releases and forever discharges the other party and its Subsidiaries, and its and their respective officers, directors, agents, record and beneficial security holders (including trustees and beneficiaries of trusts holding such securities), advisors and Representatives (in each case, in their respective capacities as such) and their respective heirs, executors, administrators, successors and assigns, of and from all debts, demands, actions, causes of action, suits, accounts, covenants, contracts, agreements, damages, claims and Liabilities whatsoever of every name and nature, both in law and in equity, which the releasing party has or ever had or ever will have, which arise out of or relate to events, circumstances or actions taken by such other party occurring or failing to occur or any conditions existing at or prior to the Time of Distribution; provided, however, that the foregoing general release shall not apply to (i) any Liabilities or other obligations (including Liabilities with respect to payment, reimbursement, indemnification or contribution) under the Separation Agreements or Financing Agreements or assumed, transferred, assigned, allocated or arising under any of the Separation Agreements or Financing Agreements (including any Liability that the parties may have with respect to payment, performance, reimbursement, indemnification or contribution pursuant to any Separation Agreement or Financing Agreement for claims brought against the parties by third Persons or any Indemnitee), and the foregoing release will not affect any party's right to enforce the Separation Agreements or Financing Agreements in accordance with their terms or (ii) any Liability arising from or relating to any agreement, arrangement, commitment or undertaking described in Section 2.03(b)(ii), or (iii) any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 4.01 (provided, that the parties agree not to bring suit or permit any of their Subsidiaries to bring suit against any member of the other Group with respect to any Liability to the extent such member of the other Group would be released with respect to such Liability by this Section 4.01 but for this clause (iii)). Each of Conexant and Mindspeed acknowledges that it has been advised by its legal counsel and is familiar with the provisions of California Civil Code Section 1542, which provides as follows: "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE 29 MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR." Being aware of said Code section, each of Conexant, on behalf of itself and each of the Conexant Subsidiaries, and Mindspeed, on behalf of itself and each of the Mindspeed Subsidiaries, hereby expressly waives any rights it may have under California Civil Code Section 1542, as well as any other statutes or common law principles of similar effect. Section 4.02 Indemnification by Conexant. Subject to the provisions of this Article IV, Conexant shall indemnify, defend and hold harmless the Mindspeed Indemnitees from and against, and pay or reimburse, as the case may be, the Mindspeed Indemnitees for, all Indemnifiable Losses, as incurred, suffered by any Mindspeed Indemnitee to the extent based upon, arising out of or relating to the following: (a) the Conexant Liabilities (including the failure by Conexant or any other member of the Conexant Group to pay, perform or otherwise discharge the Conexant Liabilities in accordance with their terms), whether such Indemnifiable Losses are based upon, arise out of or relate to events, occurrences, actions, omissions, facts, circumstances or conditions occurring, existing or asserted before, at or after the Time of Distribution; (b) any untrue statement or alleged untrue statement of a material fact contained in the sections of the Form 10 listed on Schedule 4.02(b), or any omission or alleged omission to state in such sections a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; but only in each case with respect to information relating to the Conexant Group provided by Conexant expressly for use in the sections of the Form 10 listed on Schedule 4.02(b); (c) the breach by any member of the Conexant Group of any agreement or covenant contained in a Separation Agreement which does not by its express terms expire at the Time of Distribution; (d) the use by members of the Conexant Group or their respective sublicensees of any intellectual property licensed by Mindspeed and the Mindspeed Subsidiaries pursuant to Section 5.03; and (e) the enforcement by the Mindspeed Indemnitees of their rights to be indemnified, defended and held harmless under this Section 4.02. Section 4.03 Indemnification by Mindspeed. Subject to the provisions of this Article IV, Mindspeed shall indemnify, defend and hold harmless the Conexant Indemnitees from and against, and pay or reimburse, as the case may be, the Conexant Indemnitees for, all Indemnifiable Losses, as incurred, suffered by any Conexant Indemnitee to the extent based upon, arising out of or relating to the following: (a) the Mindspeed Liabilities (including the failure by Mindspeed or any other member of the Mindspeed Group to pay, perform or otherwise discharge the Mindspeed 30 Liabilities in accordance with their terms), whether such Indemnifiable Losses are based upon, arise out of or relate to events, occurrences, actions, omissions, facts, circumstances or conditions occurring, existing or asserted before, at or after the Time of Distribution; (b) any untrue statement or alleged untrue statement of a material fact contained in the Form 10, or any omission or alleged omission to state in the Form 10 a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except in each case with respect to information relating to the Conexant Group provided by Conexant expressly for use in the sections of the Form 10 listed on Schedule 4.02(b); (c) the breach by any member of the Mindspeed Group of any agreement or covenant contained in a Separation Agreement which does not by its express terms expire at the Time of Distribution; (d) the use by members of the Mindspeed Group (or, in the case of intellectual property licensed by Conexant and the Conexant Subsidiaries pursuant to Section 5.03, members of the Mindspeed Group or their respective sublicensees) of any names, trademarks, trade names, domain names, service marks or corporate symbols or logos pursuant to Section 5.02 or intellectual property licensed by Conexant and the Conexant Subsidiaries pursuant to Section 5.03; and (e) the enforcement by the Conexant Indemnitees of their rights to be indemnified, defended and held harmless under this Section 4.03. Section 4.04 Limitations on Indemnification Obligations. (a) The amount which any party (an "Indemnifying Party") is or may be required to pay to an Indemnitee in respect of Indemnifiable Losses or other Liability for which indemnification is provided under this Agreement shall be reduced by any amounts actually received (including Insurance Proceeds actually received) by or on behalf of such Indemnitee (net of increased insurance premiums and charges related directly and solely to the related Indemnifiable Losses and costs and expenses (including reasonable legal fees and expenses) incurred by such Indemnitee in connection with seeking to collect and collecting such amounts) in respect of such Indemnifiable Losses or other Liability (such net amounts are referred to herein as "Indemnity Reduction Amounts"). If any Indemnitee receives any Indemnity Reduction Amounts in respect of an Indemnifiable Loss for which indemnification is provided under this Agreement after the full amount of such Indemnifiable Loss has been paid by an Indemnifying Party or after an Indemnifying Party has made a partial payment of such Indemnifiable Loss and such Indemnity Reduction Amounts exceed the remaining unpaid balance of such Indemnifiable Loss, then the Indemnitee shall promptly remit to the Indemnifying Party an amount equal to the excess (if any) of (A) the amount theretofore paid by the Indemnifying Party in respect of such Indemnifiable Loss, less (B) the amount of the indemnity payment that would have been due if such Indemnity Reduction Amounts in respect thereof had been received before the indemnity payment was made. An insurer or other third party who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification provisions 31 hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other third party shall be entitled to any benefit they would not be entitled to receive in the absence of the indemnification provisions by virtue of the indemnification provisions hereof. (b) In determining the amount of any Indemnifiable Losses, such amount shall be (i) reduced to take into account any net Tax benefit realized by the Indemnitee arising from the incurrence or payment by the Indemnitee of such Indemnifiable Losses and (ii) increased to take into account any net Tax cost incurred by the Indemnitee as a result of the receipt or accrual of payments hereunder (grossed-up for such increase), in each case determined by treating the Indemnitee as recognizing all other items of income, gain, loss, deduction or credit before recognizing any item arising from such Indemnifiable Losses. It is the intention of the parties that indemnity payments made pursuant to this Agreement are to be treated as relating back to the Distribution as an adjustment to capital (i.e., capital contribution or distribution), and the parties shall not take any position inconsistent with such intention before any Tax Authority (as defined in the Tax Allocation Agreement), except to the extent that a final determination (as defined in Section 1313 of the Code) with respect to the recipient party causes any such payment not to be so treated. Section 4.05 Procedures Relating to Indemnification. (a) If a claim or demand is made against an Indemnitee, or an Indemnitee shall otherwise learn of an assertion, by any Person who is not a party to this Agreement (or an Affiliate thereof) as to which an Indemnifying Party may be obligated to provide indemnification pursuant to this Agreement (a "Third Party Claim"), such Indemnitee will notify the Indemnifying Party in writing, and in reasonable detail, of the Third Party Claim reasonably promptly after becoming aware of such Third Party Claim; provided, however, that failure to give such notification will not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure. Thereafter, the Indemnitee will deliver to the Indemnifying Party, promptly after the Indemnitee's receipt thereof, copies of all material notices and documents (including court papers) received or transmitted by the Indemnitee relating to the Third Party Claim. (b) If a Third Party Claim is made against an Indemnitee, the Indemnifying Party will be entitled to participate in or to assume the defense thereof (in either case, at the expense of the Indemnifying Party) with counsel selected by the Indemnifying Party and reasonably satisfactory to the Indemnitee. Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party will not be liable to the Indemnitee for any legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, that if in the Indemnitee's reasonable judgment a conflict of interest exists in respect of such claim or if the Indemnifying Party shall have assumed responsibility for such claim with any reservations or exceptions, such Indemnitee will have the right to employ separate counsel reasonably satisfactory to the Indemnifying Party to represent such Indemnitee and in that event the reasonable fees and expenses of such separate counsel (but not more than one separate counsel for all Indemnitees similarly situated) shall be paid by such Indemnifying Party. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnitee will have the right to participate in the 32 defense thereof and to employ counsel, at its own expense, separate from the counsel employed by the Indemnifying Party, it being understood that the Indemnifying Party will control such defense. The Indemnifying Party will be liable for the fees and expenses of counsel employed by the Indemnitee for any period during which the Indemnifying Party has failed to assume the defense thereof. If the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnifying Party will promptly supply to the Indemnitee copies of all material correspondence and documents relating to or in connection with such Third Party Claim and keep the Indemnitee fully informed of all material developments relating to or in connection with such Third Party Claim (including providing to the Indemnitee on reasonable request updates and summaries as to the status thereof). If the Indemnifying Party chooses to defend a Third Party Claim, the parties hereto will cooperate in the defense thereof (such cooperation to be at the expense, including reasonable legal fees and expenses, of the Indemnifying Party), which cooperation shall include the retention in accordance with this Agreement and (upon the Indemnifying Party's request) the provision to the Indemnifying Party of records and information which are reasonably relevant to such Third Party Claim, and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. (c) No Indemnifying Party will consent to any settlement, compromise or discharge (including the consent to entry of any judgment) of any Third Party Claim without the Indemnitee's prior written consent (which consent will not be unreasonably withheld); provided, that if the Indemnifying Party assumes the defense of any Third Party Claim, the Indemnitee will agree to any settlement, compromise or discharge of such Third Party Claim which the Indemnifying Party may recommend and which by its terms obligates the Indemnifying Party to pay the full amount of Indemnifiable Losses in connection with such Third Party Claim and unconditionally and irrevocably releases the Indemnitee and its Affiliates completely from all Liability in connection with such Third Party Claim; provided, however, that the Indemnitee may refuse to agree to any such settlement, compromise or discharge (x) that provides for injunctive or other nonmonetary relief affecting the Indemnitee or any of its Affiliates or (y) that, in the reasonable opinion of the Indemnitee, would otherwise materially adversely affect the Indemnitee or any of its Affiliates. Whether or not the Indemnifying Party shall have assumed the defense of a Third Party Claim, the Indemnitee will not (unless required by law) admit any liability with respect to, or settle, compromise or discharge, such Third Party Claim without the Indemnifying Party's prior written consent (which consent will not be unreasonably withheld). (d) Any claim on account of Indemnifiable Losses which does not involve a Third Party Claim will be asserted by reasonably prompt written notice given by the Indemnitee to the Indemnifying Party from whom such indemnification is sought. The failure by any Indemnitee so to notify the Indemnifying Party will not relieve the Indemnifying Party from any liability which it may have to such Indemnitee under this Agreement, except to the extent that the Indemnifying Party shall have been actually prejudiced by such failure. (e) In the event of payment in full by an Indemnifying Party to any Indemnitee in connection with any Third Party Claim, such Indemnifying Party will be subrogated to and shall stand in the place of such Indemnitee as to any events or 33 circumstances in respect of which such Indemnitee may have any right or claim relating to such Third Party Claim against any claimant or plaintiff asserting such Third Party Claim or against any other Person. Such Indemnitee will cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right or claim. Section 4.06 Remedies Cumulative. Subject to the provisions of Section 7.05, the remedies provided in this Article IV shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party. Section 4.07 Indemnification under Tax Allocation Agreement. Notwithstanding anything in this Agreement to the contrary, indemnification in respect of Tax matters will be governed exclusively by the Tax Allocation Agreement. Section 4.08 Expenses. (a) Except as otherwise set forth in any Separation Agreement or Financing Agreement, (i) all Conexant Expenses will be charged to and paid by Conexant and (ii) all Mindspeed Expenses will be charged to and paid by Mindspeed. (b) Within ten days after the Distribution Date, Mindspeed will reimburse Conexant (by wire transfer to Conexant's bank account at Comerica Bank, Account No. 1850967629, A.B.A. Routing Number 072000096) for all amounts in respect of Mindspeed Expenses paid by Conexant or any of its Subsidiaries (including members of the Mindspeed Group) before or at the Time of Distribution and notified in writing by Conexant to Mindspeed within five days after the Distribution Date. From time to time thereafter, promptly after Conexant's request therefor, and in any event within ten days after any such request, Mindspeed will reimburse Conexant (by wire transfer to the same bank account referred to in the preceding sentence) for all Mindspeed Expenses paid by Conexant or any of its Subsidiaries before, at or after the Time of Distribution (other than as previously reimbursed by Mindspeed pursuant to the preceding sentence). Conexant will, at the request of Mindspeed, provide Mindspeed with appropriate documentation to support Mindspeed Expenses required to be reimbursed to Conexant pursuant to this Section 4.08(b). (c) Except as otherwise set forth in any Separation Agreement or Financing Agreement, and subject in all events to the provisions of Section 4.08(a), all out-of-pocket costs and expenses incurred following the Time of Distribution in connection with implementation of the transactions contemplated by the Separation Agreements will be charged to and paid by the party for whose benefit the expenses are incurred, with any out-of-pocket expenses which cannot be allocated on such basis to be split equally between Conexant and Mindspeed. 34 ARTICLE V CERTAIN OTHER MATTERS Section 5.01 Insurance. (a) Coverage. Subject to the provisions of this Section 5.01, coverage of Mindspeed and the Mindspeed Subsidiaries under all Policies shall cease as of the Time of Distribution. From and after the Time of Distribution, Mindspeed and the Mindspeed Subsidiaries will be responsible for obtaining and maintaining all insurance coverages in their own right. (b) Rights Under Shared Policies. From and after the Time of Distribution, Mindspeed and the Mindspeed Subsidiaries will have no rights with respect to any Policies, except that: (i) Mindspeed will have the right to assert claims (and Conexant will use commercially reasonable efforts to assist Mindspeed in asserting claims) for any loss, liability or damage with respect to Mindspeed Assets or Mindspeed Liabilities under Policies with third-party insurers which are "occurrence basis" insurance policies ("Occurrence Basis Policies") arising out of insured incidents occurring from the date coverage thereunder first commenced until the Time of Distribution to the extent that the terms and conditions of any such Occurrence Basis Policies and agreements relating thereto so allow, and (ii) Mindspeed will have the right to continue to prosecute claims with respect to Mindspeed Assets or Mindspeed Liabilities properly asserted with an insurer prior to the Time of Distribution (and Conexant will use commercially reasonable efforts to assist Mindspeed in connection therewith) under Policies with third-party insurers which are insurance policies written on a "claims made" basis ("Claims Made Policies") arising out of insured incidents occurring from the date coverage thereunder first commenced until the Time of Distribution to the extent that the terms and conditions of any such Claims Made Policies and agreements relating thereto so allow, provided, that in the case of both clauses (i) and (ii) above, (A) all of Conexant's and each Conexant Subsidiary's reasonable out-of-pocket costs and expenses incurred in connection with the foregoing are promptly paid by Mindspeed, (B) Conexant and the Conexant Subsidiaries may, at any time, without liability or obligation to Mindspeed or any Mindspeed Subsidiary (other than as set forth in Section 5.01(d)), amend, commute, terminate, buy-out, extinguish liability under or otherwise modify any Occurrence Basis Policies or Claims Made Policies (and such claims shall be subject to any such amendments, commutations, terminations, buy-outs, extinguishments and modifications), (C) such claims will be subject to (and recovery thereon will be reduced by the amount of) any applicable deductibles, retentions or self-insurance provisions, (D) such claims will be subject to (and recovery thereon will be reduced by the amount of) any payment or reimbursement obligations of 35 Conexant, any Conexant Subsidiary or any Affiliate of Conexant or any Conexant Subsidiary in respect thereof and (E) such claims will be subject to exhaustion of existing aggregate limits. In the event that claims submitted by Conexant and Mindspeed exhaust existing aggregate limits in any one policy year, the amount payable under the Policies shall be allocated pro rata based on the amounts paid in satisfaction of such claims or the amounts that would have been paid to satisfy such claims absent exhaustion of Policy limits. To the extent the amount paid to Mindspeed or Conexant, as the case may be, in satisfaction of claims exceeds its pro rata portion, Mindspeed or Conexant, as the case may be, shall pay to the other party an amount equal to such excess. Conexant's obligation to use commercially reasonable efforts to assist Mindspeed in asserting claims under applicable Policies will include using commercially reasonable efforts in assisting Mindspeed to establish its right to coverage under such Policies (so long as all of Conexant's reasonable out-of-pocket costs and expenses in connection therewith are promptly paid by Mindspeed). None of Conexant or the Conexant Subsidiaries will bear any Liability for the failure of an insurer to pay any claim under any Policy. It is understood that any Claims Made Policies will not provide any coverage to Mindspeed and the Mindspeed Subsidiaries for incidents occurring prior to the Time of Distribution but which are asserted with the insurance carrier after the Time of Distribution. If a claim or claims submitted by Mindspeed are paid under any Policy during any policy year in which no claim or claims are paid to Conexant, and Conexant's annual premium increases in the next policy year in respect of the Policy, then the full amount of such premium increase in the first policy year after such Mindspeed claim or claims are paid shall be deemed to be attributable to the Mindspeed claim or claims and charged to Mindspeed. Promptly (and in no event later than ten (10) Business Days) after receipt of a written request by Conexant, Mindspeed shall reimburse Conexant for the full amount of such annual premium increase. If claims submitted by both Conexant and Mindspeed are paid under the same Policy during any policy year, and Conexant's annual premium increases in the next policy year in respect of the Policy, then the amount of the premium increase will be allocated between Conexant and Mindspeed based on the amount of the claims paid to each party during the prior policy year. Promptly (and in no event later than ten (10) Business Days) after receipt of a written request by Conexant, Mindspeed shall reimburse Conexant for its pro rata portion. (c) Rights Under Property Policy. Conexant will request that the insurer under the Property Policy permit members of the Mindspeed Group to be named as additional named insureds under the Property Policy with respect to incidents occurring from the Time of Distribution to July 1, 2003, provided, that no member of the Conexant Group will be required to pay any consideration or grant any financial or other accommodation in connection therewith. In connection therewith, from and after the Time of Distribution, Mindspeed will have the right to assert claims (and Conexant will use commercially reasonable efforts to assist Mindspeed in asserting claims) for any loss, liability or damage with respect to Mindspeed Assets or Mindspeed Liabilities under the Property Policy arising out of insured incidents occurring from the Time of Distribution to July 1, 2003 to the extent that the terms and conditions of the Property Policy and agreements relating thereto and the insurer thereunder so allow; provided, that (i) all of Conexant's and each Conexant Subsidiary's reasonable costs and expenses incurred in connection with the foregoing are promptly paid by Mindspeed, (ii) Conexant and the Conexant Subsidiaries may, at any time, without liability or obligation to Mindspeed or any Mindspeed Subsidiary (other than as set 36 forth in Section 5.01(d)), amend, commute, terminate, buy-out, extinguish liability under or otherwise modify the Property Policy (and such claims shall be subject to any such amendments, commutations, terminations, buy-outs, extinguishments and modifications), (iii) such claims will be subject to (and recovery thereon will be reduced by the amount of) any applicable deductibles, retentions, self-insurance provisions or any payment or reimbursement obligations of Conexant, any Conexant Subsidiary or any Affiliate of Conexant or any Conexant Subsidiary in respect thereof, and (iv) such claims will be subject to exhaustion of existing aggregate limits. Conexant's obligation to use commercially reasonable efforts to assist Mindspeed in asserting claims under the Property Policy will include using commercially reasonable efforts in assisting Mindspeed to establish its right to coverage under the Property Policy (so long as all of Conexant's costs and expenses in connection therewith are promptly paid by Mindspeed). None of Conexant or the Conexant Subsidiaries will bear any Liability for the failure of the insurer to pay any Mindspeed claim under the Property Policy. Within five (5) Business Days after the Time of Distribution, Mindspeed will reimburse Conexant for its pro rata portion of the premium paid by Conexant under the Property Policy reasonably determined by Conexant to be attributable to Mindspeed for the period from the Time of Distribution to June 30, 2003. (d) Conexant Actions. In the event that after the Time of Distribution Conexant or any Conexant Subsidiary proposes to amend, commute, terminate, buy-out, extinguish liability under or otherwise modify any Policies under which Mindspeed has rights to assert claims pursuant to Section 5.01(b) and Section 5.01(c) in a manner that would adversely affect any such rights of Mindspeed, (i) Conexant will give Mindspeed prior notice thereof and consult with Mindspeed with respect to such action (it being understood that the decision to take any such action will be in the sole discretion of Conexant) and (ii) Conexant will pay to Mindspeed its equitable share (which shall be determined by Conexant in good faith based on the amount of premiums paid by or allocated to the Mindspeed Business in respect of the applicable Policy) of any net proceeds actually received by Conexant from the insurer under the applicable Policy as a result of such action by Conexant (after deducting Conexant's reasonable costs and expenses incurred in connection with such action). (e) Administration. From and after the Time of Distribution: (i) Conexant or a Conexant Subsidiary, as appropriate, will be responsible for the Claims Administration with respect to claims of Conexant and the Conexant Subsidiaries under Policies; and (ii) Mindspeed or a Mindspeed Subsidiary, as appropriate, will be responsible for the Claims Administration with respect to claims of Mindspeed and the Mindspeed Subsidiaries under Policies. (f) Insurance Premiums. From and after the Time of Distribution, Conexant will pay all premiums (retrospectively-rated or otherwise) as required under the terms and conditions of the respective Policies in respect of periods prior to the Time of Distribution, whereupon Mindspeed will, upon the request of Conexant, forthwith reimburse 37 Conexant for that portion of such premiums paid by Conexant as are reasonably determined by Conexant to be attributable to the Mindspeed Business. (g) Agreement for Waiver of Conflict and Shared Defense. In the event that a Policy provides coverage for both Conexant and/or a Conexant Subsidiary, on the one hand, and Mindspeed and/or a Mindspeed Subsidiary, on the other hand, relating to the same occurrence, Conexant and Mindspeed agree to defend jointly and to waive any conflict of interest necessary to the conduct of that joint defense. Nothing in this Section 5.01(g) will be construed to limit or otherwise alter in any way the indemnity obligations of the parties to this Agreement, including those created by this Agreement, by operation of law or otherwise. (h) Directors' and Officers' Insurance. Conexant will use commercially reasonable efforts to cause the persons currently serving as directors and/or officers of Conexant or any Subsidiary of Conexant who will be, effective as of the Time of Distribution, directors and/or officers of Mindspeed or any Mindspeed Subsidiary to be covered for a period of six years from the Time of Distribution with respect to claims arising from facts or events which occurred prior to the Time of Distribution by the directors' and officers' liability insurance policies maintained by Conexant during such six-year period following the Time of Distribution for all persons who served as directors and/or officers of Conexant or any Conexant Subsidiary prior to the Time of Distribution with respect to claims arising from facts or events which occurred prior to the Time of Distribution. The parties understand and acknowledge that coverage under such directors' and officers' liability insurance policies will continue so long as the continuity date under such policies remains December 31, 1998. Conexant shall be under no obligation to purchase run-off coverage in the event that the continuity date under such policies changes. In addition, Conexant shall not be restricted from reducing the amount of directors' and officers' liability insurance coverage purchased after the Time of Distribution so long as the coverage for the Mindspeed directors and officers is no less than the coverage purchased for Conexant's ongoing directors and officers. Section 5.02 Use of Names, Trademarks, etc. (a) From and after the Time of Distribution, subject to Section 5.02(b), Conexant will own all rights of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) in, and to the use of, the Conexant Marks. Prior to or promptly after the Time of Distribution (but in no event later than 90 days after the Time of Distribution in the case of United States Persons and 180 days after the Time of Distribution in the case of non-United States Persons), Mindspeed will change the name of any Mindspeed Subsidiary or other Person under its control to eliminate therefrom the names "Conexant", "Conexant Systems" and "Conexant Systems, Inc." and all derivatives thereof. (b) From and after the Time of Distribution, except as permitted in this Section 5.02(b), the Mindspeed Group will not use or have any rights to the Conexant Marks or any name, mark or symbol confusingly similar thereto, or any special script, type font, form, style, logo, design, device, trade dress or symbol which contains, represents or evokes the Conexant Marks or any name or mark confusingly similar thereto. From and after the Time of Distribution, the Mindspeed Group will not hold itself out as having any affiliation with the Conexant Group. However, Conexant hereby grants to Mindspeed a non-exclusive, non-transferable (other than by way of sublicenses to members of the Mindspeed Group) 38 license to utilize without obligation to pay royalties to Conexant the names, trademarks, trade names and service marks "Conexant", "Conexant Systems" and "Conexant Systems, Inc." and any corporate symbol or logo related thereto in connection with stationery, supplies, labels, catalogs, vehicles, signs, packaging and products of the Mindspeed Business, but only as described in paragraphs (i) through (v) of this Section 5.02(b), subject to the terms and conditions of this Section 5.02(b) and Section 5.02(c), in each case in the same manner and to the same extent as such names, trademarks, trade names, service marks, corporate symbols or logos were used by the Mindspeed Business at any time within the two year period preceding the Distribution: (i) All documents constituting Mindspeed Assets as of the Time of Distribution within the following categories may be used for the duration of the periods following the Distribution indicated below or until the supply is exhausted, whichever is the first to occur:

Maximum Period of Permitted Use Following the Category of Documents Distribution - --------------------- ------------ A. Stationery 6 months B. Invoices, purchase orders, debit and credit memos and other similar documents of a transactional nature 6 months C. Business cards 6 months D. Other outside forms such as packing lists, labels, packing materials and cartons, etc. 6 months E. Forms for internal use only 6 months F. Product literature 6 months;

provided, however, that Mindspeed will cause each document within any of the above categories A, B or F used for any purpose within the stated period to clearly and prominently display a statement, the form of which is approved by Conexant, to the effect that the Mindspeed Group was formerly affiliated with Conexant. (ii) All vehicles constituting Mindspeed Assets as of the Time of Distribution may continue to be used without re-marking (except as to legally required permit numbers, license numbers, etc.) for a period not to exceed six months following the Distribution Date or the date of disposition of the vehicle, whichever is the first to occur. Mindspeed will cause all markings on such vehicles to be removed or permanently obscured prior to the disposition of such vehicles. 39 (iii) Within six months following the Distribution Date, Mindspeed will remove or cause to be removed from display all signs and displays which contain the Conexant Marks. (iv) Products of the Mindspeed Business may have applied thereto the names, trademarks, trade names or service marks "Conexant", "Conexant Systems" or "Conexant Systems, Inc." or any Conexant corporate symbol or logo related thereto for a period of six months after the Distribution. (v) Products of the Mindspeed Business in finished goods inventory and work in process (to the extent the same bear the name, trademark, trade name or service mark "Conexant", "Conexant Systems" or "Conexant Systems, Inc." or any Conexant corporate symbol or logo related thereto as of the Time of Distribution or have any such name, trademark, trade name, service mark, corporate symbol or logo applied to them in accordance with paragraph (iv) above) may be disposed of without re-marking. (c) (i) Apart from the rights granted under Section 5.02(b), no member of the Mindspeed Group shall have any right, title or interest in, or to the use of, the Conexant Marks, either alone or in combination with any other word, name, symbol, device, trademarks, or any combination thereof. Anything contained herein to the contrary notwithstanding, except as expressly permitted by Section 5.02(b), in no event will any member of the Mindspeed Group utilize the Conexant Marks as a component of a company or trade name. Mindspeed will not, and will cause each other member of the Mindspeed Group not to, challenge or contest the validity of the Conexant Marks, the registration thereof or the ownership thereof by the Conexant Group. Mindspeed will not, and will cause each other member of the Mindspeed Group not to, apply anywhere at any time for any registration as owner or exclusive licensee of the Conexant Marks. If, notwithstanding the foregoing, any member of the Mindspeed Group develops, adopts or acquires, directly or indirectly, any right, title or interest in, or to the use of, any Conexant Marks in any jurisdiction, or any goodwill incident thereto, Mindspeed will, and will cause the Mindspeed Subsidiaries, upon the request of Conexant, and for a nominal consideration of one dollar, assign or cause to be assigned to Conexant or any designee of Conexant, all right, title and interest in, and to the use of, such Conexant Marks in any and all jurisdictions, together with any goodwill incident thereto. (ii) If the laws of any country require that any mark subject to Section 5.02(b) or the right of any member of the Mindspeed Group to use any mark as permitted by Section 5.02(b) be registered in order to fully protect the Conexant Group, Conexant and Mindspeed will cooperate in constituting such member of the Mindspeed Group as a registered user (or its equivalent) in each of the countries in which such registration is necessary. If any such laws of any country require that any such mark or the use by any member of the Mindspeed Group of any such mark be registered prior to use in order to protect fully the Conexant Group, the license granted pursuant to Section 5.02(b) will not extend to such country until such registration has been effected to the reasonable satisfaction of Conexant. Any expenses for registering such mark or constituting such 40 member of the Mindspeed Group as a registered user in any country shall be borne by Mindspeed. Any registration of such member of the Mindspeed Group as a registered user of any mark hereunder shall be expunged on termination of the period of permitted use under this Agreement or upon a breach or threatened breach by any member of the Mindspeed Group of the terms of this Section 5.02 and Mindspeed will, upon request of Conexant, take all necessary steps to cause such registration to be so expunged upon such termination or breach or threatened breach. (iii) Conexant will have the right to terminate the license granted in Section 5.02(b) upon 30 days written notice to Mindspeed for any material failure by any member of the Mindspeed Group to observe the terms of Section 5.02(b) or this Section 5.02(c), provided that such failure is not remedied prior to the effectiveness of the termination. (iv) Mindspeed hereby constitutes and appoints Conexant the true and lawful attorney of Mindspeed and its Subsidiaries to act as their attorney-in-fact to execute any documents and to take all necessary steps to cause Mindspeed and its Subsidiaries to perform any of their obligations set forth in this Section 5.02(c), provided however, that Conexant will provide Mindspeed sixty days written notice prior to executing such documents or commencing such steps. Section 5.03 License of Intellectual Property. (a) Licenses from Conexant to Mindspeed. (i) Conexant-Owned Intellectual Property. Subject to Section 5.03(a)(v) and Section 5.03(c) and subject to any licenses or rights previously granted to a third party, effective as of the Time of Distribution, Conexant, on behalf of itself and the Conexant Subsidiaries, hereby grants to the Mindspeed Group a nonexclusive, worldwide, irrevocable (except as provided in Section 5.03(a)(vi)), royalty-free license, without the right to assign or grant sublicenses except as provided in Sections 5.03(a)(iii) and (iv), under all Intellectual Property that constitutes Conexant Assets (excluding trademarks, trade names, domain names, service marks, trade dress and any other form of trade identity) and that the Conexant Group has a right to license without the payment of royalties or other fees to a third party, (A) with respect to any copyrighted work included in such Intellectual Property, to reproduce, display, distribute and prepare derivative works of such copyrighted work; and (B) to make, have made (including by third-party contract manufacturers), use, import, sell, offer for sale, and otherwise dispose of Mindspeed Products and to practice any process involved in the use or manufacture thereof. For purposes of this Section 5.03, a product will be considered a "Mindspeed Product" if the specifications and designs of such product (taken as a whole) are developed or owned by, or exclusively licensed to, Mindspeed or a Mindspeed Subsidiary (even if the specifications and designs of individual components of such Product are not owned or developed by or exclusively licensed to Mindspeed or a Mindspeed Subsidiary). 41 (ii) Third-Party Intellectual Property. Solely to the extent allowed (without Conexant or any Conexant Subsidiary being required to pay any royalty or other fee to a third party) by, and subject to all applicable terms, conditions, limitations and requirements of, any Contract pursuant to which Intellectual Property owned by a third party is licensed to Conexant or any Conexant Subsidiary, Conexant, on behalf of itself and the Conexant Subsidiaries, hereby grants to the Mindspeed Group a nonexclusive, worldwide, irrevocable (except as provided in Section 5.03(a)(vi)), royalty-free sublicense, without the right to assign or grant further sublicenses except as provided in Sections 5.03(a)(iii) and (iv), under such third-party Intellectual Property, (A) with respect to any copyrighted work included in such third-party Intellectual Property, to reproduce, display, distribute and prepare derivative works of such copyrighted work; and (B) to make, have made (including by third-party contract manufacturers), use, import, sell, offer for sale, and otherwise dispose of Mindspeed Products and to practice any process involved in the use or manufacture thereof. If, at any time after the Time of Distribution, Mindspeed becomes aware of any Intellectual Property owned by a third party that was licensed to Conexant or a Conexant Subsidiary as of the Time of Distribution and that Conexant or the Conexant Subsidiary had (at the Time of Distribution) and continues to have the right to sublicense to the Mindspeed Group (or any portion thereof) without being required to pay any royalty or other fee to the third party, but that was not effectively sublicensed to the Mindspeed Group pursuant to the previous sentence, then at Mindspeed's written request, Conexant will grant, or (provided that the relevant Conexant Subsidiary is at the time a wholly-owned subsidiary of Conexant) cause the Conexant Subsidiary to grant, to the Mindspeed Group (or if sublicensing to the entire Mindspeed Group is not allowed, to a portion thereof, to the maximum extent allowed), a nonexclusive, royalty-free sublicense to such third-party Intellectual Property, to the maximum extent (and solely to this extent) allowed under, and subject to all applicable terms, conditions, limitations and requirements of, the Contract pursuant to which such third-party Intellectual Property is licensed to Conexant or the Conexant Subsidiary. (iii) Assignment of License Rights. Mindspeed or a Mindspeed Subsidiary may assign any or all of its rights under the license granted in Section 5.03(a)(i) (other than the right to sublicense provided in Section 5.03(a)(iv)) to any entity that is, at the time of such assignment, a direct or indirect wholly-owned subsidiary of Mindspeed. Except as expressly provided in the preceding sentence and in Section 5.03(a)(iv), and notwithstanding anything to the contrary in this Agreement, neither Mindspeed nor any Mindspeed Subsidiary may assign or otherwise transfer any of its rights under such license (whether in insolvency proceedings, in corporate mergers, by acquisition or other change of control or otherwise), and any purported assignment or transfer in violation hereof will be null and void. Mindspeed or a Mindspeed Subsidiary may assign any or all of its rights under any sublicense of third-party Intellectual Property granted in Section 5.03(a)(ii) to the maximum extent (and solely to this extent) allowed under, and subject to all applicable terms, conditions, limitations and requirements of, the Contract pursuant to which such third-party Intellectual Property is licensed to Conexant or a Conexant Subsidiary. 42 (iv) Sublicensing. Subject to Section 5.03(a)(v)(B), Mindspeed or a Mindspeed Subsidiary may sublicense any or all of its rights under the license granted in Section 5.03(a)(i) (other than the right to sublicense provided herein) (A) to any entity that is, at the time when such sublicense grant is made, a direct or indirect wholly-owned subsidiary of Mindspeed; (B) to any third party in connection with a divestiture, sale, or spin-off of any business unit, product line, or business operation of Mindspeed or a Mindspeed Subsidiary; and/or (C) to any third party that works under a joint development agreement with Mindspeed to jointly develop a new Mindspeed Product or to jointly redevelop an existing Mindspeed Product wherein the Mindspeed contribution comprises a substantial hardware contribution to the resulting Mindspeed Product developed under the joint development agreement. Except as expressly provided in the preceding sentence, and notwithstanding anything to the contrary in this Agreement, neither Mindspeed nor any Mindspeed Subsidiary may sublicense any of its rights under such license, and any purported sublicense in violation hereof will be null and void. Mindspeed or a Mindspeed Subsidiary may sublicense any or all of its rights under any sublicense of third-party Intellectual Property granted in Section 5.03(a)(ii) to the maximum extent (and solely to this extent) allowed under, and subject to all applicable terms, conditions, limitations and requirements of, the Contract pursuant to which such third-party Intellectual Property is licensed to Conexant or the Conexant Subsidiary. (v) Limitations on Mindspeed's Rights. (A) Change in Control. If Mindspeed or any Mindspeed Subsidiary undergoes a Change in Control, the rights licensed to Mindspeed or such Mindspeed Subsidiary, as the case may be, in Section 5.03(a)(i) will be limited at all times after such Change in Control to (i) Mindspeed Products being developed, manufactured, or sold by or for Mindspeed or the Mindspeed Subsidiary, as the case may be, immediately prior to the time of such Change in Control, (ii) future versions of such Mindspeed Products, and (iii) Successor Products of such Mindspeed Products developed by or for Mindspeed or the Mindspeed Subsidiary after the Change in Control occurs, and in no event will such licenses or rights be deemed to extend to products already developed or being developed, manufactured, or sold by or for any third party involved in the Change in Control immediately prior to the time of the Change in Control. (B) Sublicense. If Mindspeed or any Mindspeed Subsidiary grants a sublicense permitted under Section 5.03(a)(iv) to any of the rights licensed to Mindspeed or such Mindspeed Subsidiary, as the case may be, in Section 5.03(a)(i), to any person or entity that is not a direct or indirect wholly-owned subsidiary of Mindspeed, the rights sublicensed to the third party will cover and be limited to, at all times after such sublicense grant, (i) Mindspeed Products being developed, manufactured, or sold by or for Mindspeed or the Mindspeed Subsidiary immediately prior to the time of such sublicense grant, (ii) future versions of such Mindspeed Products, and (iii) Successor Products of such Mindspeed Products developed by or for the sublicensee after the sublicense grant occurs, and in no event will such 43 sublicensed rights be deemed to extend to products already developed or being developed, manufactured, or sold by or for the sublicensee immediately prior to the time of the sublicense grant. (vi) Termination. If Mindspeed or a Mindspeed Subsidiary purports to assign or sublicense rights licensed to it in this Section 5.03(a) in willful and knowing breach of this Section 5.03(a), Conexant may, in addition to all other rights and remedies it may have, terminate the license or sublicense granted to Mindspeed or the Mindspeed Subsidiary, as the case may be, under which Mindspeed or the Mindspeed Subsidiary was attempting to assign or sublicense rights. Such termination will be effective immediately when the notice of termination is given to Mindspeed or the Mindspeed Subsidiary by Conexant. (b) License of Mindspeed Intellectual Property to Conexant. (i) Mindspeed-Owned Intellectual Property. Subject to Section 5.03(b)(v) and Section 5.03(c) and subject to any licenses or rights previously granted to a third party, effective as of the Time of Distribution, Mindspeed, on behalf of itself and the Mindspeed Subsidiaries, hereby grants to the Conexant Group a nonexclusive, worldwide, irrevocable (except as provided in Section 5.03(b)(vi)), royalty-free license, without the right to assign or grant sublicenses except as provided in Sections 5.03(b)(iii) and (iv), under all Intellectual Property that constitutes Mindspeed Assets (excluding trademarks, trade names, domain names, service marks, trade dress and any other form of trade identity) and that the Mindspeed Group has a right to license without the payment of royalties or other fees to a third party, (A) with respect to any copyrighted work included in such Intellectual Property, to reproduce, display, distribute and prepare derivative works of such copyrighted work; and (B) to make, have made (including by third-party contract manufacturers), use, import, sell, offer for sale, and otherwise dispose of Conexant Products and to practice any process involved in the use or manufacture thereof. For purposes of this Section 5.03, a product will be considered a "Conexant Product" if the specifications and designs of such product (taken as a whole) are developed or owned by, or exclusively licensed to, Conexant or a Conexant Subsidiary (even if the specifications and designs of individual components of such Product are not owned or developed by or exclusively licensed to Conexant or a Conexant Subsidiary). (ii) Third-Party Intellectual Property. Solely to the extent allowed (without Mindspeed or any Mindspeed Subsidiary being required to pay any royalty or other fee to a third party) by, and subject to all applicable terms, conditions, limitations and requirements of, any Contract pursuant to which Intellectual Property owned by a third party is licensed to Mindspeed or any Mindspeed Subsidiary, Mindspeed, on behalf of itself and the Mindspeed Subsidiaries, hereby grants to the Conexant Group a nonexclusive, worldwide, irrevocable (except as provided in Section 5.03(b)(vi)), royalty-free sublicense, without the right to assign or grant further sublicenses except as provided in Sections 5.03(b)(iii) and (iv), under such third-party Intellectual Property, (A) with respect to any copyrighted work included in such third-party 44 Intellectual Property, to reproduce, display, distribute and prepare derivative works of such copyrighted work; and (B) to make, have made (including by third-party contract manufacturers), use, import, sell, offer for sale, and otherwise dispose of Conexant Products and to practice any process involved in the use or manufacture thereof. If, at any time after the Time of Distribution, Conexant becomes aware of any Intellectual Property owned by a third party that was licensed to Mindspeed or a Mindspeed Subsidiary as of the Time of Distribution and that Mindspeed or the Mindspeed Subsidiary had (at the Time of Distribution) and continues to have the right to sublicense to the Conexant Group (or any portion thereof) without being required to pay any royalty or other fee to the third party, but that was not effectively sublicensed to the Conexant Group pursuant to the previous sentence, then at Conexant's written request, Mindspeed will grant, or (provided that the relevant Mindspeed Subsidiary is at the time a wholly-owned subsidiary of Mindspeed) cause the Mindspeed Subsidiary to grant, to the Conexant Group (or if sublicensing to the entire Conexant Group is not allowed, to a portion thereof, to the maximum extent allowed), a nonexclusive, royalty-free sublicense to such third-party Intellectual Property, to the maximum extent (and solely to this extent) allowed under, and subject to all applicable terms, conditions, limitations and requirements of, the Contract pursuant to which such third-party Intellectual Property is licensed to Mindspeed or the Mindspeed Subsidiary. (iii) Assignment of License Rights. Conexant or a Conexant Subsidiary may assign any or all of its rights under the license granted in Section 5.03(b)(i) (other than the right to sublicense provided in Section 5.03(b)(iv)) to any entity that is, at the time of such assignment, a direct or indirect wholly-owned subsidiary of Conexant. Except as expressly provided in the preceding sentence and in Section 5.03(b)(iv), and notwithstanding anything to the contrary in this Agreement, neither Conexant nor any Conexant Subsidiary may assign or otherwise transfer any of its rights under such license (whether in insolvency proceedings, in corporate mergers by acquisition or other change of control or otherwise), and any purported assignment or transfer in violation hereof will be null and void. Conexant or a Conexant Subsidiary may assign any or all of its rights under any sublicense of third-party Intellectual Property granted in Section 5.03(b)(ii) to the maximum extent (and solely to this extent) allowed under, and subject to all applicable terms, conditions, limitations and requirements of, the Contract pursuant to which such third-party Intellectual Property is licensed to Mindspeed or a Mindspeed Subsidiary. (iv) Sublicensing. Subject to Section 5.03(b)(v)(B), Conexant or a Conexant Subsidiary may sublicense any or all of its rights under the license granted in Section 5.03(b)(i) (other than the right to sublicense provided herein) (A) to any entity that is, at the time when such sublicense grant is made, a direct or indirect wholly-owned subsidiary of Conexant; (B) to any third party in connection with a divestiture, sale, or spin-off of any business unit, product line, or business operation of Conexant or a Conexant Subsidiary; and/or (C) to any third party that works under a joint development agreement with Conexant to jointly develop a new Conexant Product or to jointly redevelop an existing Conexant Product wherein the Conexant contribution comprises a substantial hardware contribution to the resulting Conexant 45 Product developed under the joint development agreement. Except as expressly provided in the preceding sentence, and notwithstanding anything to the contrary in this Agreement, neither Conexant nor any Conexant Subsidiary may sublicense any of its rights under such license, and any purported sublicense in violation hereof will be null and void. Conexant or a Conexant Subsidiary may sublicense any or all of its rights under any sublicense of third-party Intellectual Property granted in Section 5.03(b)(ii) to the maximum extent (and solely to this extent) allowed under, and subject to all applicable terms, conditions, limitations and requirements of, the Contract pursuant to which such third-party Intellectual Property is licensed to Mindspeed or a Mindspeed Subsidiary. (v) Limitations on Conexant's Rights. (A) Change in Control. If Conexant or any Conexant Subsidiary undergoes a Change in Control, the rights licensed to Conexant or such Conexant Subsidiary, as the case may be, in Section 5.03(b)(i) will be limited at all times after such Change in Control to (i) Conexant Products being developed, manufactured, or sold by or for Conexant or the Conexant Subsidiary, as the case may be, immediately prior to the time of such Change in Control, (ii) future versions of such Conexant Products, and (iii) Successor Products of such Conexant Products developed by or for Conexant or the Conexant Subsidiary after the Change in Control occurs, and in no event will such licenses or rights be deemed to extend to products already developed or being developed, manufactured, or sold by or for any third party involved in the Change in Control immediately prior to the time of the Change in Control. (B) Sublicense. If Conexant or any Conexant Subsidiary grants a sublicense permitted under Section 5.03(b)(iv) to any of the rights licensed to Conexant or such Conexant Subsidiary, as the case may be, in Section 5.03(b)(i), to any person or entity that is not a direct or indirect wholly-owned subsidiary of Conexant, the rights sublicensed to the third party will cover and be limited to, at all times after such sublicense grant, (i) Conexant Products being developed, manufactured, or sold by or for Conexant or the Conexant Subsidiary immediately prior to the time of such sublicense grant, (ii) future versions of such Conexant Products, and (iii) Successor Products of such Conexant Products developed by or for the sublicensee after the sublicense grant occurs, and in no event will such sublicensed rights be deemed to extend to products already developed or being developed, manufactured, or sold by or for the sublicensee immediately prior to the time of the sublicense grant. (vi) Termination. If Conexant or a Conexant Subsidiary purports to assign or sublicense rights licensed to it in this Section 5.03(b) in willful and knowing breach of this Section 5.03(b), Mindspeed may, in addition to all other rights and remedies it may have, terminate the license or sublicense granted to Conexant or the Conexant Subsidiary, as the case may be, under which Conexant or the Conexant Subsidiary was attempting to assign or sublicense rights. Such termination will be effective 46 immediately when the notice of termination is given to Conexant or the Conexant Subsidiary by Mindspeed. (c) Order of Precedence. In the event of any inconsistency or conflict between this Section 5.03 and either (i) the License and Assignment Agreement or (ii) the Patent License Agreement, the License and Assignment Agreement or the Patent License Agreement, as the case may be, will control. Nothing in this Section 5.03 will be construed as granting or conveying any right or license to any Intellectual Property (including Intellectual Property owned by a third party) that is licensed or sublicensed pursuant to the License and Assignment Agreement or the Patent License Agreement. (d) Definitions. Solely for purposes of this Section 5.03: (i) "Change in Control" of an entity means the occurrence of any of the following: (i) a sale of assets representing more than fifty percent (50%) of the net book value or fair market value of such entity's consolidated assets (in a single transaction or in a series of related transactions) other than to one or more direct or indirect wholly-owned subsidiaries of such entity; (ii) a merger or consolidation of such entity with a third party, whether or not such entity is the surviving entity, in which such entity's stockholders immediately before such merger or consolidation do not own, directly or indirectly, more than fifty percent (50%) of the outstanding stock of the surviving entity; or (iii) an acquisition, other than in a merger or consolidation of the type referred to in clause (ii) of this sentence, of beneficial ownership of outstanding voting securities of such entity representing at least fifty percent (50%) of the combined voting power of such entity, in a single transaction or series of related transactions. (ii) "Successor Product" shall mean, with respect to a product, a new product based on the same core technology that has substantially similar features and functionality (with or without enhancements or improvements thereto) and that is marketed and distributed under a different name instead of as a new version of the original product. (iii) "Under Development". For purposes of this Section 5.03, the phrase "being developed" by an entity means, with respect to a product, that such entity is actively engaged in the development of the product (as reflected in such entity's laboratory notebooks, product development plans and reports, and other documents and records), either alone or in conjunction with a third party, pursuant to existing functional specifications (which need not be detailed technical specifications) and a development schedule or timeline. (e) Defensive Use of Other Party's Patents. (i) From and after the Time of Distribution, each party has and retains the unrestricted right to enforce against any third party such Intellectual Property rights as that party then owns. Notwithstanding the grant of any license or sublicense to the 47 other party (or the members of such other party's Group) under Section 5.03(a) or 5.03(b), the owner of such Intellectual Property (the "Owner") may enforce the same without any obligation to the other party. (ii) Upon the occurrence of any dispute involving Intellectual Property, including a pre-litigation dispute, (an "IP Dispute") either party may request (the requesting party referred to hereinafter as "Requestor") from the other party who is the Owner of the applicable Intellectual Property, the right to use certain Intellectual Property owned by the Owner for defensive purposes, but only during the five-year period following the Distribution Date, unless such date is extended in writing by both parties, and subject to strict compliance with the provisions of Section 5.03(e)(i) - (xvi), each of which is material. (iii) A Requestor who desires to use the Owner's Intellectual Property for defensive purposes in connection with an IP Dispute in accordance with this section 5.03(e) shall first confer with the Owner and submit in writing the proposed terms and conditions of any proposed license to a third party who is a party to the IP Dispute (the "Third Party") or the plan of enforcement (the "Enforcement Plan"), including the identity of the Third Party and a list of Intellectual Property proposed to be licensed or enforced. (iv) The Owner may reject or condition the proposed terms and conditions of the license or the Enforcement Plan for any of the following reasons: (A) The proposed license or Enforcement Plan would violate or conflict with any contractual obligation of the Owner; (B) The requested Intellectual Property is encumbered and the proposed license or Enforcement Plan is prohibited by such encumbrance; (C) The proposed terms and conditions of the license would impose obligations on the Owner other than or in addition to a naked patent grant including, without limitation, the obligations to enforce the patent(s) or to transfer technology; or (D) The Owner can demonstrate a significant, near-term competitive harm to its business other than one specified in subparts (A)-(C) above, and including but not limited to evidence of imminent threat of suit by the same Third Party, were the proposed license to be granted or the Enforcement Plan be carried out. (v) In response to a request by a Requestor to use the Owner's patents for defensive purposes in connection with an IP Dispute in accordance with this Section 5.03(e), the Owner may either: (A) Initiate suit against the alleged infringer as a co-party with the Requestor; or 48 (B) Assign to the Requestor the Intellectual Property rights necessary for the Requestor to initiate suit or counter-claim in its own name along with the rights necessary to obtain remedies for past infringement; provided, however, that subject to the Owner's discretion, if the Requestor negotiates a license for itself from the Third Party, Requestor agrees to use commercially reasonable efforts to secure a comparable license for the benefit of the Owner. (vi) The Owner will cooperate as reasonably required for the Requestor to resolve the controversy with the Third Party and, if necessary, to enforce the Intellectual Property rights, whether as a co-party with the Requestor, or as assignor to the Requestor, provided that all costs to the Owner occasioned thereby shall be promptly and fully paid by the Requestor. (vii) If the Owner elects to commence suit along with the Requestor as co-plaintiff as provided in Section 5.03(e)(v)(A) above, the Requestor shall be responsible for all costs for prosecution of the suit and shall control prosecution of the suit through settlement or judgment as the Requestor considers appropriate; provided, however, that the Owner may, at its own expense, be represented by its own counsel and participate in the proceedings and any settlement, subject to the Requestor's right of control. (viii) If the Owner elects to assign the Intellectual Property rights to the Requestor as provided in Section 5.03(e)(v)(B) above, any such assignment shall be subject to the reservation to the Owner of an irrevocable, freely assignable, royalty-free, world-wide license to practice the assigned Intellectual Property rights in the Owner's business on terms and conditions agreed to by the parties and subject to the following conditions: (A) The Requestor may enforce up to a maximum of 10 of the Owner's patents for each IP Dispute; (B) Subject to applicable laws, any Intellectual Property rights assigned to the Requestor pursuant to Section 5.03(e)(v)(B) will be reassigned back to the Owner immediately following the conclusion of the IP Dispute; and (C) With respect to the Owner's patents, the Requestor agrees to zealously assert infringement, defend validity and not stipulate to invalidity or non-infringement of any claim. (ix) Anything contained herein to the contrary notwithstanding, the Owner will not be required to initiate suit, assign Intellectual Property rights to the Requestor or otherwise cooperate in the enforcement of Intellectual Property rights if the putative defendant or party against which enforcement is sought is a duly authorized licensee or sub-licensee of the Owner under the Intellectual Property rights sought to be enforced by the Requestor. 49 (x) No license shall become effective and no rights shall be granted to a Third Party unless and until the Owner has approved in writing all of the terms and conditions of the proposed license, such terms and conditions will include at a minimum: (A) a non-exclusive license grant to the Third Party; and (B) a clause that revokes said license grant in the event that the Third Party, its successors and/or assigns, initiates a patent infringement suit against the Owner. (xi) The Requestor and the Owner shall share equally any royalties and/or damages recovered after reimbursement to the Requestor of any costs and expenses associated with the grant of any license or damages under this Section 5.03(e). (xii) The rights granted between the parties under this Section 5.03(e) shall expire five years from the Time of Distribution; provided, however, that any license granted to a Third Party may be made for the life of the patent rights underlying such grant and all such licenses shall survive expiration of this Section 5.03(e) and remain in full force and effect for the duration of the license. (xiii) Anything contained herein to the contrary notwithstanding, the rights granted between the parties under this Section 5.03(e) are personal and nontransferable by either party to any other Person, whether or not in connection with the sale of any party's business or any portion thereof. The rights granted between the parties under this Section 5.03(e) shall, unless otherwise agreed in writing, terminate upon a Change in Control of either party; provided, however, that licenses granted prior to such termination shall remain in full force and effect for the duration of the license. (xiv) In any dispute between the parties arising under the provisions of this Section 5.03(e) with respect to the right to grant a license or the scope of such license, the General Counsel of Conexant and the General Counsel of Mindspeed will attempt a good faith resolution of such dispute within thirty days after either party notifies the other of such dispute. If such dispute is not resolved within thirty days of such notification, such dispute will be referred for resolution to the Chief Executive Officers and, ultimately, to the respective Chairmen of the Board of Conexant and Mindspeed, whose joint decision will be final and binding on the parties. Notwithstanding anything contained in this Agreement to the contrary, this Section 5.03(e)(xiv) shall be the parties' exclusive remedy with respect to claims arising under the provisions of this Section 5.03(e). (xv) Conexant makes no representations or warranties of any kind with respect to the validity, scope or enforceability of any Intellectual Property rights licensed by Conexant and the Conexant Subsidiaries pursuant to this Section 5.03(e) and Conexant has no obligation to file or prosecute any patent applications or maintain 50 any patents in force in connection therewith. Conexant will, at no cost to Mindspeed, promptly execute or cause a member of the Conexant Group promptly to execute such further documents as Mindspeed may reasonably request as necessary or desirable to carry out the terms of this Section 5.03(e). Notwithstanding anything contained herein to the contrary, this Section 5.03(e) will not be applicable to any rights in and use of the names, trademarks, trade names and service marks "Conexant" and "Conexant Systems" and all corporate symbols and logos related thereto and all names, trademarks, trade names and service marks which include the words "Conexant" or "Conexant Systems" or any derivative thereof. (xvi) Mindspeed makes no representations or warranties of any kind with respect to the validity, scope or enforceability of any Intellectual Property rights licensed by Mindspeed and Mindspeed Subsidiaries pursuant to this Section 5.03(e) and Mindspeed has no obligation to file or prosecute any patent applications or maintain any patents in force in connection therewith. Mindspeed will, at no cost to Conexant, promptly execute or cause a member of the Mindspeed Group promptly to execute such further documents as Conexant may reasonably request as necessary or desirable to carry out the terms of this Section 5.03(e). Section 5.04 Jazz Warrant. Effective as of the Time of Distribution Mindspeed will issue to the holder of the Jazz Warrant a warrant to purchase shares of Mindspeed Common Stock (the "New Jazz-Mindspeed Warrant"), pursuant to the equitable adjustment and other provisions of the Jazz Warrant. The number of shares of Mindspeed Common Stock subject to the New Jazz-Mindspeed Warrant and the per-share exercise price of the New Jazz-Mindspeed Warrant will be determined as set forth in the Jazz Warrant. The New Jazz-Mindspeed Warrant will otherwise have substantially the same terms and conditions as the Jazz Warrant, except that references to Conexant will be changed to refer to Mindspeed. Section 5.05 Charitable Funds. As promptly as practicable after the Time of Distribution, Conexant and Mindspeed shall cooperate and take actions reasonably required to effect the transfer of $300,000 from the Conexant Systems Charitable Fund, a donor advisor fund established by Conexant and administered through the California Community Foundation, to a charitable fund to be established by Mindspeed and also administered through the California Community Foundation. ARTICLE VI ACCESS TO INFORMATION Section 6.01 Provision of Corporate Records. Prior to or as promptly as practicable after the Time of Distribution, Conexant shall deliver to Mindspeed all minute books and other records of meetings of the Board of Directors, committees of the Board of Directors and stockholders of the Mindspeed Group and all corporate books and records of the Mindspeed Group in its possession, including, in each case, all active agreements and 51 active litigation files. From and after the Time of Distribution, all such books and records shall be the property of Mindspeed. Prior to or as promptly as practicable after the Time of Distribution, Mindspeed shall deliver to Conexant all corporate books and records of the Conexant Group in Mindspeed's possession (other than the books and records described in the first sentence of this Section 6.01), including, in each case, all active agreements and active litigation files. From and after the Time of Distribution, all such books and records shall be the property of Conexant. Section 6.02 Access to Information. (a) From and after the Time of Distribution, Conexant will, and will cause each Conexant Subsidiary to, afford to Mindspeed and its Representatives (at Mindspeed's expense) reasonable access and duplicating rights during normal business hours and upon reasonable advance notice to all Information within the Conexant Group's possession or control relating to Mindspeed, any Mindspeed Subsidiary, any Mindspeed Asset, any Mindspeed Liability or the Mindspeed Business, insofar as such access is reasonably required by Mindspeed or any Mindspeed Subsidiary, subject to the provisions below regarding Privileged Information. (b) From and after the Time of Distribution, Mindspeed will, and will cause each Mindspeed Subsidiary to, afford to Conexant and its Representatives (at Conexant's expense) reasonable access and duplicating rights during normal business hours and upon reasonable advance notice to all Information within the Mindspeed Group's possession or control relating to Conexant, any Conexant Subsidiary, any Conexant Asset, any Conexant Liability or the Broadband Business, insofar as such access is reasonably required by Conexant or any Conexant Subsidiary, subject to the provisions below regarding Privileged Information. (c) Without limiting the foregoing, Information may be requested under this Article VI for audit, accounting, claims, litigation, insurance, environmental and safety and tax purposes, as well as for purposes of fulfilling disclosure and reporting obligations and for performing this Agreement and the transactions contemplated hereby. In furtherance of the foregoing: (i) Each party acknowledges that (A) each of Conexant and Mindspeed (and the members of the Conexant Group and the Mindspeed Group, respectively) has or may obtain Privileged Information; (B) there are or may be a number of Actions affecting one or more of the members of the Conexant Group and the Mindspeed Group; (C) the parties may have a common legal interest in Actions, in the Privileged Information, and in the preservation of the confidential status of the Privileged Information; and (D) each of Conexant and Mindspeed intends that the transactions contemplated by the Separation Agreements and any transfer of Privileged Information in connection therewith shall not operate as a waiver of any potentially applicable privilege. (ii) Each of Conexant and Mindspeed agrees, on behalf of itself and each member of the Group of which it is a member, not to disclose or otherwise waive any 52 privilege attaching to any Privileged Information relating to the business of the other Group or relating to or arising in connection with the relationship between the Groups on or prior to the Time of Distribution, without providing prompt written notice to and obtaining the prior written consent of the other, which consent will not be unreasonably withheld. In the event of a disagreement between any member of the Conexant Group and any member of the Mindspeed Group concerning the reasonableness of withholding such consent, no disclosure will be made prior to a final, nonappealable resolution of such disagreement by a court of competent jurisdiction. (iii) Upon any member of the Conexant Group or any member of the Mindspeed Group receiving any subpoena or other compulsory disclosure notice from a court, other Governmental Entity or otherwise which requests disclosure of Privileged Information, in each case relating to the business of the other Group or relating to or arising in connection with the relationship between the Groups on or prior to the Time of Distribution, the recipient of the notice will promptly provide to the other party (following the notice provisions set forth herein) a copy of such notice, the intended response, and a description of all materials or information relating to the other Group that might be disclosed. In the event of a disagreement as to the intended response or disclosure, unless and until the disagreement is resolved as provided in Section 6.02(c)(ii), the parties will cooperate to assert all defenses to disclosure claimed by either Group, at the cost and expense of the Group claiming such defense to disclosure, and shall not disclose any disputed documents or information until all legal defenses and claims of privilege have been finally determined. Section 6.03 Production of Witnesses. Subject to Section 6.02, after the Time of Distribution, each of Conexant and Mindspeed will, and will cause each member of the Conexant Group and the Mindspeed Group, respectively, to, make available to the other party and members of such other party's Group, upon written request and at the cost and expense of the party so requesting, its directors, officers, employees and agents as witnesses to the extent that any such Person may reasonably be required (giving consideration to business demands of such directors, officers, employees and agents) in connection with any Actions, administrative or other proceedings in which the requesting party may from time to time be involved and relating to the business of either Group or relating to or arising in connection with the relationship between the Groups on or prior to the Time of Distribution, provided that the same shall not unreasonably interfere with the conduct of business by the Group of which the request is made. Section 6.04 Retention of Records. Except as otherwise required by law or agreed to by the parties in writing, if any Information relating to the pre-Distribution business, Assets or Liabilities of a member of a Group is retained by a member of the other Group, each of Conexant and Mindspeed will, and will cause the members of the Group of which it is a member to, retain for the period required by the applicable Conexant records retention policy in effect immediately prior to the Time of Distribution all such Information in such Group's possession or under its control. In addition, if, prior to the scheduled date for destruction or disposal of such Information under the applicable Conexant records retention policy, 53 Conexant or Mindspeed, on behalf of any member of its Group, requests in writing that any of the Information scheduled to be destroyed or disposed of be delivered to such requesting party, the party whose Group is scheduled to destroy or dispose of such Information will arrange for the delivery of the requested Information to a location specified by, and at the expense of, the requesting party, at or about the time such Information would have otherwise been destroyed or disposed of. Section 6.05 Confidentiality. Subject to the provisions of Section 6.02, which shall govern Privileged Information, from and after the Time of Distribution, each of Conexant and Mindspeed shall hold, and shall use reasonable efforts to cause members of its Group and its and their Affiliates and Representatives to hold, in strict confidence all Information concerning the other party's Group in its possession or control prior to the Time of Distribution or furnished to it by such other party's Group pursuant to the Separation Agreements or the transactions contemplated thereby and will not release or disclose such Information to any other Person, except members of its Group and its and their Representatives, who will be bound by the provisions of this Section 6.05; provided, however, that any member of the Conexant Group or the Mindspeed Group may disclose such Information to the extent that (a) disclosure is compelled by judicial or administrative process or, in the opinion of such Person's counsel, by other requirements of law (in which case the party required to make such disclosure will notify the other party as soon as practicable of such obligation or requirement and cooperate with the other party (at the expense of the other party) to limit the Information required to be disclosed and to obtain a protective order or other appropriate remedy with respect to the Information ultimately disclosed) or (b) such Person can show that such Information was (i) available to such Person on a nonconfidential basis (other than from a member of the other party's Group) prior to its disclosure by such Person, (ii) in the public domain through no fault of such Person or (iii) lawfully acquired by such Person from another source after the time that it was furnished to such Person by the other party's Group, and not acquired from such source subject to any confidentiality obligation on the part of such source known to the acquiror, or on the part of the acquiror. Each party acknowledges that it will be liable for any breach of this Section 6.05 by its Affiliates, Representatives and Subsidiaries. Notwithstanding the foregoing, each of Conexant and Mindspeed will be deemed to have satisfied its obligations under this Section 6.05 with respect to any Information (other than Privileged Information) if it exercises the same care with regard to such Information as it takes to preserve confidentiality for its own similar Information. ARTICLE VII MISCELLANEOUS Section 7.01 Entire Agreement; Construction. The Separation Agreements, the Financing Agreements, the License and Assignment Agreement and the Patent License Agreement including any annexes, schedules and exhibits hereto or thereto, and other agreements and documents referred to herein and therein, will together constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and will 54 supersede all prior negotiations, agreements and understandings of the parties of any nature, whether oral or written, with respect to such subject matter. Notwithstanding any other provisions in the Separation Agreements to the contrary, (i) in the event and to the extent that there is a conflict between the provisions of this Agreement and the provisions of the Employee Matters Agreement, the Tax Allocation Agreement, the License and Assignment Agreement or the Patent License Agreement, the provisions of the Employee Matters Agreement, the Tax Allocation Agreement, the License and Assignment Agreement or the Patent License Agreement, as appropriate, will control and (ii) in the event and to the extent that there is a conflict between the provisions of this Agreement and the provisions of any Conveyance and Assumption Instruments, the provisions of this Agreement will control. Section 7.02 Survival of Agreements. Except as otherwise contemplated by the Separation Agreements (including Section 7.13 of this Agreement), all covenants and agreements of the parties contained in the Separation Agreements will remain in full force and effect and survive the Time of Distribution. The obligations of each of Conexant and Mindspeed under Article IV will not terminate at any time and will survive the sale or other transfer by any party of any assets or businesses or the assignment by any party of any Liabilities with respect to any Indemnifiable Losses of the other related to such assets, businesses or Liabilities. Section 7.03 Governing Law. This Agreement will be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and to be performed entirely within such State, without regard to the conflicts of law principles of such State. Section 7.04 Notices. All notices, requests, claims, demands and other communications required or permitted to be given hereunder will be in writing and will be delivered by hand or telecopied, e-mailed or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and will be deemed given when so delivered by hand or telecopied, when e-mail confirmation is received if delivered by e-mail, or three Business Days after being so mailed (one Business Day in the case of express mail or overnight courier service). All such notices, requests, claims, demands and other communications will be addressed as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice: (a) If to Conexant: Conexant Systems, Inc. 4311 Jamboree Road Newport Beach, California 92660-3095 Attention: Dwight W. Decker Chairman of the Board and Chief Executive Officer Telecopy: (949) 483-4318 E-mail: dwight.decker@conexant.com 55 with a copy to: Conexant Systems, Inc. 4311 Jamboree Road Newport Beach, California 92660-3095 Attention: Dennis E. O'Reilly, Esq. Senior Vice President, General Counsel and Secretary Telecopy: (949) 483-9475 E-mail: dennis.o'reilly@conexant.com (b) If to Mindspeed: Mindspeed Technologies, Inc. 4000 MacArthur Boulevard Newport Beach, California 92660-3095 Attention: Raouf Y. Halim Chief Executive Officer Telecopy: (949) 579-6106 E-mail: raouf.halim@mindspeed.com with a copy to: Mindspeed Technologies, Inc. 4000 MacArthur Boulevard Newport Beach, California 92660-3095 Attention: Ian J. Stock, Esq. Senior Vice President, General Counsel and Secretary Telecopy: (949) 579-3000 E-mail: ian.stock@mindspeed.com Section 7.05 Dispute Resolution. Except as otherwise provided in Section 5.03(e)(xiv), in the event that from and after the Time of Distribution any dispute, claim or controversy (collectively, a "Dispute") arises out of or relates to this Agreement, the Employee Matters Agreement or the Tax Allocation Agreement or any transaction contemplated thereby or the breach, performance, enforcement or validity or invalidity of any thereof, the designees of the Conexant Chief Executive Officer and the Mindspeed Chief Executive Officer will attempt a good faith resolution of the Dispute within thirty days after either party notifies the other party in writing of the Dispute. If the Dispute is not resolved within thirty days of the receipt of the notification, or within such other time as they may agree, the Dispute will be referred for resolution to the Conexant Chief Executive Officer and the Mindspeed Chief Executive Officer. Should they be unable to resolve the Dispute within thirty days following the referral to them, or within such other time as they may agree, 56 Conexant and Mindspeed will then attempt in good faith to resolve such Dispute by mediation in accordance with the then-existing CPR Mediation Procedures promulgated by the CPR Institute for Dispute Resolution. If such mediation is unsuccessful within sixty days after commencement thereof, any party to the Dispute may pursue any other remedies available to it. Section 7.06 Consent to Jurisdiction. Each of Conexant and Mindspeed irrevocably submits to the exclusive jurisdiction of (i) the Superior Court of the State of California, Orange County and (ii) the United States District Court for the Central District of California, for the purposes of any suit, action or other proceeding arising out of this Agreement, the Employee Matters Agreement or the Tax Allocation Agreement or any transaction contemplated thereby or the breach, performance, enforcement or validity or invalidity of any thereof (and agrees not to commence any action, suit or proceeding relating thereto except in such courts). Each of Conexant and Mindspeed further agrees that service of any process, summons, notice or document hand delivered or sent by U.S. registered mail to such party's respective address set forth in Section 7.04 will be effective service of process for any action, suit or proceeding in California with respect to any matters to which it has submitted to jurisdiction as set forth in the immediately preceding sentence. Each of Conexant and Mindspeed irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement, the Employee Matters Agreement or the Tax Allocation Agreement or the transactions contemplated thereby or the breach, performance, enforcement or validity or invalidity of any thereof in (i) the Superior Court of the State of California, Orange County or (ii) the United States District Court for the Central District of California, and hereby further irrevocably and unconditionally waives and agrees 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. Notwithstanding the foregoing, each party agrees that a final judgment in any action, suit or proceeding so brought shall be conclusive and may be enforced by suit on the judgment in any jurisdiction or in any other manner provided in law or in equity. Section 7.07 Amendments. This Agreement cannot be amended, modified or supplemented except by a written agreement executed by Conexant and Mindspeed. Section 7.08 Assignment. Except as otherwise provided herein, neither party will convey, assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the other party in its sole and absolute discretion. Notwithstanding the foregoing, but subject to the provisions of Section 5.03, either party may (without obtaining any consent) assign all or any portion of its rights and obligations hereunder to (i) the surviving entity resulting from a merger or consolidation involving such party, (ii) the acquiring entity in a sale or other disposition of all or substantially all of the assets of such party as a whole or of any line of business or division of such party, or (iii) any other Person that is created as a result of a spin-off from, or similar reorganization transaction of, such party or any line of business or division of such party. In the event of an assignment pursuant to (ii) or (iii) above, the nonassigning party shall, at the assigning party's request, use good faith commercially reasonable efforts to enter into separate agreements with each of the resulting entities and take such further actions as may be reasonably required to assure that the 57 rights and obligations under this Agreement are preserved, in the aggregate, and divided equitably between such resulting entities. Any conveyance, assignment or transfer requiring the prior written consent of another party pursuant to this Section 7.08 which is made without such consent will be void ab initio. No assignment of this Agreement will relieve the assigning party of its obligations hereunder. Section 7.09 Captions; Currency. The article, section and paragraph captions herein and the table of contents hereto are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof. Unless otherwise specified, all references herein to numbered articles or sections are to articles and sections of this Agreement and all references herein to schedules are to schedules to this Agreement. Unless otherwise specified, all references contained in this Agreement, in any schedule referred to herein or in any instrument or document delivered pursuant hereto to dollars or "$" shall mean United States Dollars. Section 7.10 Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and will in no way be affected, impaired or invalidated thereby. If the economic or legal substance of the transactions contemplated hereby is affected in any manner adverse to any party as a result thereof, the parties will negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties. Section 7.11 Parties in Interest. This Agreement is binding upon and is for the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is not made for the benefit of any Person not a party hereto, and no Person other than the parties hereto or their respective successors and permitted assigns will acquire or have any benefit, right, remedy or claim under or by reason of this Agreement, except that the provisions of Sections 4.02 and 4.03 shall inure to the benefit of and shall be enforceable by the Persons referred to therein. Section 7.12 Schedules. All schedules attached hereto are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Capitalized terms used in the schedules hereto but not otherwise defined therein will have the respective meanings assigned to such terms in this Agreement. Section 7.13 Termination. This Agreement may be terminated and the Distribution abandoned at any time prior to the Time of Distribution by and in the sole discretion of the Conexant Board without the approval of Mindspeed or Conexant's shareowners. In the event of such termination, neither party will have any liability of any kind to the other party on account of such termination. Section 7.14 Waivers; Remedies. The conditions to Conexant's obligation to consummate the Distribution are for the sole benefit of Conexant and may be waived in 58 writing by Conexant in whole or in part in Conexant's sole discretion. No failure or delay on the part of either Conexant or Mindspeed in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any waiver on the part of either Conexant or Mindspeed of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder, nor will any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. Subject to Section 7.05, the rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which the parties may otherwise have at law or in equity. Section 7.15 Further Assurances. From time to time after the Time of Distribution, as and when requested by either party hereto, the other party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such actions as the requesting party may reasonably request to consummate the transactions contemplated by the Separation Agreements. Section 7.16 Counterparts. This Agreement may be executed in separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement. This Agreement may be executed and delivered by telecopier with the same force and effect as if it were a manually executed and delivered counterpart. Section 7.17 Performance. Conexant will cause to be performed and hereby guarantees the performance of all actions, agreements and obligations set forth herein to be performed by any Conexant Subsidiary. Mindspeed will cause to be performed and hereby guarantees the performance of all actions, agreements and obligations set forth herein to be performed by any Mindspeed Subsidiary. Section 7.18 Currency Calculations. Following the Distribution Date, for purposes of calculating the United States Dollar equivalent of any amount payable under any Separation Agreement which is denominated in a currency other than United States Dollars, the New York foreign exchange selling rate applicable to such currency will be used, as published in the Wall Street Journal, New York Edition, for the second Business Day preceding the earlier of the date such payment is due or the date such payment is made (it being understood that this Section 7.18 shall not apply to the conversion of foreign currency balances made as of the Distribution Date in accordance with standard Conexant accounting practices and procedures). Section 7.19 Interpretation. Any reference herein to any federal, state, local, or foreign law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. For the purposes of this Agreement, (a) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (b) the terms "hereof", "herein", and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this 59 Agreement and (c) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation". [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] 60 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties as of the date first hereinabove written. CONEXANT SYSTEMS, INC. By: /s/ Dennis E. O'Reilly ---------------------------------------------- Name: Dennis E. O'Reilly Title: Senior Vice President, General Counsel and Secretary MINDSPEED TECHNOLOGIES, INC. By: /s/ Bradley W. Yates ---------------------------------------------- Name: Bradley W. Yates Title: Senior Vice President and Chief Administrative Officer 61 EX-2.2 4 a91233exv2w2.txt EXHIBIT 2.2 Exhibit 2.2 - -------------------------------------------------------------------------------- EMPLOYEE MATTERS AGREEMENT by and between CONEXANT SYSTEMS, INC. and MINDSPEED TECHNOLOGIES, INC. - -------------------------------------------------------------------------------- June 27, 2003 TABLE OF CONTENTS

Page ---- ARTICLE I DEFINITIONS..................................................... 1 Section 1.01 General................................................ 1 ARTICLE II EMPLOYEES...................................................... 5 Section 2.01 Employees.............................................. 5 Section 2.02 Non-Solicitation of Employees.......................... 7 ARTICLE III SAVINGS PLANS................................................. 8 Section 3.01 Retirement Savings Plan................................ 8 Section 3.02 Hourly Employees' Savings Plan......................... 8 Section 3.03 Non-Qualified Retirement Savings Plan.................. 9 ARTICLE IV STOCK PLANS.................................................... 9 Section 4.01 Stock Plans............................................ 9 ARTICLE V OTHER EMPLOYEE PLANS AND MATTERS............................... 10 Section 5.01 Welfare Plans......................................... 10 Section 5.02 Incentive Compensation Plans.......................... 13 Section 5.03 Deferred Compensation Plans........................... 14 Section 5.04 Severance Pay......................................... 15 Section 5.05 Employment, Consulting and Other Employee Related Agreements........................................... 15 Section 5.06 Employee Stock Purchase Plans......................... 16 Section 5.07 VERP.................................................. 16 Section 5.08 Other Liabilities..................................... 17 ARTICLE VI MISCELLANEOUS................................................. 17 Section 6.01 Indemnification....................................... 17 Section 6.02 Sharing of Information................................ 17 Section 6.03 Entire Agreement; Construction........................ 18 Section 6.04 Survival of Agreements................................ 18 Section 6.05 Governing Law......................................... 18 Section 6.06 Notices............................................... 18 Section 6.07 Amendments............................................ 18 Section 6.08 Assignment............................................ 18 Section 6.09 Captions; Currency.................................... 19 Section 6.10 Severability.......................................... 19 Section 6.11 Parties in Interest................................... 19 Section 6.12 Schedules............................................. 19 Section 6.13 Termination........................................... 20 Section 6.14 Change of Name........................................ 20 Section 6.15 Waivers; Remedies..................................... 20 Section 6.16 Counterparts.......................................... 20

i Section 6.17 Performance........................................... 20 Section 6.18 Dispute Resolution.................................... 20 Section 6.19 Cooperation........................................... 20 Section 6.20 Interpretation........................................ 21 SCHEDULES Schedule 1.01(a) - Certain Definitions Schedule 1.01(b) - Specified Conexant Options Schedule 2.01 - Active Mindspeed Employees Schedule 3.03 - Mindspeed Participants in the Conexant Non-Qualified Savings Plan Schedule 4.01(a)(i) - Conexant Split Option Adjustment - Conexant Options Schedule 4.01(a)(ii) - Conexant Split Option Adjustment - Mindspeed Options Schedule 4.01(d) - Specified Conexant Option Adjustment Schedule 5.07 - Mindspeed Participants in the Conexant VERP Schedule 5.08(c) - Other Liabilities ii EMPLOYEE MATTERS AGREEMENT EMPLOYEE MATTERS AGREEMENT (this "Agreement") dated as of June 27, 2003 by and between CONEXANT SYSTEMS, INC., a Delaware corporation ("Conexant"), and MINDSPEED TECHNOLOGIES, INC., a Delaware corporation ("Mindspeed"). WHEREAS, the Conexant Board has determined that it is appropriate and desirable, subject to the terms and conditions set forth in the Distribution Agreement by and between Conexant and Mindspeed dated as of the date hereof (the "Distribution Agreement"), to distribute on a pro rata basis to holders of shares of Conexant Common Stock all outstanding shares of Mindspeed Common Stock owned by Conexant (the "Distribution"); WHEREAS, Conexant and Mindspeed are entering into the Distribution Agreement which, among other things, sets forth the principal corporate transactions required to effect the Contribution and the Distribution and certain other agreements that will govern certain matters relating to the Contribution and the Distribution; and WHEREAS, in connection with the Contribution and the Distribution, Conexant and Mindspeed have determined that it is appropriate and desirable to provide for the allocation of certain assets and liabilities and certain other matters relating to employees, employee benefit plans and compensation arrangements; NOW, THEREFORE, in consideration of the premises and the respective agreements and covenants contained in this Agreement, the parties hereby agree as follows: ARTICLE I DEFINITIONS Section 1.01 General. Capitalized terms used in this Agreement (or in any Schedule to this Agreement) but not defined herein (other than the names of employee benefit plans) have the meanings ascribed to such terms in the Distribution Agreement. As used in this Agreement (or in any Schedule to this Agreement), the terms defined in Schedule 1.01 have the meanings set forth in Schedule 1.01 and the following terms have the following meanings (in each case, such meanings to be equally applicable to both the singular and plural forms of the terms defined): "ACTIVE CONEXANT EMPLOYEE" means any individual who, immediately after the Time of Distribution, will be employed by a member of the Conexant Group pursuant to Section 2.01(b). "ACTIVE MINDSPEED EMPLOYEE" means any individual who, immediately after the Time of Distribution, will be employed by a member of the Mindspeed Group pursuant to Section 2.01(a). "AGREEMENT" has the meaning set forth in the preamble. "CONEXANT" has the meaning set forth in the preamble. "CONEXANT 2001 ESPP" means the Conexant Systems, Inc. 2001 Employee Stock Purchase Plan, including all amendments thereto through the Distribution Date. "CONEXANT DEFERRED COMPENSATION PLAN" means the Conexant Systems, Inc. Deferred Compensation Plan, including all amendments thereto through the Distribution Date. "CONEXANT DEFERRED COMPENSATION PLAN RABBI TRUST" means the Conexant Systems, Inc. rabbi trust relating to the Conexant Deferred Compensation Plan, including all amendments thereto through the Distribution Date. "CONEXANT HOURLY SAVINGS PLAN" means the Conexant Systems, Inc. Hourly Employees' Savings Plan, including all amendments thereto through the Distribution Date. "CONEXANT NON-QUALIFIED ESPP" means the Conexant Systems, Inc. Non-Qualified Employee Stock Purchase Plan, including all amendments thereto through the Distribution Date. "CONEXANT NON-QUALIFIED SAVINGS PLAN" means the Conexant Systems, Inc. Non-Qualified Retirement Savings Plan, including all amendments thereto through the Distribution Date. "CONEXANT OPTION" means an option to purchase from Conexant shares of Conexant Common Stock granted pursuant to or governed by one of the Conexant Stock Plans which is outstanding immediately prior to the Time of Distribution. "CONEXANT PARTICIPANT" means any individual who, immediately after the Time of Distribution, is (i) an Active Conexant Employee, (ii) a Former Conexant Employee or (iii) a beneficiary of either of the foregoing. "CONEXANT SAVINGS PLAN" means the Conexant Systems, Inc. Retirement Savings Plan, including all amendments thereto through the Distribution Date. "CONEXANT SPLIT OPTION" means each Conexant Option (other than a Specified Conexant Option). "CONEXANT STOCK PLANS" means each of the following plans, including any sub-plans thereunder: (i) Conexant Systems, Inc. 1998 Stock Option Plan; (ii) Conexant Systems, Inc. 1999 Long-Term Incentives Plan; (iii) Conexant Systems, Inc. 2000 Non-Qualified Stock Plan; 2 (iv) Conexant Systems, Inc. Directors Stock Plan; (v) Istari Design, Inc. 1997 Stock Option Plan; (vi) Microcosm Communications Limited Stock Option Plan; (vii) Maker Communications, Inc. 1996 Stock Incentive Plan; (viii) Maker Communications, Inc. 1999 Stock Incentive Plan; (ix) Applied Telecom, Inc. 2000 Non-Qualified Stock Option Plan; (x) Philsar Semiconductor Inc. Stock Option Plan; (xi) Sierra Imaging, Inc. 1996 Stock Option Plan; (xii) HotRail, Inc. 1997 Equity Incentive Plan; (xiii) HotRail, Inc. 2000 Equity Plan; (xiv) NetPlane Systems, Inc. Stock Option Plan; (xv) Novanet Semiconductor Ltd. Employee Shares Option Plan; and (xvi) HyperXS Communications, Inc. 2000 Stock Option Plan; in each case, including all amendments thereto through the Distribution Date. "CONEXANT VERP" means the Conexant Systems, Inc. Voluntary Early Retirement Program, including all amendments thereto through the Distribution Date. "CONEXANT VERP TRUST" means the Conexant Systems, Inc. trust relating to the Conexant VERP, including all amendments thereto through the Distribution Date. "CONEXANT WELFARE PLANS" mean the Welfare Plans and other employee welfare benefit and fringe benefit arrangements maintained by Conexant and its Subsidiaries (including members of the Mindspeed Group) immediately prior to the Time of Distribution. "DISTRIBUTION" has the meaning set forth in the recitals. "DISTRIBUTION AGREEMENT" has the meaning set forth in the recitals. "DIVISION" has the meaning set forth in Section 5.01(d)(ii). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor legislation. 3 "FORMER CONEXANT EMPLOYEE" means any Pre-Distribution Group Employee who is not, immediately after the Time of Distribution, an Active Conexant Employee or an Active Mindspeed Employee, and whose most recent active employment with Conexant or any other member of the Pre-Distribution Group was with the Broadband Business. "FORMER MINDSPEED EMPLOYEE" means any Pre-Distribution Group Employee who is not, immediately after the Time of Distribution, an Active Mindspeed Employee or an Active Conexant Employee, and whose most recent active employment with Conexant or any other member of the Pre-Distribution Group was with the Mindspeed Business. "INCENTIVE COMPENSATION PLANS" means each of the following plans: (i) Peak Performance Plan, Conexant's Annual Incentive Plan; (ii) Peak Performance Plan - Marketing, Conexant's Annual Incentive Plan; and (iii) Conexant Systems, Inc. FY03 Sales Compensation Plan. "MINDSPEED" has the meaning set forth in the preamble. "MINDSPEED DEFERRED COMPENSATION PLAN" has the meaning set forth in Section 5.03(a)(i). "MINDSPEED DEFERRED COMPENSATION PLAN RABBI TRUST" has the meaning set forth in Section 5.03(a)(i). "MINDSPEED ESPP" has the meaning set forth in Section 5.06(a). "MINDSPEED INCENTIVE COMPENSATION PLANS" means each of the following plans: (i) Peak Performance Plan, Mindspeed's Annual Incentive Plan; (ii) Peak Performance Plan - Marketing MBO, Mindspeed's Annual Incentive Plan; and (iii) Mindspeed Technologies FY03 Sales Compensation Plan. "MINDSPEED OPTION" means an option to purchase from Mindspeed shares of Mindspeed Common Stock provided to a holder of a Conexant Split Option pursuant to Section 4.01(a). "MINDSPEED PARTICIPANT" means any individual who, immediately after the Time of Distribution, is (i) an Active Mindspeed Employee, (ii) a Former Mindspeed Employee or (iii) a beneficiary of either of the foregoing. "MINDSPEED RESERVE AMOUNT" has the meaning set forth in Section 5.01(d)(ii). 4 "MINDSPEED SAVINGS PLAN" has the meaning set forth in Section 3.01(a). "MINDSPEED STOCK PLANS" has the meaning set forth in Section 4.01(b). "MINDSPEED TRANSFER EMPLOYEE" has the meaning set forth in Section 2.01(c). "MINDSPEED WELFARE PLANS" has the meaning set forth in Section 5.01(a). "PRE-DISTRIBUTION GROUP" has the meaning set forth in the Distribution Agreement. "PRE-DISTRIBUTION GROUP EMPLOYEE" means any individual who was, at any time prior to the Time of Distribution, employed by Conexant or any other member of the Pre-Distribution Group. "RESERVE AMOUNT" has the meaning set forth in Section 5.01(d)(ii). "RETURNING MINDSPEED EMPLOYEE" has the meaning set forth in Section 2.01(c). "SPECIFIED CONEXANT OPTION" means the Conexant Options set forth on Schedule 1.01(b). "TRANSFER DATE" has the meaning set forth in Section 5.03(c). "WELFARE PLAN" means an employee welfare benefit plan as defined in Section 3(1) of ERISA, including medical, vision, dental and other health plans, retiree health plans, life insurance plans, retiree life insurance plans, accidental death and dismemberment plans, long-term disability plans and severance pay plans. ARTICLE II EMPLOYEES Section 2.01 Employees. (a) Each individual who is employed by Conexant or any of its Subsidiaries (including members of the Mindspeed Group and the Conexant Group) immediately prior to the Time of Distribution and who is identified on the attached Schedule 2.01 (including those individuals identified on Schedule 2.01 who are actively employed or on lay-off, leave, short-term or long-term disability or other permitted absence from employment) will be or will continue to be employed by a member of the Mindspeed Group immediately after the Time of Distribution and will be an Active Mindspeed Employee. (b) Each individual (other than those identified on Schedule 2.01) who is employed by Conexant or any of its Subsidiaries (including members of the Conexant Group and the Mindspeed Group) immediately prior to the Distribution (including those who are actively employed or on lay-off, leave, short-term or long-term disability or other 5 permitted absence from employment) will be or will continue to be employed by a member of the Conexant Group immediately after the Time of Distribution and will be an Active Conexant Employee. (c) Notwithstanding the foregoing, in the event that on or prior to 18 months after the Time of Distribution, any Active Mindspeed Employee returns directly from employment with Mindspeed or any of its Subsidiaries to employment with Conexant or any of its Subsidiaries (a "Returning Mindspeed Employee") or any Active Conexant Employee leaves employment with Conexant or any of its Subsidiaries and is employed directly by Mindspeed or any of its Subsidiaries (a "Mindspeed Transfer Employee"), in each case, with the prior written consent of either (x) both the Chief Executive Officer of Conexant and the Chief Executive Officer of Mindspeed or (y) both the Senior Vice President, Human Resources of Conexant and the Senior Vice President, Human Resources of Mindspeed, then: (i) Conexant shall credit such Returning Mindspeed Employee (A) under welfare benefit plans of Conexant and its Subsidiaries with all service and other items which have been credited or accumulated for the benefit of such Returning Mindspeed Employee under the corresponding welfare benefit plans of Mindspeed and its Subsidiaries and (B) with all service with Mindspeed and its Subsidiaries for purposes of eligibility and vesting (but not for benefit accrual or contributions) under any savings plan, retirement plan, stock option plan, incentive compensation plan, deferred compensation plan, performance share plan, employee stock purchase plan or other similar plan of Conexant and its Subsidiaries. Such Returning Mindspeed Employee (x) will be considered to have been in continuous service with Conexant and its Subsidiaries during the combined period of employment with both Conexant and its Subsidiaries and Mindspeed and its Subsidiaries (including for purposes of vesting and treatment of Mindspeed Options upon termination of employment, retirement, death or disability under the Mindspeed Stock Plans) and (y) will not be considered to have terminated employment with Conexant and its Subsidiaries as a result of the Distribution (other than with respect to distributions made to such Returning Mindspeed Employee in accordance with the terms of any of the foregoing plans of Conexant and its Subsidiaries); and (ii) Mindspeed shall credit such Mindspeed Transfer Employee (A) under welfare benefit plans of Mindspeed and its Subsidiaries with all service and other items which have been credited or accumulated for the benefit of such Mindspeed Transfer Employee under any welfare benefit plans of Conexant and its Subsidiaries and (B) with all service with Conexant and its Subsidiaries for purposes of eligibility and vesting (but not for benefit accrual or contributions) under any savings plan, retirement plan, stock option plan, incentive compensation plan, deferred compensation plan, performance share plan, employee stock purchase plan or other similar plan of Mindspeed and its Subsidiaries, as if such Mindspeed Transfer Employee had become an Active Mindspeed Employee as of the Time of Distribution pursuant to the terms of this Agreement. 6 (d) Effective as of the Time of Distribution, (i) for immigration purposes Mindspeed will be the successor-in-interest to any and all pending or approved visa petitions (whether with the U.S. Bureau of Citizenship and Immigration Services or U.S. Department of Labor), including pending or completed Labor Condition Applications, made by Conexant and its Subsidiaries with respect to Active Mindspeed Employees, and Mindspeed will adopt and accept all representations made by Conexant in any of these petitions and applications, (ii) Mindspeed will adopt any Labor Condition Application included in the "Public Access Folders" for Active Mindspeed Employees who have H-1B visas, and (iii) Mindspeed will adopt any existing I-9 certifications of Conexant and its Subsidiaries with respect to Active Mindspeed Employees. (e) Nothing contained in this Section 2.01 is intended to confer upon any employee of the Mindspeed Group or the Conexant Group any right to continued employment after the Time of Distribution. Section 2.02 Non-Solicitation of Employees. Without the express written agreement of either (x) both the Chief Executive Officer of Conexant and the Chief Executive Officer of Mindspeed or (y) both the Senior Vice President, Human Resources of Conexant and the Senior Vice President, Human Resources of Mindspeed: (a) Conexant agrees not to (and to cause the other members of the Conexant Group not to) solicit, recruit or hire, directly or indirectly (including by contracting with or through an independent contractor, consultant or other third party) any employee of, or individual providing contracting services to, Mindspeed or any other member of the Mindspeed Group until 18 months after the Time of Distribution or until six months after such employee's employment with, or such individual's provision of contracting services to, Mindspeed or any other member of the Mindspeed Group terminates, whichever occurs first; (b) Mindspeed agrees not to (and to cause the other members of the Mindspeed Group not to) solicit, recruit or hire, directly or indirectly (including by contracting with or through an independent contractor, consultant or other third party) any employee of, or individual providing contracting services to, Conexant or any other member of the Conexant Group until 18 months after the Time of Distribution or until six months after such employee's employment with, or such individual's provision of contracting services to, Conexant or any other member of the Conexant Group terminates, whichever occurs first; and (c) Notwithstanding the foregoing (but subject to the restriction on hiring), such prohibitions on solicitation do not restrict general recruitment efforts carried out through a public or general solicitation. 7 ARTICLE III SAVINGS PLANS Section 3.01 Retirement Savings Plan. (a) As of the Time of Distribution, Mindspeed will have established, and will cover Active Mindspeed Employees who were eligible to participate in the Conexant Savings Plan immediately prior to the Time of Distribution under, a new defined contribution plan (the "Mindspeed Savings Plan"), which will be qualified pursuant to Sections 401(a) and 401(k) of the Code, and will have established a related trust which will be exempt from taxation under Section 501(a) of the Code. The Mindspeed Savings Plan will credit each participating Active Mindspeed Employee thereunder for purposes of eligibility and vesting with all service which had been credited to such Active Mindspeed Employee for such purposes under the Conexant Savings Plan immediately prior to the Time of Distribution. (b) After the Time of Distribution, each Active Mindspeed Employee who participated in the Conexant Savings Plan prior to the Time of Distribution will be permitted to rollover his or her account balances from the Conexant Savings Plan to the Mindspeed Savings Plan in accordance with the terms of the respective plans and applicable law; provided, however, that if any Active Mindspeed Employee has any outstanding loans related to his or her account balances in the Conexant Savings Plan, such Active Mindspeed Employee will not be permitted to rollover his or her account balances to the Mindspeed Savings Plan until such loan has been repaid in full to the Conexant Savings Plan. (c) As of and after the Time of Distribution, Conexant will retain sponsorship of the Conexant Savings Plan and will retain all assets thereof and all rights therein. Effective as of the Time of Distribution, Active Mindspeed Employees will cease to be eligible to contribute to, or receive contributions in respect of, their Conexant Savings Plan accounts. None of Mindspeed, any other member of the Mindspeed Group, Affiliates of the foregoing, the Mindspeed Savings Plan or the trust thereunder will have or acquire any interest in or right to any of the assets of the Conexant Savings Plan or will have any Liabilities with respect to such plan, and Conexant will have full power and authority with respect to the amendment and termination of the Conexant Savings Plan and the investment and disposition of assets held in the Conexant Savings Plan. Section 3.02 Hourly Employees' Savings Plan. As of and after the Time of Distribution, Conexant will retain sponsorship of the Conexant Hourly Savings Plan and will retain all assets thereof and all rights therein. No Active Mindspeed Employees or Former Mindspeed Employees are eligible to participate in the Conexant Hourly Savings Plan. Accordingly, none of Mindspeed, any other member of the Mindspeed Group or Affiliates of the foregoing will have or acquire any interest in or right to any of the assets of the Conexant Hourly Savings Plan or will have any Liabilities with respect to such plan, and Conexant will have full power and authority with respect to the amendment and termination of the Conexant 8 Hourly Savings Plan and the investment and disposition of assets held in the Conexant Hourly Savings Plan. Section 3.03 Non-Qualified Retirement Savings Plan. As of and after the Time of Distribution, Conexant will retain sponsorship of the Conexant Non-Qualified Savings Plan and will retain all assets thereof and all rights therein. Effective as of the Time of Distribution, each Mindspeed Participant set forth on Schedule 3.03 who was eligible to participate in the Conexant Non-Qualified Savings Plan prior to the Time of Distribution will be treated as having terminated employment with Conexant and its Subsidiaries for purposes of determining his or her eligibility to participate in the Conexant Non-Qualified Savings Plan and will be paid his or her vested account balance pursuant to the terms of the plan. Accordingly, none of Mindspeed, any other member of the Mindspeed Group or Affiliates of the foregoing will have or acquire any interest in or right to any of the assets of the Conexant Non-Qualified Savings Plan or, except as set forth in the immediately following sentence, will have any Liabilities with respect to such plan, and Conexant will have full power and authority with respect to the amendment and termination of the Conexant Non-Qualified Savings Plan and the investment and disposition of assets held in the Conexant Non-Qualified Savings Plan. Notwithstanding anything to the contrary in this Section 3.03, within five (5) Business Days after the Time of Distribution, Mindspeed shall pay to Conexant an amount equal to the vested account balances paid or to be paid to such Mindspeed Participants by Conexant pursuant to the terms of the Conexant Non-Qualified Savings Plan and this Section 3.03. ARTICLE IV STOCK PLANS Section 4.01 Stock Plans. (a) Conexant and Mindspeed will take all action necessary or appropriate so that each Conexant Split Option that is outstanding immediately prior to the Time of Distribution will be adjusted pursuant to the equitable adjustment and other provisions of the applicable Conexant Stock Plan under which such Conexant Split Option was granted in the manner described in this Section 4.01. The number of shares of Conexant Common Stock subject to such adjusted Conexant Split Option and the per-share exercise price of such adjusted Conexant Split Option will be determined as set forth on Schedule 4.01(a)(i). Each such adjusted Conexant Split Option will otherwise have the same terms and conditions as those in effect immediately prior to the adjustment. In addition, each person holding a Conexant Split Option that is outstanding immediately prior to the Time of Distribution will receive a Mindspeed Option pursuant to the equitable adjustment and other provisions of the applicable Conexant Stock Plan under which such Conexant Split Option was granted. The number of shares of Mindspeed Common Stock subject to such Mindspeed Option and the per-share exercise price of such Mindspeed Option will be determined as set forth on Schedule 4.01(a)(ii). Each such Mindspeed Option will otherwise have substantially the same terms and conditions as the corresponding Conexant Split Option being adjusted, except that references to Conexant will be changed to refer to 9 Mindspeed and references to any of the Conexant Stock Plans will be changed to refer to Mindspeed's applicable stock option plan. (b) As of the Time of Distribution, Mindspeed will have established one or more stock option plans (the "Mindspeed Stock Plans") the purposes of which are to provide a means for Mindspeed to perform its obligations with respect to Mindspeed Options arising from the Conexant Split Options and which will be substantially similar in all material respects to the corresponding Conexant Stock Plan governing the Conexant Split Option from which the Mindspeed Option was derived and will provide that solely for purposes of vesting and treatment of the Mindspeed Options upon termination of employment, retirement, death or disability under the Mindspeed Stock Plans, continued employment of the holder of any Mindspeed Option who is not an Active Mindspeed Employee with such holder's current employer (or an Affiliate thereof) (including a Returning Mindspeed Employee's continued employment with Conexant (or an Affiliate thereof)) shall be treated as continued employment with Mindspeed. From and after the Time of Distribution, Mindspeed will retain sponsorship of and will be solely responsible for the Mindspeed Stock Plans. (c) The Conexant Stock Plans will provide that solely for purposes of vesting and treatment of the Conexant Split Options upon termination of employment, retirement, death or disability under the Conexant Stock Plans, continued employment of any Active Mindspeed Employee (including a Mindspeed Transfer Employee) who holds a Conexant Split Option with Mindspeed (or an Affiliate thereof) shall be treated as continued employment with Conexant. From and after the Time of Distribution, Conexant will retain sponsorship of and will be solely responsible for the Conexant Stock Plans. (d) Conexant and Mindspeed will take all action necessary or appropriate so that each Specified Conexant Option that is outstanding immediately prior to the Time of Distribution is adjusted pursuant to the equitable adjustment and other provisions of the applicable Conexant Stock Plan under which such Specified Conexant Option was granted in the manner described in this Section 4.01(d). The number of shares of Conexant Common Stock subject to such adjusted Specified Conexant Option and the per-share exercise price of such adjusted Specified Conexant Option will be determined as set forth on Schedule 4.01(d). Each such adjusted Specified Conexant Option will otherwise have the same terms and conditions as those in effect immediately prior to the adjustment. ARTICLE V OTHER EMPLOYEE PLANS AND MATTERS Section 5.01 Welfare Plans. (a) As of the Time of Distribution, Mindspeed and the Mindspeed Subsidiaries will have established, and will cover Mindspeed Participants who were eligible to participate in the Conexant Welfare Plans immediately prior to the Time of Distribution under, Welfare Plans and other employee welfare benefit and fringe benefit arrangements 10 (collectively, "Mindspeed Welfare Plans") that are comparable in the aggregate to the Conexant Welfare Plans. (b) The Mindspeed Welfare Plans will provide for the immediate participation of those Mindspeed Participants who participated in the corresponding Conexant Welfare Plans immediately prior to the Time of Distribution. Each of the Mindspeed Welfare Plans will credit each Mindspeed Participant thereunder for all Mindspeed Welfare Plan purposes with all service and any other item which had been credited to or otherwise accumulated for the benefit of such Mindspeed Participant under the corresponding Conexant Welfare Plans immediately prior to the Time of Distribution, including service credited toward any waiting periods and amounts credited toward any medical or health insurance deductible or co-payment. Without limiting the generality of the foregoing, each Mindspeed Welfare Plan, to the extent applicable: (i) will recognize all amounts applied to deductibles, co-payments, out-of-pocket maximums, lifetime maximum benefits and amounts contributed under a flexible spending plan with respect to Mindspeed Participants under the corresponding Conexant Welfare Plan for the plan year that includes the Time of Distribution and for prior periods (if applicable); (ii) will recognize all service credited to waiting periods with respect to Mindspeed Participants under the corresponding Conexant Welfare Plan; (iii) will not impose any limitations on coverage of pre-existing conditions of Mindspeed Participants except to the extent such limitations applied to such Mindspeed Participants under the corresponding Conexant Welfare Plan immediately prior to the Time of Distribution; and (iv) will not impose any other conditions (such as proof of good health, evidence of insurability or a requirement of a physical examination) upon the participation by Mindspeed Participants who were participating in the corresponding Conexant Welfare Plan immediately prior to the Time of Distribution. (c) As of the Time of Distribution, Mindspeed and the Mindspeed Subsidiaries will have established, and will cover Active Mindspeed Employees under, policies relating to vacation days and personal and sick days that are comparable in the aggregate to the policies relating to vacation days and personal and sick days maintained by Conexant immediately prior to the Time of Distribution. As of the Time of Distribution, Mindspeed and the Mindspeed Subsidiaries will credit each Active Mindspeed Employee with the unused vacation days and personal and sick days accrued by such employee through the Time of Distribution in accordance with the policies relating to vacation days and personal and sick days maintained by Conexant and its Subsidiaries (including members of the Mindspeed Group) applicable to such employee in effect immediately prior to the Time of Distribution. (d)(i) From and after the Time of Distribution, except as specifically set forth in Section 5.01(e)(ii), Mindspeed and the Mindspeed Subsidiaries hereby assume or retain, as applicable, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) in respect of Mindspeed Participants (and claims by or relating to Mindspeed Participants) with respect to employee welfare and fringe benefits (including medical, dental, life, travel, accident, short- and long-term disability, hospitalization, workers' compensation and other insurance benefits), whether under the Conexant Welfare Plans, 11 the Mindspeed Welfare Plans or otherwise, whether incurred, or arising in connection with incidents occurring, before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution. (ii) Conexant and Mindspeed acknowledge and agree that, prior to the Time of Distribution, Conexant, as a joint or concurrent employer of Mindspeed Participants under California Labor Code Section 3602, shall have covered such Mindspeed Participants under workers' compensation coverage through a workers' compensation insurance policy, or as allowed by law, through self-insurance. From and after the Time of Distribution, Conexant will provide workers' compensation insurance coverage on the terms in effect prior to the Time of Distribution in respect of claims by or relating to Mindspeed Participants for periods prior to the Time of Distribution. Promptly (and in no event later than five (5) Business Days) after receipt of a written request by Conexant, Mindspeed shall reimburse Conexant for any amounts paid by Conexant after the Time of Distribution in respect of workers' compensation claims by or relating to Mindspeed Participants. If the portion of Conexant's total deposit (the "Reserve Amount") as a self-insured employer with the California Department of Industrial Relations, Division of Workers' Compensation (the "Division") attributable to claims by or relating to Mindspeed Participants (the "Mindspeed Reserve Amount") is equal to or greater than $170,000, promptly (and in no event later than five (5) Business Days) after receipt of a written request by Conexant, Mindspeed will deposit with Conexant cash in an amount equal to the excess of the Mindspeed Reserve Amount over the then-current amount deposited by Mindspeed with Conexant pursuant to this Section 5.01(d)(ii). The Mindspeed Reserve Amount shall be based on the Reserve Amount determined by the Division on the basis of claims reported on the most recent Self-Insurer's Annual Report filed by Conexant with the Division. The Mindspeed Reserve Amount shall be adjusted annually based on the portion of the Reserve Amount (as determined by the Division on the basis of claims reported on the Self-Insurer's Annual Report) attributable to claims by or relating to Mindspeed Participants. Conexant shall pay to Mindspeed an amount equal to the excess, if any, of the amount deposited by Mindspeed with Conexant pursuant to this Section 5.01(d)(ii) over the then-current Mindspeed Reserve Amount within five (5) Business Days after Conexant receives any excess Reserve Amounts from the Division following the Division's annual determination of the Reserve Amount. (e)(i) From and after the Time of Distribution, except as specifically set forth in this Agreement, Conexant and the Conexant Subsidiaries hereby assume or retain, as applicable, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) in respect of Conexant Participants (and claims by or relating to Conexant Participants) with respect to employee welfare and fringe benefits (including medical, dental, life, travel, accident, short- and long-term disability, hospitalization, workers' compensation and other insurance benefits), whether under the Conexant Welfare Plans or otherwise, whether incurred, or arising in connection with incidents occurring, before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution. (ii) Except as specifically set forth in this Agreement, from and after the Time of Distribution, Conexant and the Conexant Subsidiaries (or where appropriate, the Conexant Welfare Plans) hereby assume or retain, as applicable, and will be solely responsible for and will fully perform, pay and discharge all Liabilities of Conexant or 12 any of its Subsidiaries (including members of the Mindspeed Group) in respect of Conexant Participants and Former Mindspeed Employees and their beneficiaries (and claims by or relating to Conexant Participants and Former Mindspeed Employees and their beneficiaries) with respect to retiree health and welfare benefits, whether under the Conexant Welfare Plans or otherwise, whether incurred, or arising in connection with incidents occurring, before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution. Section 5.02 Incentive Compensation Plans. (a) Effective as of the Time of Distribution, Mindspeed and the Mindspeed Subsidiaries hereby assume or retain, as applicable, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities (including liability for earned but unpaid incentive payments) of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) for, due to and/or attributable to Mindspeed Participants under the Incentive Compensation Plans and all other long-term, annual and other incentive compensation plans of Conexant and its Subsidiaries (including members of the Mindspeed Group) in effect at or prior to the Time of Distribution. (b) Effective as of the Time of Distribution, Conexant and the Conexant Subsidiaries hereby assume or retain, as applicable, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities (including liability for earned but unpaid incentive payments) of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) for, due to and/or attributable to Conexant Participants under the Incentive Compensation Plans and all other long-term, annual and other incentive compensation plans of Conexant and its Subsidiaries (including members of the Mindspeed Group) in effect at or prior to the Time of Distribution (other than the Mindspeed Incentive Compensation Plans). (c) Effective as of the Time of Distribution, Mindspeed and the Mindspeed Subsidiaries hereby assume or retain, as applicable, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities (including liability for earned but unpaid incentive payments) of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) under or relating to the Mindspeed Incentive Compensation Plans. (d) Conexant and Mindspeed will cooperate in taking all actions necessary or appropriate to adjust the performance goals and other applicable terms and conditions of awards under the Incentive Compensation Plans, the Mindspeed Incentive Compensation Plans and all other long-term, annual or other incentive compensation plans and arrangements for performance periods that begin before and end after the Time of Distribution as appropriate to reflect the Distribution. Without limiting the generality of the foregoing, for purposes of any Conexant restricted stock awards held by any Active Mindspeed Employee, continued employment of such employee with Mindspeed (or an Affiliate thereof) (including a Mindspeed Transfer Employee) following the Time of Distribution will be treated as continued employment with Conexant. 13 Section 5.03 Deferred Compensation Plans. (a) Establishment and Sponsorship of Deferred Compensation Plans and Rabbi Trusts. (i) As of the Time of Distribution, Mindspeed will have established, and will cover Mindspeed Participants who were eligible to participate in the Conexant Deferred Compensation Plan immediately prior to the Time of Distribution under, a new or existing deferred compensation plan (the "Mindspeed Deferred Compensation Plan") and a rabbi trust related thereto (the "Mindspeed Deferred Compensation Plan Rabbi Trust"). The Mindspeed Deferred Compensation Plan will credit each Mindspeed Participant thereunder for purposes of eligibility to participate, vesting, benefit accruals and all other plan purposes with all service which had been credited to such participant for such purposes under the Conexant Deferred Compensation Plan immediately prior to the Time of Distribution. (ii) As of and after the Time of Distribution, Conexant will retain sponsorship of the Conexant Deferred Compensation Plan and the related Conexant Deferred Compensation Plan Rabbi Trust. Conexant will retain, and will be solely responsible for and will fully perform, pay and discharge, and agrees to cause the Conexant Deferred Compensation Plan and the Conexant Deferred Compensation Plan Rabbi Trust to retain, and to fully perform, pay and discharge all accrued benefit and other Liabilities of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) under and relating to the Conexant Deferred Compensation Plan and the Conexant Deferred Compensation Plan Rabbi Trust with respect to Conexant Participants, before, at or after the Time of Distribution. (b) Assumption of Deferred Compensation Plan Liabilities. As of the Time of Distribution, Mindspeed hereby assumes, and agrees to fully perform, pay and discharge, and agrees to cause the Mindspeed Deferred Compensation Plan and the Mindspeed Deferred Compensation Plan Rabbi Trust to assume, and to fully perform, pay and discharge, all accrued benefit and other Liabilities of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) under and relating to the Conexant Deferred Compensation Plan and the Conexant Deferred Compensation Plan Rabbi Trust with respect to Mindspeed Participants who were covered under the Conexant Deferred Compensation Plan prior to the Time of Distribution. (c) Transfers of Conexant Deferred Compensation Plan Rabbi Trust Assets. Within twenty (20) Business Days after the Time of Distribution (the "Transfer Date"), Conexant will transfer from the Conexant Deferred Compensation Rabbi Trust to the Mindspeed Deferred Compensation Rabbi Trust an amount equal to the sum of (i) compensation deferred and not paid under the Conexant Deferred Compensation Plan to Mindspeed Participants through the Time of Distribution and (ii) earnings deemed credited thereon through the date of such transfer for all Mindspeed Participants. 14 Section 5.04 Severance Pay. (a) Conexant and Mindspeed acknowledge and agree that the transactions contemplated by the Separation Agreements will not constitute a severance of employment of any employee of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) prior to or as a result thereof, and that individuals who, in connection with the Distribution, become Active Conexant Employees or Active Mindspeed Employees pursuant to this Agreement will not be deemed to have experienced a termination, layoff or severance of employment from Conexant and its Subsidiaries (including members of the Mindspeed Group), in each case for purposes of any policy, plan, program or agreement of Conexant or any of its Subsidiaries (including any member of the Mindspeed Group) that provides for the payment of severance, salary continuation or similar benefits. (b) Mindspeed and the Mindspeed Subsidiaries hereby assume or retain, as applicable, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) in connection with claims made by or on behalf of Mindspeed Participants in respect of severance pay, salary continuation and similar obligations relating to the termination or alleged termination (whether voluntary or involuntary) of any such person's employment, whether such termination or alleged termination occurred before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution (whether or not such claim is based on any severance policy, agreement, arrangement or program which may exist or arise under any employment, collective bargaining or other agreement or under any federal, state, local, provincial or foreign law). (c) Conexant and the Conexant Subsidiaries hereby assume or retain, as applicable, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) in connection with claims made by or on behalf of Conexant Participants in respect of severance pay, salary continuation and similar obligations relating to the termination or alleged termination (whether voluntary or involuntary) of any such person's employment, whether such termination or alleged termination occurred before, at or after the Time of Distribution and whether any claim is made with respect thereto before, at or after the Time of Distribution (whether or not such claim is based on any severance policy, agreement, arrangement or program which may exist or arise under any employment, collective bargaining or other agreement or under any federal, state, local, provincial or foreign law). Section 5.05 Employment, Consulting and Other Employee Related Agreements. (a) Effective as of the Time of Distribution, Mindspeed and the Mindspeed Subsidiaries hereby assume or retain, as applicable, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) relating to all Mindspeed Participants under their respective employment, consulting, separation, arbitration and other employee related 15 agreements with any member of the Pre-Distribution Group, as the same are in effect immediately prior to the Time of Distribution. (b) Effective as of the Time of Distribution, Conexant and the Conexant Subsidiaries hereby assume or retain, as applicable, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) relating to all Conexant Participants under their respective employment, consulting, separation, arbitration and other employee related agreements with any member of the Pre-Distribution Group, as the same are in effect immediately prior to the Time of Distribution. Section 5.06 Employee Stock Purchase Plans. (a) As of the Time of Distribution, Mindspeed will have established, and will cover Active Mindspeed Employees under, a new or existing employee stock purchase plan qualified under Section 423 of the Code which is comparable to the Conexant 2001 ESPP (the "Mindspeed ESPP"). The Mindspeed ESPP will credit each participating Active Mindspeed Employee thereunder for purposes of eligibility and vesting with all service which had been credited to such employee for such purposes under the Conexant 2001 ESPP and the Conexant Non-Qualified ESPP immediately prior to the Time of Distribution. (b) As of and after the Time of Distribution, Conexant will retain sponsorship of the Conexant 2001 ESPP and the Conexant Non-Qualified ESPP and will retain all assets thereof and all rights therein. Effective as of the Time of Distribution, each Active Mindspeed Employee will be treated as having terminated employment with Conexant and the Conexant Subsidiaries for purposes of determining his or her eligibility to participate in the Conexant 2001 ESPP and the Conexant Non-Qualified ESPP. Accordingly, none of Mindspeed, any other member of the Mindspeed Group, Affiliates of the foregoing or the Mindspeed ESPP will have or retain any interest in or right to any of the assets of the Conexant 2001 ESPP and the Conexant Non-Qualified ESPP or will have any Liabilities with respect to such plans, and Conexant will have full power and authority with respect to the amendment and termination of the Conexant 2001 ESPP and the Conexant Non-Qualified ESPP. Section 5.07 VERP. As of and after the Time of Distribution, Conexant will retain sponsorship of the Conexant VERP and will retain all assets thereof and all rights therein. Effective as of the Time of Distribution, each Mindspeed Participant set forth on Schedule 5.07 who was eligible to participate in the Conexant VERP prior to the Time of Distribution will be treated as having terminated employment with Conexant and the Conexant Subsidiaries for purposes of determining his or her eligibility to participate in the Conexant VERP and will be paid his or her benefit pursuant to the terms of the plan. Accordingly, none of Mindspeed, any other member of the Mindspeed Group or Affiliates of the foregoing will have or acquire any interest in or right to any of the assets of the Conexant VERP Trust or will have any Liabilities with respect to such plan, and Conexant will have full 16 power and authority with respect to the amendment and termination of the Conexant VERP and the investment and disposition of assets held in the Conexant VERP Trust. Section 5.08 Other Liabilities. (a) From and after the Time of Distribution, except as specifically set forth in this Agreement, Mindspeed and the Mindspeed Subsidiaries hereby assume or retain, as applicable, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) arising out of or relating to the employment of Mindspeed Participants by any member of the Pre-Distribution Group, whether pursuant to benefit plans or otherwise and whether such Liabilities arose before, at or after the Time of Distribution or any claim is made with respect thereto before, at or after the Time of Distribution. (b) From and after the Time of Distribution, except as specifically set forth in this Agreement, Conexant and the Conexant Subsidiaries hereby assume or retain, as applicable, and will be solely responsible for and will fully perform, pay and discharge, all Liabilities of Conexant or any of its Subsidiaries (including members of the Mindspeed Group) arising out of or relating to employment of Conexant Participants by any member of the Pre-Distribution Group, whether pursuant to benefit plans or otherwise and whether such Liabilities arose before, at or after the Time of Distribution or any claim is made with respect thereto before, at or after the Time of Distribution. (c) Notwithstanding any other provision of this Agreement to the contrary, each of Conexant and Mindspeed shall be responsible for and will fully perform, pay and discharge, their respective Liabilities in respect of the matters set forth in Schedule 5.08(c) as provided therein. ARTICLE VI MISCELLANEOUS Section 6.01 Indemnification. All Liabilities retained or assumed by or allocated to Mindspeed or any Mindspeed Subsidiary pursuant to this Agreement will be deemed to be Mindspeed Liabilities, and all Liabilities retained or assumed by or allocated to Conexant or any Conexant Subsidiary pursuant to this Agreement will be deemed to be Conexant Liabilities, and, in each case, will be subject to the indemnification provisions set forth in Article IV of the Distribution Agreement. Section 6.02 Sharing of Information. Each of Conexant and Mindspeed will, and will cause each of their respective Subsidiaries to, provide to the other all such Information in its possession as the other may reasonably request to enable the requesting party to administer its employee benefit plans and programs, and to determine the scope of, and fulfill, its obligations under this Agreement. Such Information will, to the extent reasonably practicable, be provided in the format and at the times and places requested, but in no event will the party providing such Information be obligated to incur any direct expense not reimbursed by the party making such request, nor to make such Information available outside its normal business hours and premises. The right of the parties to receive Information hereunder will, without limiting the generality of the foregoing, extend to any and all reports, and the data underlying such reports. Any Information shared or exchanged pursuant to this 17 Agreement will be subject to the confidentiality requirements set forth in the Distribution Agreement. Section 6.03 Entire Agreement; Construction. This Agreement, the Distribution Agreement, the other Separation Agreements and the Financing Agreements, including any annexes, schedules and exhibits hereto or thereto, and other agreements and documents referred to herein and therein, will together constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and will supersede all prior negotiations, agreements and understandings of the parties of any nature, whether oral or written, with respect to such subject matter. Notwithstanding any other provisions in the Separation Agreements to the contrary, in the event and to the extent that there is a conflict between the provisions of this Agreement and the provisions of the Distribution Agreement, the provisions of this Agreement will control. Section 6.04 Survival of Agreements. Except as otherwise contemplated by the Separation Agreements, all covenants and agreements of the parties contained in this Agreement will remain in full force and effect and survive the Time of Distribution. Section 6.05 Governing Law. This Agreement will be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and to be performed entirely within such State, without regard to the conflicts of law principles of such State. Section 6.06 Notices. All notices, requests, claims, demands and other communications required or permitted to be given hereunder will be in writing and will be delivered by hand or telecopied, e-mailed or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and will be deemed given when so delivered by hand or telecopied, when e-mail confirmation is received if delivered by e-mail, or three (3) Business Days after being so mailed (one (1) Business Day in the case of express mail or overnight courier service). All such notices, requests, claims, demands and other communications will be addressed as set forth in Section 7.04 of the Distribution Agreement, or pursuant to such other instructions as may be designated in writing by the party to receive such notice. Section 6.07 Amendments. This Agreement cannot be amended, modified or supplemented except by a written agreement executed by Conexant and Mindspeed. Section 6.08 Assignment. Except as otherwise provided herein, neither party to this Agreement will convey, assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the other party in its sole and absolute discretion. Notwithstanding the foregoing, either party may (without obtaining any consent) assign all or any portion of its rights and obligations hereunder to (i) the surviving entity resulting from a merger or consolidation involving such party, (ii) the acquiring entity in a sale or other disposition of all or substantially all of the assets of such party as a whole or of any line of business or division of such party, or (iii) any other Person that is created as a result of a spin-off from, or similar reorganization transaction of, such party or any line of 18 business or division of such party. In the event of an assignment pursuant to (ii) or (iii) above, the nonassigning party shall, at the assigning party's request, use good faith commercially reasonable efforts to enter into separate agreements with each of the resulting entities and take such further actions as may be reasonably required to assure that the rights and obligations under this Agreement are preserved, in the aggregate, and divided equitably between such resulting entities. Any conveyance, assignment or transfer requiring the prior written consent of another party pursuant to this Section 6.08 which is made without such consent will be void ab initio. No assignment of this Agreement will relieve the assigning party of its obligations hereunder. Section 6.09 Captions; Currency. The article, section and paragraph captions herein and the table of contents hereto are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof. Unless otherwise specified, all references herein to numbered articles or sections are to articles and sections of this Agreement and all references herein to schedules are to schedules to this Agreement. Unless otherwise specified, all references contained in this Agreement, in any schedule referred to herein or in any instrument or document delivered pursuant hereto to dollars or $ will mean United States Dollars. Section 6.10 Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and will in no way be affected, impaired or invalidated thereby. If the economic or legal substance of the transactions contemplated hereby is affected in any manner adverse to any party as a result thereof, the parties will negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties. Section 6.11 Parties in Interest. This Agreement is binding upon and is for the benefit of the parties hereto and their respective successors and permitted assigns. This Agreement is not made for the benefit of any Person not a party hereto, and no Person other than the parties hereto or their respective successors and permitted assigns will acquire or have any benefit, right, remedy or claim under or by reason of this Agreement. No provision of this Agreement will be construed (a) to limit the right of Conexant, any Conexant Subsidiary, Mindspeed or any Mindspeed Subsidiary to amend any plan or terminate their plans, or (b) to create any right or entitlement whatsoever in any employee, former employee or beneficiary including a right to continued employment or to any benefit under a plan or any other benefit or compensation. Section 6.12 Schedules. All schedules attached hereto are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Capitalized terms used in the schedules hereto but not otherwise defined therein will have the respective meanings assigned to such terms in this Agreement. 19 Section 6.13 Termination. This Agreement may be terminated at any time prior to the Time of Distribution by and in the sole discretion of the Conexant Board without the approval of Mindspeed or Conexant's shareowners. In the event of any such termination, neither party will have any liability of any kind to the other party on account of such termination. Section 6.14 Change of Name. On or promptly after the Distribution Date, Mindspeed will take such actions as may be required to change the names of all employee benefit plans sponsored or maintained by Mindspeed or any member of the Mindspeed Group to eliminate therefrom any reference to "Conexant", "Conexant Systems" or any derivative thereof. Section 6.15 Waivers; Remedies. No failure or delay on the part of either Conexant or Mindspeed in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any waiver on the part of either Conexant or Mindspeed of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder, nor will any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. Subject to Section 6.18, the rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which the parties may otherwise have at law or in equity. Section 6.16 Counterparts. This Agreement may be executed in separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement. This Agreement may be executed and delivered by telecopier with the same force and effect as if it were a manually executed and delivered counterpart. Section 6.17 Performance. Conexant will cause to be performed and hereby guarantees the performance of all actions, agreements and obligations set forth herein to be performed by any Conexant Subsidiary. Mindspeed will cause to be performed and hereby guarantees the performance of all actions, agreements and obligations set forth herein to be performed by any Mindspeed Subsidiary. Section 6.18 Dispute Resolution. Any dispute, claim or controversy arising out of or relating to any provision of this Agreement or the breach, performance or validity thereof will be resolved in accordance with the procedures set forth in Section 7.05 of the Distribution Agreement. Section 6.19 Cooperation. Conexant and Mindspeed will cooperate in taking all such action as may be necessary or appropriate to implement the provisions of this Agreement, including making all appropriate filings as may be required under ERISA or the Code, the regulations thereunder and any other applicable laws, exchanging and sharing all appropriate records, amending plan, trust, record keeping and other related documents and implementing all appropriate communications with participants. 20 Section 6.20 Interpretation. Any reference herein to any federal, state, local or foreign law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. For the purposes of this Agreement, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms "hereof", "herein", and "herewith" and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, (iii) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation" and (iv) all references to any plan shall be deemed to include any amendments thereto. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.] 21 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties as of the date first hereinabove written. CONEXANT SYSTEMS, INC. By: /s/ Dennis E. O'Reilly ------------------------------- Name: Dennis E. O'Reilly Title: Senior Vice President, General Counsel and Secretary MINDSPEED TECHNOLOGIES, INC. By: /s/ Bradley W. Yates ------------------------------- Name: Bradley W. Yates Title: Senior Vice President and Chief Administrative Officer 22 EX-2.3 5 a91233exv2w3.txt EXHIBIT 2.3 Exhibit 2.3 ================================================================================ TAX ALLOCATION AGREEMENT by and between CONEXANT SYSTEMS, INC. and MINDSPEED TECHNOLOGIES, INC. ====================================================== June 27, 2003 ====================================================== ================================================================================ TABLE OF CONTENTS

Page ---- ARTICLE I DEFINITIONS....................................................................... 1 Section 1.01 General........................................................................... 1 Section 1.02 Schedules, etc.................................................................... 8 ARTICLE II FILING OF TAX RETURNS; PAYMENT OF TAXES; REFUNDS.................................. 8 Section 2.01 Preparation of Tax Returns........................................................ 8 Section 2.02 Payment of Taxes.................................................................. 10 Section 2.03 Tax Refunds and Carrybacks........................................................ 13 Section 2.04 Allocation of Straddle Period Taxes............................................... 14 ARTICLE III TAX INDEMNIFICATION; TAX CONTESTS................................................. 15 Section 3.01 Indemnification................................................................... 15 Section 3.02 Mindspeed Tax Acts................................................................ 17 Section 3.03 Notice of Indemnity............................................................... 18 Section 3.04 Payments.......................................................................... 18 Section 3.05 Tax Contests...................................................................... 20 ARTICLE IV OPTIONS; COMPENSATION PAYMENTS; INTEREST CHARGE FOR LATE PAYMENTS; CURRENCY CALCULATIONS; EFFECTIVE TIME OF TRANSACTIONS...................................... 21 Section 4.01 Stock Options; Restricted Shares.................................................. 21 Section 4.02 Compensation Payments............................................................. 23 Section 4.03 Change in Law..................................................................... 24 Section 4.04 Interest Charge for Late Payments................................................. 24 Section 4.05 Currency Calculations............................................................. 24 Section 4.06 Effective Time of Transaction..................................................... 24 ARTICLE V COOPERATION AND EXCHANGE OF INFORMATION........................................... 25 Section 5.01 Inconsistent Actions.............................................................. 25 Section 5.02 [Intentionally Omitted]........................................................... 25 Section 5.03 [Intentionally Omitted]........................................................... 25 Section 5.04 Cooperation and Exchange of Information........................................... 25 Section 5.05 Tax Records....................................................................... 26

ARTICLE VI MISCELLANEOUS..................................................................... 27 Section 6.01 Entire Agreement; Construction.................................................... 27 Section 6.02 Effectiveness..................................................................... 27 Section 6.03 Survival of Agreements............................................................ 27 Section 6.04 Governing Law..................................................................... 27 Section 6.05 Notices........................................................................... 27 Section 6.06 Amendments........................................................................ 28 Section 6.07 Successors and Assigns............................................................ 28 Section 6.08 Captions; Currency................................................................ 28 Section 6.09 Severability...................................................................... 28 Section 6.10 Parties in Interest............................................................... 28 Section 6.11 Schedules......................................................................... 29 Section 6.12 Termination....................................................................... 29 Section 6.13 Waivers; Remedies................................................................. 29 Section 6.14 Counterparts...................................................................... 29 Section 6.15 Performance....................................................................... 29 Section 6.16 Interpretation.................................................................... 29 Section 6.17 Dispute Resolution................................................................ 30 ii TAX ALLOCATION AGREEMENT TAX ALLOCATION AGREEMENT (this "AGREEMENT") dated as of June 27, 2003 by and between CONEXANT SYSTEMS, INC., a Delaware corporation ("CONEXANT"), and MINDSPEED TECHNOLOGIES, INC., a Delaware corporation and, as of the date hereof, a wholly-owned subsidiary of Conexant ("MINDSPEED"). WHEREAS, the Conexant Board (as defined herein) has determined that it is appropriate and desirable, subject to the terms and conditions contained in the Distribution Agreement by and between Conexant and Mindspeed dated as of the date hereof ("DISTRIBUTION AGREEMENT") for Conexant to distribute on a pro rata basis to holders of shares of Conexant Common Stock (as defined herein) the outstanding shares of Mindspeed Common Stock (as defined herein) owned by Conexant; and WHEREAS, Conexant and Mindspeed wish to provide for and agree upon the allocation between the Conexant Tax Group (as defined herein) and the Mindspeed Tax Group (as defined herein) of all responsibilities, liabilities and benefits relating to or affecting Taxes (as defined herein) paid or payable by either of them for all taxable periods, whether beginning before, on or after the Distribution Date (as defined herein). NOW, THEREFORE, in consideration of the premises and of the respective agreements contained in this Agreement, the parties hereto hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.01 GENERAL. As used in this Agreement, the following terms shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined). Any capitalized term not otherwise defined in this Agreement shall have the meaning ascribed to it in the Distribution Agreement. "ACTUALLY REALIZED" shall mean, for purposes of determining the timing of any Taxes (or related Tax cost or benefit) relating to any payment, transaction, occurrence or event, the time at which the amount of Taxes (including estimated Taxes) payable by any person is increased above or reduced below, as the case may be, the amount of Taxes that such person would be required to pay but for the payment, transaction, occurrence or event. "BOEING" shall mean The Boeing Company, a Delaware corporation. "BOEING TAX GROUP" shall mean Boeing and its affiliates. "CODE" shall mean the Internal Revenue Code of 1986, as amended, or any successor legislation. "COMPENSATION PAYMENTS" shall mean all non-qualified employee benefit plan and welfare benefit plan payments made under the Employee Matters Agreement dated the date hereof by and between Conexant and Mindspeed. "CONEXANT" shall have the meaning ascribed thereto in the preamble. "CONEXANT BOARD" shall mean the Board of Directors of Conexant or a duly authorized committee thereof. "CONEXANT COMMON STOCK" shall mean the Common Stock, par value of $.01 per share, of Conexant and the associated preferred share purchase rights. "CONEXANT COMMON STOCK OPTIONS" shall mean options to acquire Conexant Common Stock. "CONEXANT GROUP EMPLOYEES AND FORMER EMPLOYEES" shall mean individuals (i) who are employees of any member of the Conexant Tax Group on the date of the event giving rise to a deduction in respect of any Compensation Payments made to such individuals or Stock Options or Restricted Stock held by such individuals, or (ii) whose most recent employment with any member of the Conexant Tax Group or the Mindspeed Tax Group prior to such date was more closely associated with the Broadband Business or some other business rather than the Mindspeed Business. "CONEXANT/MINDSPEED TAX GROUP" shall mean any corporation or other legal entity which is a member of the Conexant Tax Group or the Mindspeed Tax Group but only with respect to taxable periods (or portions thereof) ending on or before or including the Distribution Date. "CONEXANT RESTRICTED STOCK" shall mean shares of Conexant Common Stock subject to restrictions on transferability and subject to a substantial risk of forfeiture. 2 "CONEXANT TAX GROUP" shall mean (i) Conexant, (ii) any corporation or other legal entity which Conexant directly or indirectly owns immediately following the Distribution Date other than a member of the Mindspeed Tax Group, (iii) any other corporation or other legal entity which Conexant directly or indirectly owned at any time prior to the Distribution Date (but only with respect to the period such corporation or other entity was so owned by Conexant) other than a member of the Mindspeed Tax Group, and (iv) solely for purposes of this Agreement and not for purposes of any other Separation Agreement, for any taxable period up to or including (A) December 6, 1996, Old Rockwell and any other corporation or legal entity owned by Old Rockwell other than a member of the Mindspeed Tax Group and (B) December 30, 1998, Rockwell and any other corporation or legal entity owned by Rockwell other than a member of the Mindspeed Tax Group. "DISTRIBUTION" shall mean the distribution of the Mindspeed Common Stock on a pro rata basis to holders of Conexant Common Stock on the Distribution Date pursuant to the Distribution Agreement. "DISTRIBUTION AGREEMENT" shall have the meaning ascribed thereto in the preamble. "DISTRIBUTION TRANSACTION" shall mean any transaction undertaken in connection with the Distribution. "DISTRIBUTION DATE" shall mean the date on which the Distribution occurs (or, if different, the date on which the Distribution is deemed to occur for U.S. federal Income Tax purposes). For purposes of this Agreement, the Distribution shall be deemed effective as of the end of the day on the Distribution Date. "FOREIGN INCOME TAX" shall mean any Income Tax other than a U.S. federal, state or local Income Tax. "FOREIGN INCOME TAX RETURNS" shall mean any Income Tax Return which is not a U.S. federal, state or local Income Tax Return. "INCOME TAX" shall mean (a) any Tax based upon, measured by, or calculated with respect to (i) net income or profits (including, but not limited to, any capital gains, minimum Tax and any Tax on items of Tax preference, but not including sales, use, real or personal property, gross or net receipts, transfer or similar Taxes) or (ii) multiple bases (including, but not limited to, corporate franchise, doing business or occupation Taxes) if one or more of the bases upon which such Tax may be based, measured by, or calculated with respect to, is described in clause (i) above, or (b) any U.S. state or local franchise Tax; including in the case of each of (a) and 3 (b) any related interest and any penalties, additions to such Tax or additional amounts imposed with respect thereto by any Tax Authority. "INCOME TAX BENEFIT" shall mean for any taxable period the excess of (i) the hypothetical Income Tax liability of the taxpayer for the taxable period calculated as if the Timing Difference or Reverse Timing Difference, as the case may be, had not occurred but with all other facts unchanged, over (ii) the actual Income Tax liability of the taxpayer for the taxable period, calculated taking into account the Timing Difference or Reverse Timing Difference, as the case may be (treating an Income Tax refund or credit as a negative Income Tax liability for purposes of such calculation). "INCOME TAX DETRIMENT" shall mean for any taxable period the excess of (i) the actual Income Tax liability of the taxpayer for the taxable period, calculated taking into account the Timing Difference or Reverse Timing Difference, as the case may be, over (ii) the hypothetical Income Tax liability of the taxpayer for the taxable period, calculated as if the Timing Difference or Reverse Timing Difference, as the case may be, had not occurred but with all other facts unchanged (treating an Income Tax refund or credit as a negative Income Tax liability for purposes of such calculation). "INCOME TAX RETURN" shall mean any Tax Return that relates to Income Taxes. "INDEMNITEE" shall have the meaning set forth in Section 3.03. "INDEMNITOR" shall have the meaning set forth in Section 3.03. "INDEMNITY ISSUE" shall have the meaning set forth in Section 3.03. "IRS" shall mean the Internal Revenue Service. "MINDSPEED" shall have the meaning ascribed thereto in the preamble. "MINDSPEED COMMON STOCK" shall mean the Common Stock, par value $.01 per share, of Mindspeed, and the related Rights. "MINDSPEED COMMON STOCK OPTIONS" shall mean options to acquire Mindspeed Common Stock. "MINDSPEED GROUP EMPLOYEES AND FORMER EMPLOYEES" shall mean individuals (i) who are employees of any member of the Mindspeed Tax Group on the date of the event giving rise to a deduction in respect of any Compensation Payments 4 made to such individuals or Stock Options held by such individuals or (ii) whose most recent employment with any member of the Conexant Tax Group or the Mindspeed Tax Group prior to such date was more closely associated with the Mindspeed Business rather than the Broadband business or some other business. "MINDSPEED TAX ACT" shall have the meaning set forth in Section 3.02(a). "MINDSPEED TAX GROUP" shall mean (i) Mindspeed and (ii) any corporation or other legal entity set forth on Schedule 1.01. "MINDSPEED TAX REPRESENTATION LETTER" shall mean the letter delivered by Mindspeed to Conexant on the Distribution Date, substantially in the form set forth in Schedule 3.02(b). "NON-INCOME TAX" shall mean any Tax other than an Income Tax. "OLD ROCKWELL" shall mean the corporation, formerly named Rockwell International Corporation, which owned all of the Rockwell Common Stock prior to the distribution of the Rockwell Common Stock to the shareholders of such corporation on December 6, 1996. "PERSON" shall mean any individual, partnership, joint venture, corporation, limited liability entity, trust, unincorporated organization or other entity (including a governmental entity). "POST-DISTRIBUTION TAXABLE PERIOD" shall mean a taxable period beginning after the Distribution Date. "POST-DISTRIBUTION TAX ACT" shall have the meaning set forth in Section 3.01(a). "POST-TAX INDEMNIFICATION PERIOD" shall mean any Post-Distribution Taxable Period and that portion of any Straddle Period that begins on the day after the Distribution Date. "PRE-DISTRIBUTION TAXABLE PERIOD" shall mean a taxable period ending on or before the Distribution Date. "RESTRICTED STOCK" shall mean Conexant Restricted Stock or Mindspeed Restricted Stock. 5 "REVERSE TIMING DIFFERENCE" shall mean an increase in income, gain or recapture, or a decrease in deduction, loss or credit, as calculated for Income Tax purposes, of the taxpayer for the Tax Indemnification Period coupled with an increase in deduction, loss or credit, or a decrease in income, gain or recapture, of the taxpayer for any Post-Tax Indemnification Period. "RIGHTS" shall have the meaning ascribed thereto in the Distribution Agreement. "ROCKWELL" shall mean Rockwell Automation, Inc., formerly named Rockwell International Corporation, a Delaware corporation. "ROCKWELL COMMON STOCK" shall mean the Common Stock, par value of $1 per share, of Rockwell. "ROCKWELL TAX GROUP" shall mean Rockwell and its affiliates. "SEPARATION AGREEMENTS" shall have the meaning ascribed thereto in the Distribution Agreement. "STOCK OPTIONS" shall mean Mindspeed Common Stock Options or Conexant Common Stock Options. "STRADDLE PERIOD" shall mean a taxable period that includes but does not end on the Distribution Date. "TAX" and "TAXES" shall mean all forms of taxation, whenever created or imposed, and whether of the United States or elsewhere, and whether imposed by a federal, state, municipal, governmental, territorial, local, foreign or other body, and without limiting the generality of the foregoing, shall include net income, gross income, gross receipts, sales, use, value added, ad valorem, transfer, recording, franchise, profits, license, lease, service, service use, payroll, wage, withholding, employment, unemployment insurance, workers compensation, social security, excise, severance, stamp, business license, business organization, occupation, premium, property, environmental, windfall profits, customs, duties, alternative minimum, estimated or other taxes, fees, premiums, assessments or charges of any kind whatever imposed or collected by any governmental entity or political subdivision thereof, together with any related interest and any penalties, additions to such tax or additional amounts imposed with respect thereto by any Tax Authority. "TAX AUTHORITY" shall mean, with respect to any Tax, any governmental entity, quasi-governmental body or political subdivision thereof that 6 imposes such Tax and the agency (if any) charged with the determination or collection of such Tax for such entity, body or subdivision. "TAX GROUP" shall mean the Conexant Tax Group or the Mindspeed Tax Group, as the case may be. "TAX INDEMNIFICATION PERIOD" shall mean any Pre-Distribution Taxable Period and that portion of any Straddle Period that ends on the Distribution Date. "TAX RETURN" shall mean any return, filing, questionnaire, information return, election or other document required or permitted to be filed, including requests for extensions of time, filings made with respect to estimated tax payments, claims for refund and amended returns that may be filed, for any period with any Tax Authority (whether domestic or foreign) in connection with any Tax (whether or not a payment is required to be made with respect to such filing). "TIMING DIFFERENCE" means an increase in income, gain or recapture, or a decrease in deduction, loss or credit, as calculated for Income Tax purposes, of the taxpayer for any Post-Tax Indemnification Period coupled with an increase in deduction, loss or credit, or a decrease in income, gain or recapture, of the taxpayer for the Tax Indemnification Period. "WIRELESS DISTRIBUTION" shall mean the distribution of the Washington common stock on a pro rata basis to holders of Conexant Common Stock on June 25, 2002 pursuant to the Contribution and Distribution Agreement by and between Conexant and Washington Sub, Inc. dated as of December 16, 2001, as amended as of June 25, 2002. "WIRELESS RULING REQUEST" shall mean the private letter ruling request dated January 10, 2002 filed by Conexant with the IRS (as modified or supplemented by any materials submitted to the IRS), seeking rulings that, inter alia, the Wireless Distribution qualified for U.S. federal Income Tax purposes as a tax-free reorganization under Section 368(a)(1)(D) of the Code. "WIRELESS TRANSACTION AGREEMENTS" shall have the meaning ascribed to the phrase "Transaction Agreements" in the Contribution and Distribution Agreement by and between Conexant and Washington Sub, Inc. dated as of December 16, 2001, as amended as of June 25, 2002. 7 SECTION 1.02 SCHEDULES, ETC. References to a "SCHEDULE" are, unless otherwise specified, to a Schedule attached to this Agreement; references to "SECTION" or "ARTICLE" are, unless otherwise specified, to one of the Sections or Articles of this Agreement; references to "SUB-SECTION" are, unless the context otherwise requires, references to the section in which the reference appears; and references to this Agreement include the Schedules. ARTICLE II FILING OF TAX RETURNS; PAYMENT OF TAXES; REFUNDS SECTION 2.01 PREPARATION OF TAX RETURNS. (a) UNITED STATES FEDERAL INCOME TAX RETURNS. (i) Conexant shall prepare and file or cause to be prepared and filed all U.S. federal Income Tax Returns (including amendments thereto) which are required to be filed in respect of (A) a member of the Conexant/Mindspeed Tax Group for any Pre-Distribution Taxable Period or Straddle Period or (B) a member of the Conexant Tax Group for any Post-Distribution Taxable Period. Mindspeed hereby irrevocably designates, and agrees to cause each of its affiliates to so designate, Conexant as its agent to take any and all actions necessary or incidental to the preparation and filing of such U.S. federal Income Tax Returns of Conexant's affiliated group. (ii) All U.S. federal Income Tax Returns (including amendments thereto) required to be filed in respect of a member of the Mindspeed Tax Group which are not the responsibility of the Conexant Tax Group are the responsibility of the Mindspeed Tax Group. (b) UNITED STATES STATE AND LOCAL INCOME TAX RETURNS. (i) Conexant shall prepare and file or cause to be prepared and filed all U.S. state and local Income Tax Returns (including amendments thereto) which are required to be filed in respect of (A) a member of the Conexant/Mindspeed Tax Group for any Pre-Distribution Taxable Period or Straddle Period including consolidated, combined and unitary Tax Returns including a member of the Mindspeed Tax Group, (B) any member of the Mindspeed Tax Group for any Pre-Distribution Period or Straddle Period in which it conducts or has conducted both a Conexant business and a Mindspeed business or (C) a member of the Conexant Tax Group for any Post-Distribution Taxable Period. Mindspeed hereby irrevocably 8 designates, and agrees to cause each of its affiliates to so designate, Conexant as its agent to take any and all actions necessary or incidental to the preparation and filing of such U.S. state and local Income Tax Returns of members of the Conexant Tax Group. (ii) All U.S. state and local Income Tax Returns (including amendments thereto) required to be filed in respect of a member of the Mindspeed Tax Group which are not the responsibility of the Conexant Tax Group shall be the responsibility of the Mindspeed Tax Group. (c) FOREIGN INCOME TAX RETURNS. (i) Conexant shall prepare and file or cause to be prepared and filed all Foreign Income Tax Returns (including amendments thereto) which are required to be filed in respect of (A) a member of the Conexant Tax Group for any Pre-Distribution Taxable Period or Straddle Period, (B) a member of the Mindspeed Tax Group for any Pre-Distribution Period or Straddle Period in which it conducts, or has conducted, both a Conexant business and a Mindspeed business, or (C) a member of the Conexant Tax Group for any Post-Distribution Taxable Period. Mindspeed hereby irrevocably designates, and agrees to cause each of its affiliates to so designate, Conexant as its agent to take any and all actions necessary or incidental to the preparation and filing of such Foreign Income Tax Returns of members of the Conexant Tax Group. (ii) All Foreign Income Tax Returns (including amendments thereto) required to be filed in respect of a member of the Mindspeed Tax Group which are not the responsibility of the Conexant Tax Group shall be the responsibility of the Mindspeed Tax Group. (d) NON-INCOME TAX RETURNS. (i) Conexant shall prepare and file or cause to be prepared and filed all Tax Returns (including amendments thereto) which are Non-Income Tax Returns which are required to be filed in respect of (A) a member of the Conexant Tax Group for any Pre-Distribution Taxable Period or Straddle Period), (B) any member of the Mindspeed Tax Group for any Pre-Distribution Period or Straddle Period in which it conducts or has conducted both a Conexant business and a Mindspeed business or (C) a member of the Conexant Tax Group for any Post-Distribution Taxable Period. Mindspeed hereby irrevocably designates, and agrees to cause each of its affiliates to so designate, Conexant as its agent to take any and all actions necessary or incidental to the preparation and filing of such non-U.S. federal Income Tax Returns. 9 (ii) All Non-Income Tax Returns (including amendments thereto) required to be filed in respect of a member of the Mindspeed Tax Group which are not the responsibility of the Conexant Tax Group shall be the responsibility of the Mindspeed Tax Group. (e) CONSISTENT WITH PAST PRACTICE; REVIEW BY NON-RESPONSIBLE PARTY. Unless Conexant and Mindspeed otherwise agree in writing, all Tax Returns (including amendments thereto) described in this Section 2.01 filed after the date of this Agreement for Pre-Distribution Taxable Periods or Straddle Periods, in the absence of a controlling change in law or circumstances, shall be prepared on a basis consistent with the elections, accounting methods, conventions and principles of taxation used for the most recent taxable periods for which Tax Returns involving similar matters have been filed. Upon the request of the non-responsible party, the party responsible under this Section 2.01 for preparation of a particular Tax Return for Pre-Distribution Taxable Periods or Straddle Periods shall make available a draft of such Tax Return (or relevant portions thereof) for review and comment by such non-responsible party. Subject to the provisions of this Agreement, all decisions relating to the preparation of Tax Returns shall be made in the sole discretion of the party responsible under this Agreement for such preparation. (f) RESPONSIBILITY FOR FILING. Although, pursuant to this Agreement, Conexant or Mindspeed may be responsible for filing a particular Tax Return, Conexant and Mindspeed have agreed that the actual preparation and filing of certain Tax Returns will be done by the non-responsible party. Schedule 2.01(f) attached hereto sets forth a schedule specifying such Tax Returns. Conexant and Mindspeed may agree from time to time to additions to or deletions from Schedule 2.01(f). SECTION 2.02 PAYMENT OF TAXES. (a) UNITED STATES FEDERAL INCOME TAXES. Except as otherwise provided in this Agreement: (i) Conexant shall pay or cause to be paid, on a timely basis, all Taxes due with respect to the consolidated U.S. federal Income Tax liability for (A) all members of the Conexant Tax Group for any Pre-Distribution Taxable Period or Straddle Period, including consolidated Tax Returns also including a member of the Mindspeed Tax Group, and (B) any member of the Conexant Tax Group for any Post-Distribution Taxable Period, provided, however, that Mindspeed, on behalf of the Mindspeed Tax Group hereby assumes and agrees to pay directly to or at the direction of Conexant, at least five days prior to the date payment (including estimated payment) thereof is due, the share of such U.S. federal Income Tax liability 10 of any member of the Mindspeed Tax Group attributable to the Mindspeed business, assets or activities allocated between the Conexant Tax Group, on the one hand, and the Mindspeed Tax Group, on the other hand, determined in a manner analogous to that set forth in Treasury Regulation Section 1.1552-1(a)(2). (ii) Mindspeed shall pay or cause to be paid, on a timely basis, all U.S. federal Income Taxes of the Mindspeed Tax Group which are not the responsibility of the Conexant Tax Group. (b) UNITED STATES STATE AND LOCAL INCOME TAXES. Except as otherwise provided in this Agreement: (i) Conexant shall pay or cause to be paid, on a timely basis, all Taxes due with respect to the state and local Income Tax liability for (A) all members of the Conexant Tax Group for any Pre-Distribution Taxable Period or Straddle Period, including consolidated, combined and unitary Tax Returns also including a member of the Mindspeed Tax Group, (B) any member of the Mindspeed Tax Group for any Pre-Distribution Period or Straddle Period in which it conducts or has conducted both a Conexant business and a Mindspeed business, and (C) any member of the Conexant Tax Group for any Post-Distribution Taxable Period, provided, however, that Mindspeed, on behalf of the Mindspeed Tax Group hereby assumes and agrees to pay directly to or at the direction of Conexant, at least five days prior to the date payment (including estimated payment) thereof is due, the share of such U.S. state and local Income Tax liability of any member of the Mindspeed Tax Group attributable to the Mindspeed business, assets or activities allocated between the Conexant Tax Group, on the one hand, and the Mindspeed Tax Group, on the other hand, determined in a manner analogous to that set forth in Treasury Regulation Section 1.1552-1(a)(2). (ii) Mindspeed shall pay or cause to be paid, on a timely basis, all U.S. state and local Income Taxes of the Mindspeed Tax Group which are not the responsibility of the Conexant Tax Group. (c) FOREIGN INCOME TAXES. Except as otherwise provided in this Agreement: (i) Conexant shall pay or cause to be paid, on a timely basis, all Taxes due with respect to the Foreign Income Tax liability for (A) all members of the Conexant Tax Group for any Pre-Distribution Taxable Period or Straddle Period, (B) any member of the Mindspeed Tax Group for any Pre-Distribution Period or Straddle Period in which it conducts, or has conducted, both a Conexant business and a Mindspeed business, or (C) any member of the Conexant Tax Group for any 11 Post-Distribution Taxable Period, provided, however, that Mindspeed, on behalf of the Mindspeed Tax Group hereby assumes and agrees to pay directly to or at the direction of Conexant, at least five days prior to the date payment (including estimated payment) thereof is due, the share of such Foreign Income Tax liability of any member of the Mindspeed Tax Group attributable to the Mindspeed business, assets or activities allocated between the Conexant Tax Group, on the one hand, and the Mindspeed Tax Group, on the other hand, determined in a manner analogous to that set forth in Treasury Regulation Section 1.1552-1(a)(2). (ii) Mindspeed shall pay or cause to be paid, on a timely basis, all Foreign Income Taxes which are not the responsibility of the Conexant Tax Group. (d) NON-INCOME TAXES. Except as otherwise provided in this Agreement: (i) Conexant shall pay or cause to be paid, on a timely basis, all Taxes which are Non-Income Taxes due with respect to the Tax liability for (A) all members of the Conexant Tax Group for any Pre-Distribution Taxable Period, Straddle Period or Post-Distribution Taxable Period, (B) any member of the Mindspeed Tax Group for any Pre-Distribution Period or Straddle Period in which it conducts or has conducted both a Conexant business and a Mindspeed business and (C) a member of the Conexant Tax Group for any Post-Distribution Taxable Period, provided, however, that Mindspeed, on behalf of the Mindspeed Tax Group hereby assumes and agrees to pay directly to or at the direction of Conexant, at least five days prior to the date payment (including estimated payment) thereof is due, the share of such Non-Income Tax liability of any member of the Mindspeed Tax Group, attributable to the Mindspeed business, assets or activities. (ii) Mindspeed shall pay or cause to be paid, on a timely basis, all Taxes which are Non-Income Taxes which are not the responsibility of the Conexant Tax Group. (e) EMPLOYMENT TAXES. Mindspeed shall pay or cause to be paid, on a timely basis, all employment Taxes for all Pre-Distribution Taxable Periods, Straddle Periods and Post-Distribution Taxable Periods attributable to (I) any employee of the Mindspeed Tax Group on the day following the Distribution Date or (II) any individual who was neither an employee of the Mindspeed Tax Group or the Conexant Tax Group on the day following the Distribution Date but whose most recent employment prior to the Distribution Date with any member of the Mindspeed Tax Group or the Conexant Tax Group was more closely associated with the Mindspeed Business rather than the Broadband Business. 12 (f) POST-DISTRIBUTION DATE TAXES. Except as otherwise provided in this Agreement, all Taxes for all Post-Distribution Taxable Periods shall be paid or caused to be paid by the party responsible under this Agreement for filing the Tax Returns pursuant to which such Taxes are due or, if no such Tax Returns are due, by the party liable for such Taxes. (g) CREDIT FOR PRIOR TAX PAYMENTS. To the extent any member of a Tax Group has made a payment of Taxes (including estimated Taxes) on or before the Distribution Date, the party liable for paying such Taxes under this Agreement shall be entitled to treat the payment as having been paid or caused to have been paid by such party, and such party shall not be required to reimburse the party which actually paid such Taxes. (h) RESPONSIBILITY FOR PAYMENT; NOTICE OF PAYMENT DUE. Although Conexant or Mindspeed may be responsible for paying a particular Tax liability, Conexant and Mindspeed may agree that the actual payment to a Taxing Authority of certain Tax liabilities will be made by the non-responsible party. Conexant and Mindspeed may agree to prepare a schedule setting forth such Tax liabilities and may agree from time to time to additions to or deletions from such schedule. In each case where Conexant or Mindspeed, as the case may be, is required to make payment of Taxes to the other party, Conexant or Mindspeed, as the case may be shall notify the other party as to the amount of Taxes due from the other party at least five days prior to the date payment (including estimated payment) is due. SECTION 2.03 TAX REFUNDS AND CARRYBACKS. (a) RETENTION AND PAYMENT OF TAX REFUNDS. Except as otherwise provided in this Agreement, Conexant shall be entitled to retain, and to receive within ten days after Actually Realized by the Mindspeed Tax Group, the portion of all refunds or credits of Taxes for which the Conexant Tax Group is liable pursuant to Section 2.02 or Section 3.01(a) or is treated as having paid or caused to have been paid pursuant to Section 2.02(d), and Mindspeed shall be entitled to retain, and to receive within ten days after Actually Realized by the Conexant Tax Group, the portion of all refunds or credits of Taxes for which the Mindspeed Tax Group is liable pursuant to Section 2.02 or Section 3.01(b) or is treated as having paid or caused to have been paid pursuant to Section 2.02(d). The amount of any refund or credit of Taxes to which Conexant or Mindspeed is entitled to retain or receive pursuant to the foregoing sentence shall be reduced to take account of any Taxes incurred by the Mindspeed Tax Group, in the case of a refund or credit to which Conexant is entitled, or the Conexant Tax Group, in the case of a refund or credit to which Mindspeed is entitled, upon the receipt of such refund or credit. 13 (b) CARRYBACKS. Unless the parties otherwise agree in writing, Mindspeed shall elect and shall cause each member of the Mindspeed Tax Group to elect, where permitted by law, to carry forward any net operating loss, net capital loss, charitable contribution or other item arising after the Distribution Date that could, in the absence of such election, be carried back to a Pre-Distribution Taxable Period. Except as otherwise provided in this Agreement, notwithstanding the provisions of Section 2.03(a), (i) any refund or credit of Taxes resulting from the carryback of any item of Taxes attributable to the Mindspeed Tax Group arising in a Post-Tax Indemnification Period to a Tax Indemnification Period shall be for the account and benefit of the Mindspeed Tax Group, (ii) any refund or credit of Taxes resulting from the carryback of any item of Taxes attributable to the Conexant Tax Group arising in a Post-Tax Indemnification Period to a Tax Indemnification Period shall be for the account and benefit of the Conexant Tax Group, and (iii) any refund or credit of Taxes resulting from a carryback of any item of federal Income Taxes attributable to the Conexant/Mindspeed Tax Group (including derivative state and local refunds or credits) shall be for the account and benefit of the Conexant Tax Group. (c) REFUND CLAIMS. Conexant shall be permitted to file at Conexant's sole expense, and Mindspeed shall reasonably cooperate with Conexant in connection with, any claims for refund of Taxes to which Conexant is entitled pursuant to this Section 2.03 or any other provision of this Agreement. Conexant shall reimburse Mindspeed for any reasonable out-of-pocket costs and expenses incurred by any member of the Mindspeed Tax Group in connection with such cooperation. Mindspeed shall be permitted to file at Mindspeed's sole expense, and Conexant shall reasonably cooperate with Mindspeed in connection with, any claims for refunds of Taxes to which Mindspeed is entitled pursuant to this Section 2.03 or any other provision of this Agreement. Mindspeed shall reimburse Conexant for any reasonable out-of-pocket costs and expenses incurred by any member of the Conexant Tax Group in connection with such cooperation. SECTION 2.04 ALLOCATION OF STRADDLE PERIOD TAXES. In the case of any Straddle Period: (a) PERIODIC TAXES. (i) The periodic Taxes of a member of the Conexant Tax Group or the Mindspeed Tax Group or its business, assets or activities that are not based on income or receipts (e.g., property Taxes) for the portion of any Straddle Period ending on the Distribution Date shall be computed based on the ratio of the number of days in such portion of the Straddle Period and the number of days in the entire taxable period; and (ii) the periodic taxes of a member of the Conexant Tax Group or the Mindspeed Tax Group or its business, assets or activities that are not based on income or receipts for the portion of any Straddle Period beginning on 14 the day after the Distribution Date shall be computed based on the ratio of the number of days in such portion of the Straddle Period and the number of days in the entire taxable period. (b) NON-PERIODIC TAXES. (i) The Taxes of a member of the Conexant Tax Group or the Mindspeed Tax Group or its business, assets or activities for that portion of any Straddle Period ending on the Distribution Date (other than Taxes described in Section 2.04(a) above), shall be computed on a "closing-of-the-books" basis as if such taxable period ended as of the close of business on the Distribution Date, and, in the case of any Taxes of a member of the Conexant Tax Group or the Mindspeed Tax Group or its business, assets or activities with respect to any equity interest in any partnership or other "flowthrough" entity, as if the taxable period of such partnership or other "flowthrough" entity ended on the Distribution Date; and (ii) the Taxes of a member of the Conexant Tax Group or the Mindspeed Tax Group or its business, assets or activities for that portion of any Straddle Period beginning after the Distribution Date (other than Taxes described in Section 2.04(a) above), shall be computed on a "closing-of-the-books" basis as if such taxable period began on the day after the Distribution Date, and, in the case of any Taxes of a member of the Conexant Tax Group or the Mindspeed Tax Group or its business, assets or activities with respect to any equity interest in any partnership or other "flowthrough" entity, as if the taxable period of such partnership or other "flowthrough" entity began as of the day after the Distribution Date. (c) The Taxes of the Conexant Tax Group and the Mindspeed Tax Group with respect to any Tax Return for a Straddle Period which includes a member of each of the Conexant Tax Group and the Mindspeed Tax Group or their respective businesses, assets or activities shall be allocated between the Conexant Tax Group, on the one hand, and the Mindspeed Tax Group, on the other hand, determined in a manner analogous to that set forth in Treasury Regulation Section 1.1552-1(a)(2). ARTICLE III TAX INDEMNIFICATION; TAX CONTESTS SECTION 3.01 INDEMNIFICATION. (a) CONEXANT INDEMNIFICATION. Subject to Section 3.01(b) and Section 3.02, Conexant shall indemnify, defend and hold harmless each member of the Mindspeed Tax Group and each of their respective shareowners, directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing from and against: 15 (i) all Taxes of the Conexant Tax Group other than any Taxes for which Mindspeed is liable pursuant to Section 2.02(e); (ii) all Taxes of the Mindspeed Tax Group for all Pre-Distribution Taxable Periods and all Straddle Periods for which Conexant is liable pursuant to Section 2.02 or 3.02; (iii) all liability as a result of Treasury Regulation Section 1.1502-6(a) (which imposes several liability on members of an affiliated group that file a U.S. federal consolidated Income Tax return) or comparable U.S. state or local provision for Income Taxes of any person which is or has ever been affiliated with any member of the Conexant/Mindspeed Tax Group or with which any member of the Conexant/Mindspeed Tax Group joins or has ever joined (or is or has ever been required to join) in filing any consolidated, combined or unitary Income Tax Return for any Tax period ending on or before or including the Distribution Date except to the extent the Mindspeed Tax Group is liable for such Taxes pursuant to Section 2.02 or 3.02; (iv) all Taxes for any Tax period (whether beginning before, on or after the Distribution Date) that would not have been payable but for the breach by any member of the Conexant Tax Group of any representation, warranty, covenant or obligation under this Agreement; (v) all liability for a breach by any member of the Conexant Tax Group of any representation, warranty, covenant or obligation under this Agreement; (vi) all Taxes imposed in connection with the transactions contemplated by the Separation Agreements or any other agreement entered into for the purpose of implementing the Distribution; (vii) all Taxes for which Conexant is liable pursuant to Section 3.02; and (viii) all liability for any reasonable legal, accounting, appraisal, consulting or similar fees and expenses relating to the foregoing. Notwithstanding the foregoing and subject to Section 3.01(b) and Section 3.02, Conexant shall not indemnify, defend or hold harmless any member of the Mindspeed Tax Group from any liability for Taxes attributable to any action (including the making of an election under Section 338 of the Code) taken by any member of the Mindspeed Tax Group after the Distribution (other than any such action expressly required or otherwise expressly contemplated by the Separation Agreements or any 16 other agreement entered into for the purpose of implementing the Distribution or taken in the ordinary course of business) (a "POST-DISTRIBUTION TAX ACT"). (b) MINDSPEED INDEMNIFICATION. Mindspeed shall be liable for, and shall indemnify, defend and hold harmless each member of the Conexant Tax Group and each of the respective shareowners, directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing from and against: (i) all Taxes of any member of the Mindspeed Tax Group (other than Taxes for which Conexant provides indemnification pursuant to Section 3.01(a)); (ii) all Taxes for which Mindspeed is liable pursuant to Section 2.02(e). (iii) all Taxes for any Tax period (whether beginning before, on or after the Distribution Date) that would not have been payable but for the breach by any member of the Mindspeed Tax Group of any representation, warranty, covenant or obligation under this Agreement; (iv) all liability for a breach by any member of the Mindspeed Tax Group of any representation, warranty, covenant or obligation under this Agreement; (v) all Taxes for which Mindspeed is liable pursuant to Section 3.02; (vi) all Taxes attributable to a Post-Distribution Tax Act; and (vii) all liability for any reasonable legal, accounting, appraisal, consulting or similar fees and expenses relating to the foregoing. SECTION 3.02 MINDSPEED TAX ACTS (a) Notwithstanding Section 3.01, Mindspeed agrees to indemnify, defend and hold harmless each member of the Conexant Tax Group and each of the respective shareowners, directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing from and against any Taxes resulting from any Mindspeed Tax Act. A Mindspeed Tax Act shall mean any action specified on Schedule 3.02(a) attached hereto. (b) Mindspeed shall, and shall cause each member of the Mindspeed Tax Group to, comply with and take no action inconsistent with the 17 Mindspeed Tax Representation Letter, unless, pursuant to a favorable ruling letter obtained from the IRS which is satisfactory to Conexant or the advice of Chadbourne & Parke LLP or other nationally recognized tax counsel to Conexant, which advice shall be satisfactory to Conexant, such act or omission would not adversely affect the U.S. federal Income Tax consequences of the Distribution to Conexant or the shareowners of Conexant. Notwithstanding Sections 3.01(b)(iv), 3.01(b)(v), 3.01(b)(vii) and 3.01(b)(viii), the parties intend that the sole remedy for breach of the covenants contained in this Section 3.02(b) shall be as set forth in Section 3.02(a). (c) Notwithstanding the foregoing, a Mindspeed Tax Act shall not include any transaction or action specifically disclosed or specifically described in any of the Separation Agreements or, except as specifically set forth in Schedule 3.02(c) occurring on or prior to the Distribution Date, any action taken on or prior to the Distribution Date. A Mindspeed Tax Act shall not include any action on the part of any member of the Conexant Tax Group. (d) Conexant agrees to indemnify, defend and hold harmless each member of the Mindspeed Tax Group and each of the respective shareowners, directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing from and against any Taxes resulting from any transaction undertaken in connection with the formation of Mindspeed and the contribution of assets to Mindspeed other than any employment Taxes. SECTION 3.03 NOTICE OF INDEMNITY. Whenever a party hereto (hereinafter an "INDEMNITEE") becomes aware of the existence of an issue raised by any Tax Authority which could reasonably be expected to result in a determination that would increase the liability for any Tax of the other party hereto or any member of its Tax Group for any Tax period or require a payment hereunder by the other party (hereinafter an "INDEMNITY ISSUE"), the Indemnitee shall in good faith promptly give notice to such other party (hereinafter the "INDEMNITOR") of such Indemnity Issue. The failure of the Indemnitee to give such notice shall not relieve the Indemnitor of its obligations under this Agreement, except to the extent such Indemnitor or a member of its Tax Group is actually prejudiced by such failure to give notice. SECTION 3.04 PAYMENTS. (a) TIMING ADJUSTMENTS. (i) TIMING DIFFERENCES. If a Tax audit proceeding or an amendment of a Tax Return results in a Timing Difference, and such Timing Difference results in a decrease in an indemnity obligation Conexant has or would 18 otherwise have under Section 3.01(a) and/or an increase in the amount of a Tax refund or credit to which Conexant is entitled under Section 2.03, then in each Post-Tax Indemnification Period in which the Mindspeed Tax Group Actually Realizes an Income Tax Detriment, Conexant shall pay to Mindspeed an amount equal to such Income Tax Detriment; provided, however, that the aggregate payments which Conexant shall be required to make under this Section 3.04(a)(i) with respect to any Timing Difference shall not exceed the aggregate amount of the Income Tax Benefits realized by the Conexant Tax Group for all taxable periods and the Mindspeed Tax Group for all Tax Indemnification Periods as a result of such Timing Difference. Conexant shall make all such payments within ten days after Mindspeed notifies Conexant that the relevant Income Tax Detriment has been Actually Realized. (ii) REVERSE TIMING DIFFERENCES. If a Tax audit proceeding or an amendment to a Tax Return results in a Reverse Timing Difference, and such Reverse Timing Difference results in an increase in an indemnity payment obligation of Conexant under Section 3.01(a) and/or a decrease in the amount of a Tax refund or credit to which Conexant is or would otherwise be entitled under Section 2.03, then in each Post-Tax Indemnification Period in which the Mindspeed Tax Group Actually Realizes an Income Tax Benefit, Mindspeed shall pay to Conexant within ten days after Mindspeed has Actually Realized such Income Tax Benefit an amount equal to such Income Tax Benefit, provided, however, that the aggregate payments which Mindspeed shall be required to make under this Section 3.04(a)(ii) with respect to Reverse Timing Differences shall not exceed the aggregate amount of the Income Tax Detriments realized by the Mindspeed Tax Group and the Conexant Tax Group for all Tax Indemnification Periods as a result of such Reverse Timing Difference. (b) TIME FOR PAYMENT. Except as otherwise provided in this Section 3.04(b), any indemnity payment required to be made pursuant to this Agreement shall be paid within thirty days after the indemnified party makes written demand upon the indemnifying party, provided that in no event shall such payment be required to be made earlier than five (5) Business Days prior to the date on which the relevant Taxes (including estimated Taxes) are required to be paid (or would be required to be paid if no such Taxes are due) to the relevant Tax Authority. Notwithstanding any other provision in this Agreement, to simplify the administration of this Agreement, the payment of any amount less than $100,000 required to be made pursuant to this Agreement by one party hereto to another party hereto need not be made to such other party prior to thirty days following the later of (i) the close of the calendar quarter during which such payment obligation arose and (ii) the day during such calendar quarter when the aggregate amount of all such less than $100,000 payment obligations arising during such calendar quarter exceeds $250,000. 19 (c) PAYMENTS NET OF TAXES AND TAX BENEFITS. The amount of any payment under this Agreement shall be (i) reduced to take into account any net Tax benefit realized by the recipient's Tax Group arising from the incurrence or payment by such recipient's Tax Group of any amount in respect of which such payment is made and (ii) increased to take into account any net Tax cost incurred by the recipient's Tax Group as a result of the receipt or accrual of payments hereunder (grossed-up for such increase), in each case determined by treating the recipient as recognizing all other items of income, gain, loss, deduction or credit before recognizing any item arising from the receipt of accrual of any payment hereunder. Except as otherwise provided in this Agreement or unless the parties otherwise agree to an alternative method for determining the present value of any such anticipated Tax benefit or Tax cost, any payment hereunder shall initially be made without regard to this section and shall be increased or reduced to reflect any such net Tax cost (including gross-up) or net Tax benefit only after the recipient's Tax Group has Actually Realized such Tax cost or Tax benefit. (d) RIGHT TO OFFSET. Any party making a payment under this Agreement shall have the right to reduce any such payment by any undisputed amounts owed to it by the other party to this Agreement. (e) CHARACTERIZATION OF PAYMENTS. It is the intention of the parties to this Agreement that payments made pursuant to this Agreement are to be treated as relating back to the Distribution as an adjustment to capital (i.e., capital contribution or distribution), and the parties shall not take any position inconsistent with such intention before any Tax Authority, except to the extent that a final determination (as defined in Section 1313 of the Code) with respect to the recipient party causes any such payment not to be so treated. SECTION 3.05 TAX CONTESTS. The Indemnitor and its representatives, at the Indemnitor's expense, shall be entitled to participate (a) in all conferences, meetings and proceedings with any Tax Authority, the subject matter of which is or includes an Indemnity Issue and (b) in all appearances before any court, the subject matter of which is or includes an Indemnity Issue. The party who has responsibility for filing the Tax Return under this Agreement (the "RESPONSIBLE PARTY") with respect to which there could be an increase in liability for any Tax or with respect to which a payment could be required hereunder shall have the right to decide as between the parties hereto how such matter is to be dealt with and finally resolved with the appropriate Tax Authority and shall control all audits and similar proceedings. If no Tax Return is or was required to be filed in respect of an Indemnity Issue, the Indemnitor shall be treated as the Responsible Party with respect thereto. The Responsible Party agrees to cooperate in the settlement of any 20 Indemnity Issue with the other party and to take such other party's interests into account. ARTICLE IV OPTIONS; COMPENSATION PAYMENTS; INTEREST CHARGE FOR LATE PAYMENTS; CURRENCY CALCULATIONS; EFFECTIVE TIME OF TRANSACTIONS SECTION 4.01 STOCK OPTIONS; RESTRICTED SHARES. (a) STOCK OPTION ADJUSTMENTS. Conexant Common Stock Options outstanding at the time of the Distribution will be adjusted in accordance with the terms of the Employee Matters Agreement. Conexant Restricted Shares outstanding at the time of the Distribution will be adjusted in accordance with the terms of the underlying plan and award for such Conexant Restricted Shares and the Distribution Agreement. (b) TAX DEDUCTIONS. Notwithstanding anything to the contrary in this Agreement, unless the IRS issues a contrary private letter ruling to Conexant or Mindspeed, or Conexant and Mindspeed otherwise agree in writing, (i) the Conexant Tax Group (and not the Mindspeed Tax Group) shall claim any Post-Distribution Date Tax deductions in respect of Conexant Common Stock Options exercised by, or Conexant Restricted Shares held by, Conexant Group Employees and Former Employees, (ii) the Conexant Tax Group (and not the Mindspeed Tax Group) shall claim any Post-Distribution Date Tax deductions in respect of Mindspeed Common Stock Options exercised by, or Mindspeed Restricted Shares held by, Conexant Group Employees and Former Employees and Conexant shall pay to Mindspeed the amount received as a result of any Tax benefit realized in respect of such Tax deductions within ten days after such amount is Actually Realized by Conexant, (iii) the Mindspeed Tax Group (and not the Conexant Tax Group) shall claim any Post-Distribution Date Tax deductions in respect of Conexant Common Stock Options exercised by, or Conexant Restricted Shares held by, Mindspeed Group Employees and Former Employees and Mindspeed shall pay to Conexant the amount received as a result of any Tax benefit realized in respect of such Tax deductions within ten days after such amount is Actually Realized by Mindspeed, and (iv) the Mindspeed Tax Group (and not the Conexant Tax Group) shall claim the Post-Distribution Date Tax deductions in respect of the Mindspeed Common Stock Options exercised by, or Mindspeed Restricted Shares held by, Mindspeed Group Employees and Former Employees. In the case of Skyworks stock options and Skyworks restricted stock held by Mindspeed Group Employees and Former 21 Employees, to the extent the tax allocation agreement between Conexant and Skyworks dated as of June 25, 2002 allocates the Tax deduction to the employer corporation, Mindspeed shall, within ten days after any Tax refund or credit arising in respect of the Tax deduction with respect to such stock options and restricted stock is Actually Realized by Mindspeed, pay such amount to Skyworks. (c) NOTICES, WITHHOLDING, REPORTING. (i) Conexant shall promptly notify Mindspeed of any post-Distribution Date event giving rise to income to any Mindspeed Group Employees and Former Employees in connection with the Conexant Common Stock Options and Conexant Restricted Shares and, if required by law, Mindspeed shall withhold applicable Taxes and satisfy applicable Tax reporting obligations in connection therewith. Conexant shall within ten days of demand thereof reimburse Mindspeed for all reasonable out-of-pocket expenses incurred in connection with the Conexant Common Stock Options and Conexant Restricted Shares, including with respect to incremental Tax reporting obligations and any incremental employment Tax obligations; provided that Mindspeed shall use reasonable efforts to collect any such amounts required to be paid by Mindspeed Group Employees and Former Employees from such Mindspeed Group Employees and Former Employees. (ii) Mindspeed shall promptly notify Conexant of any post-Distribution Date event giving rise to income to any non-Mindspeed Group Employees and Former Employees in connection with the Mindspeed Common Stock Options and Mindspeed Restricted Shares and, if required by law, Conexant shall withhold applicable Taxes and satisfy applicable Tax reporting obligations in connection therewith. Mindspeed shall within ten days of demand thereof reimburse Conexant for all reasonable out-of-pocket expenses incurred in connection with the Mindspeed Common Stock Options and Mindspeed Restricted Shares, including with respect to incremental Tax reporting obligations and any incremental employment Tax obligations; provided that Conexant shall use reasonable efforts to collect any such amounts required to be paid by non-Mindspeed Group Employees and Former Employees from such non-Mindspeed Group Employees and Former Employees. (d) TAX AUDIT ADJUSTMENTS. Notwithstanding the provisions of Section 4.01(b), in the event a Tax audit proceeding shall determine (by settlement or otherwise), or the parties otherwise determine pursuant to Section 4.03, that all or a portion of the Tax deductions in respect of Conexant Common Stock Options and Conexant Restricted Shares or Mindspeed Common Stock Options and Mindspeed Restricted Shares should have been claimed by the Mindspeed Tax Group or the Conexant Tax Group, respectively, the Mindspeed Tax Group or the Conexant Tax Group, respectively, shall claim such Tax deductions (by an amended Tax Return or 22 otherwise) and shall pay to Conexant or Mindspeed, as the case may be, the amount of any Tax refund or credit arising in respect of such Tax deduction within ten days after such Tax refund or credit is Actually Realized by the Mindspeed Tax Group or the Conexant Tax Group, as the case may be. (e) STATUS OF DIRECTORS. For purposes of this Section 4.01 (except as it relates to employment and withholding Taxes), (i) Conexant or Mindspeed Common Stock Options and Restricted Shares held by present or former non-employee members of the Conexant Board of Directors shall be treated as held by present or former employees of Conexant, (ii) Conexant or Mindspeed Common Stock Options and Restricted Shares held by present or former non-employee members of the Mindspeed Board of Directors shall be treated as held by present or former employees of Mindspeed, and (iii) notwithstanding (i) or (ii) above, Conexant or Mindspeed Common Stock Options and Restricted Shares held by individuals who, as of the Distribution Date, were both non-employee members of the Conexant Board of Directors and non-employee members of the Mindspeed Board of Directors shall be treated as (A) employees of Conexant with respect to Conexant Common Stock Options exercised by, or Conexant Restricted Shares held by, such individuals and (B) employees of Mindspeed with respect to Mindspeed Common Stock Options exercised by, or Mindspeed Restricted Shares held by, such individuals. SECTION 4.02 COMPENSATION PAYMENTS. (a) TAX DEDUCTIONS. Notwithstanding anything to the contrary in this Agreement, unless Conexant and Mindspeed otherwise agree in writing, (i) the Boeing Tax Group (and not the Conexant Tax Group or the Mindspeed Tax Group) shall claim the Post-Distribution Date Tax deductions in respect of Compensation Payments paid to Mindspeed Group Employees and Former Employees who ceased employment on or before December 6, 1996 and Conexant shall pay to Mindspeed the amount received from Rockwell as a result of any Tax benefit realized in respect of such Tax deductions within ten days after such amount is received by Conexant, (ii) the Rockwell Tax Group (and not the Conexant Tax Group or the Mindspeed Tax Group) shall claim the Post-Distribution Date Tax deductions in respect of Compensation Payments paid by the Rockwell Tax Group to Mindspeed Group Employees and Former Employers; (iii) the Mindspeed Tax Group (and not the Conexant Tax Group) shall claim the Post-Distribution Date Tax deductions in respect of Compensation Payments paid by the Mindspeed Tax Group to all other Mindspeed Group Employees and Former Employees, and (iv) the Conexant Tax Group (and not the Mindspeed Tax Group) shall claim the Post-Distribution Date Tax deductions in respect of Compensation Payments paid by the Conexant Tax Group to all other Mindspeed Group Employees and Former Employees. 23 (b) NOTICES, WITHHOLDING, REPORTING. The party responsible for making the Compensation Payments pursuant to the Employee Matters Agreement shall withhold applicable Taxes and satisfy applicable Tax reporting obligations in connection with the Compensation Payments made to all Mindspeed Group Employees and Former Employees. (c) TAX AUDIT ADJUSTMENTS. Notwithstanding the provisions of Section 4.02(a), in the event a Tax audit proceeding shall determine (by settlement or otherwise), or the parties otherwise determine pursuant to Section 4.03, that all or a portion of the Tax deductions in respect of Compensation Payments paid to Mindspeed Group Employees and Former Employees was not available to the party claiming the Tax deduction, then the appropriate party shall claim such Tax deductions (by an amended Tax Return or otherwise) and shall pay to the party which had previously claimed such Tax deduction, within ten days after such Tax deduction has been Actually Realized by the such appropriate party, the amount of the resulting Tax benefit to such appropriate party. SECTION 4.03 CHANGE IN LAW. Notwithstanding the agreement with respect to reporting of Tax items and the claiming of the deductions set forth in Article 4 of this Agreement, neither the Mindspeed Tax Group nor the Conexant Tax Group shall have any obligation to report any such Tax items or claim such deductions as set forth in such Article in the event that either such party determines, based on an opinion of nationally recognized tax counsel, which opinion shall be satisfactory to the other party, that there is no substantial authority to support reporting such Tax items or claiming such deductions on a Tax Return filed by such party as a result of a change in or amendment to any law or regulation, or any change in the official interpretation thereof, effective or occurring after the date of this Agreement, and such Tax Group provides prompt notice to the other Tax Group of any such determination. SECTION 4.04 INTEREST CHARGE FOR LATE PAYMENTS. Any amount due and owing by one party to the other party pursuant to this Agreement that is not paid when due shall bear interest from the due date thereof until paid at a rate equal to the JPMorgan Chase Bank base rate in effect from time to time during such period plus 1%. SECTION 4.05 CURRENCY CALCULATIONS. All currency calculations shall be made in accordance with Section 7.09 of the Distribution Agreement. SECTION 4.06 EFFECTIVE TIME OF TRANSACTION. Conexant and Mindspeed agree that any transaction that, pursuant to the Distribution Agreement, is expressly effective immediately after the Time of Distribution shall be treated for 24 federal Income Tax purposes as occurring at the beginning of the day following the Distribution Date. ARTICLE V COOPERATION AND EXCHANGE OF INFORMATION SECTION 5.01 INCONSISTENT ACTIONS. Each party to this Agreement agrees (i) to, and to cause each of the relevant members of its Tax Group to, report the Distribution as a transaction described in Section 368(a)(1)(D) of the Code on all Tax Returns and other filings, (ii) to use its best efforts to ensure that the Distribution receives such treatment for U.S. federal Income Tax purposes and (iii) that, unless it has obtained the prior written consent of the other party, it (and the members of its Tax Group) shall not take any action inconsistent with, or fail to take any action required by, the Separation Agreements. SECTION 5.02 [INTENTIONALLY OMITTED]. SECTION 5.03 [INTENTIONALLY OMITTED]. SECTION 5.04 COOPERATION AND EXCHANGE OF INFORMATION. Each party hereto agrees to provide, and to cause each member of its Tax Group to provide, such cooperation and information as such other party shall request, on a timely basis, in connection with the preparation or filing of any Tax Return or claim for Tax refund not inconsistent with this Agreement or in conducting any Tax audit, Tax dispute, or otherwise in respect of Taxes or to carry out the provisions of this Agreement. To the extent necessary to carry out the purposes of this Agreement and subject to the other provisions of this Agreement, such cooperation and information shall include without limitation the non-exclusive designation of an officer of Conexant as an officer of Mindspeed and each of its affiliates (for the purpose of signing Tax Returns, cashing refund checks, pursuing refund claims, dealing with Tax Authorities and defending audits); promptly forwarding to the other party, where relevant, copies of appropriate notices and forms or other communications received from or sent to any Tax Authority which relate to the Tax Indemnification Period; providing copies of all relevant Tax Returns for the Tax Indemnification Period, together with accompanying schedules and related workpapers, documents relating to rulings or other determinations by Tax Authorities, including without limitation, foreign Tax Authorities, and records concerning the ownership and Tax basis of property, which either party may possess; and making its employees involved in the research and development process available to the other party and having such employees provide such assistance as the other party may require for such purposes, provided, however, 25 that neither party shall be obligated to provide the other party Tax Returns, documentation or other information of a proprietary or confidential nature for purposes of verifying any calculation, and provided further, that in any such case where one party does not provide the other party with Tax Returns, documentation or information because it is proprietary or confidential, both parties shall cooperate in developing mutually acceptable procedures including retaining a mutually agreeable accounting firm to review such Tax Returns, documentation or information for purposes of verifying such calculation. Subject to the rights of the Mindspeed Tax Group under the other provisions of this Agreement, such officer shall have the authority to execute powers of attorney (including Form 2848) on behalf of each member of the Mindspeed Tax Group with respect to Tax Returns for the Tax Indemnification Period. Each party to this Agreement shall make, or shall cause its affiliates to make, its employees and facilities available on a mutually convenient basis to provide an explanation of any documents or information provided hereunder. SECTION 5.05 TAX RECORDS. (a) Conexant and Mindspeed agree to (and to cause each member of their respective Tax Group to) (i) retain all Tax Returns, related schedules and workpapers, and all material records and other documents as required under Section 6001 of the Code and the regulations promulgated thereunder relating thereto existing on the date hereof or created through the Distribution Date, for a period of at least ten years following the Distribution Date and (ii) allow the party to this Agreement, at times and dates reasonably acceptable to the retaining party, to inspect, review and make copies of such records, as Conexant and Mindspeed may reasonably deem necessary or appropriate from time to time. In addition, after the expiration of such ten-year period, such Tax Returns, related schedules and workpapers, and material records shall not be destroyed or otherwise disposed of at any time, unless, prior to such destruction or disposal, (A) the party proposing to destroy or otherwise dispose of such records shall provide no less than 30 days' prior written notice to the other party, specifying in reasonable detail the records proposed to be destroyed or disposed of and (B) if a recipient of such notice shall request in writing prior to the scheduled date for such destruction or disposal that any of the records proposed to be destroyed or disposed of be delivered to such requesting party, the party proposing the destruction or disposal shall promptly arrange for the delivery of such requested records at the expense of the party requesting such records. (b) Notwithstanding anything in this Agreement to the contrary, if any party fails to comply with the requirements of Section 5.05(a) hereof, the party failing so to comply shall be liable for, and shall hold the other party, harmless from, any Taxes (including without limitation, penalties for failure to comply with the 26 record retention requirements of the Code) and other costs resulting from such party's failure to comply. ARTICLE VI MISCELLANEOUS SECTION 6.01 ENTIRE AGREEMENT; CONSTRUCTION. This Agreement, the Distribution Agreement, the other Separation Agreements and the Financing Agreements, including any annexes, schedules and exhibits hereto or thereto, and other agreements and documents referred to herein and therein, will together constitute the entire agreement between the parties with respect to the subject matter hereof and thereof and will supersede all prior negotiations, agreements and understandings of the parties of any nature, whether oral or written, with respect to such subject matter. Notwithstanding any other provisions in the Separation Agreements to the contrary, in the event and to the extent that there is a conflict relating to Taxes between the provisions of this Agreement and the provisions of the Distribution Agreement or any other Separation Agreement, the provisions of this Agreement will control. SECTION 6.02 EFFECTIVENESS. All covenants and agreements of the parties contained in this Agreement shall be subject to and conditioned upon the Distribution becoming effective. SECTION 6.03 SURVIVAL OF AGREEMENTS. Except as otherwise contemplated by the Separation Agreements, all covenants and agreements of the parties contained in this Agreement will remain in full force and effect and survive the Time of Distribution. SECTION 6.04 GOVERNING LAW. This Agreement will be governed by and construed in accordance with the internal laws of the State of Delaware applicable to contracts made and to be performed entirely within such State, without regard to the conflicts of law principles of such State. SECTION 6.05 NOTICES. All notices, requests, claims, demands and other communications required or permitted to be given hereunder will be in writing and will be delivered by hand, telecopied, e-mailed or sent, postage prepaid, by registered, certified or express mail or reputable overnight courier service and will be deemed given when so delivered by hand or telecopied, when e-mail confirmation is received if delivered by e-mail, or three (3) Business Days after being so mailed (one (1) Business Day in the case of express mail or overnight courier service). All 27 such notices, requests, claims, demands and other communications will be addressed as set forth in Section 7.04 of the Distribution Agreement, or pursuant to such other instructions as may be designated in writing by the party to receive such notice. SECTION 6.06 AMENDMENTS. This Agreement may not be amended, modified or supplemented except by a written agreement executed by Conexant and Mindspeed. SECTION 6.07 SUCCESSORS AND ASSIGNS. Neither party to this Agreement will convey, assign or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the other party in its sole and absolute discretion other than as expressly provided herein, any party may (without obtaining any consent) assign any of its rights hereunder to a successor to all or any part of its business. Any such conveyance, assignment or transfer requiring the prior written consent of another party which is made without such consent will be void ab initio. No assignment of this Agreement will relieve the assigning party of its obligations hereunder. SECTION 6.08 CAPTIONS; CURRENCY. The article, section and paragraph captions herein and the table of contents hereto are for convenience of reference only, do not constitute part of this Agreement and will not be deemed to limit or otherwise affect any of the provisions hereof. Unless otherwise specified, all references herein to numbered articles or sections are to articles and sections of this Agreement and all references herein to schedules are to schedules to this Agreement. Unless otherwise specified, all references contained in this Agreement or in any schedule referred to herein to dollars or "$" shall mean U.S. dollars. SECTION 6.09 SEVERABILITY. If any provision of this Agreement or the application thereof to any person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to persons or circumstances other than those as to which it has been held invalid or unenforceable, will remain in full force and effect and will in no way be affected, impaired or invalidated thereby. If the economic or legal substance of the transactions contemplated hereby is affected in any manner adverse to any party as a result thereof, the parties will negotiate in good faith in an effort to agree upon a suitable and equitable substitute provision to effect the original intent of the parties. SECTION 6.10 PARTIES IN INTEREST. Except for the provisions of Article III relating to Tax Indemnification, this Agreement is solely for the benefit of the parties hereto and the respective members of their Tax Group and should not be deemed to confer upon third parties (including any employee of Conexant or 28 Mindspeed or of any Conexant or Mindspeed subsidiary) any remedy, claim, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement. SECTION 6.11 SCHEDULES. All schedules attached hereto are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Capitalized terms used in the schedules hereto but not otherwise defined therein will have the respective meanings assigned to such terms in this Agreement. SECTION 6.12 TERMINATION. This Agreement may be terminated and the Distribution abandoned at any time prior to the Distribution Date by and in the sole discretion of the Conexant Board without the approval of Mindspeed or Conexant's shareowners. In the event of such termination, neither party will have any liability of any kind to the other party on account of such termination. SECTION 6.13 WAIVERS; REMEDIES. No failure or delay by any party hereto in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any waiver on the part of any party hereto of any right, power or privilege hereunder operate as a waiver of any other right, power or privilege hereunder, nor will any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder. Subject to Section 6.17, the rights and remedies herein provided are cumulative and are not exclusive of any rights or remedies which the parties may otherwise have at law or in equity. SECTION 6.14 COUNTERPARTS. This Agreement may be executed in separate counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts will together constitute the same agreement. This Agreement may be executed and delivered by telecopier with the same force and effect as if it were a manually executed and delivered counterpart. SECTION 6.15 PERFORMANCE. Each party hereto will cause to be performed, and hereby guarantees the performance of all actions, agreements and obligations set forth herein to be performed by any subsidiary or any member of such party's Tax Group. SECTION 6.16 INTERPRETATION. Any reference to any federal, state, local, or foreign law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. For the purposes of this Agreement, (i) words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires, (ii) the terms "hereof ", "herein", and "herewith" and words of similar import 29 shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement and (iii) the word "including" and words of similar import when used in this Agreement shall mean "including, without limitation". SECTION 6.17 DISPUTE RESOLUTION. Any dispute, claim or controversy arising out of or relating to any provision of this Agreement or the breach, performance or validity thereof will be resolved in accordance with the procedures set forth in Section 7.05 of the Distribution Agreement. 30 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the duly authorized officers of the parties as of the date first hereinabove written. CONEXANT SYSTEMS, INC. By: /s/ Dennis E. O'Reilly ---------------------------------------- Name: Dennis E. O'Reilly Title: Senior Vice President, General Counsel and Secretary MINDSPEED TECHNOLOGIES, INC. By: /s/ Bradley W. Yates ---------------------------------------- Name: Bradley W. Yates Title: Senior Vice President and Chief Administrative Officer 31 EX-2.4 6 a91233exv2w4.txt EXHIBIT 2.4 Exhibit 2.4 SUBLEASE THIS SUBLEASE (this "Sublease") is entered into as of June 27, 2003 (the "Effective Date"), by and between Conexant Systems, Inc., a Delaware corporation ("Sublandlord"), and Mindspeed Technologies, Inc., a Delaware corporation ("Subtenant"). RECITALS A. Sublandlord is the lessee under that certain Lease, dated as of August 18, 1998 (the "Master Lease"), by and between Deutsche Bank, AG, having its principal office at 31 West 52nd Street, New York, New York, 10019, (the "Master Landlord") and Sublandlord (under its previous name of Rockwell Semiconductor Systems, Inc.). A copy of the Master Lease is attached to this Sublease as Exhibit "A". B. Under the Master Lease, Sublandlord leases the entire buildings, consisting of the west tower and the east tower, located at 4000 MacArthur Blvd., Newport Beach, California, 92660 (collectively the "Building"). C. Concurrently with the execution of this Sublease, Sublandlord and Subtenant are entering into that certain Distribution Agreement ("DA") pursuant to which Subtenant is spinning-off from Sublandlord. D. Subtenant desires to sublease a portion of the Building and obtain from Sublandlord the right to use associated parking spaces and to access some of the common areas associated with the Building. Sublandlord has agreed to sublease and grant the same to Subtenant upon the terms, covenants and conditions stated in this Sublease. AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants contained in this Sublease, the above recitals, and for valuable consideration, the receipt and sufficiency of which are acknowledged by the parties, the parties agree as follows: 1. Sublease. 1.1 Subleased Premises. Sublandlord hereby subleases to Subtenant and Subtenant hereby subleases from Sublandlord the entire east tower of the Building, a small portion of the second floor of the west tower of the Building and the second floor bridge between the two towers, all as more particularly depicted or described on Exhibit "B" attached hereto (the "Subleased Premises"), subject to the terms, covenants, and conditions contained in this Sublease. The entire Building consists of approximately 360,000 rentable square feet and the Subleased Premises consist of approximately 189,729 rentable square feet. 1.2 Parking. Subtenant shall have the right to utilize its Building Share (as defined in Section 5.1 below) of the parking areas associated with the Building. Parking shall be supplied to Subtenant on the basis of 3.15 parking spaces per 1,000 square feet of rentable area within the Subleased Premises. The Parties agree that Subtenant will initially be allotted 598 parking spaces on the Effective Date. If Subtenant wants additional spaces, it will either acquire such additional spaces directly from the parking vendor or request Sublandlord to obtain and, if Sublandlord if able to obtain such additional spaces, then Subtenant shall pay Sublandlord the amount charged to Sublandlord for such spaces from time to time. In addition, Subtenant shall be responsible for any costs associated with enforcing any CC&Rs charged to Sublandlord as a result of Subtenant's acts or omissions. Sublandlord may regulate the parking areas within the "Common Areas" (as defined in Section 9.5 below) and may utilize parking gates or other methods for controlling entry and exit to the parking areas; provided, however, that such regulations shall be non-discriminatory and equally applied to Subtenant's employees and invitees in the same manner as they are applicable to Sublandlord's employees and invitees. Sublandlord shall provide Subtenant and its employees with any gate cards or other security devices necessary for access to the parking areas that Subtenant can utilize pursuant to this Section, except that the cost of such cards or devices and their replacement, if necessary, shall be Subtenant's responsibility. 1.3 Campus. The parties agree that Sublandlord shall provide a license, to the extent it can without obtaining consents from any landords, to Subtenant to use the other property then-currently owned or leased by Sublandlord at its "Newport Beach Campus", which is defined as the property bordered by Jamboree, MacArthur, Von Karman and Birch streets, and as of the Effective Date are at 4311 Jamboree Road, 5000 Birch and 4340 Von Karman, as long as such use is in accordance with the CC&Rs and any such other rules or regulations applicable to such properties. 2. Master Lease. 2.1 Coverage of Master Lease Provisions. Subtenant acknowledges that Sublandlord is in possession of the Building pursuant to the terms of the Master Lease. This Sublease is subject and subordinate to the Master Lease and the rights of Sublandlord and Master Landlord thereunder. This Sublease is designed to be a standard lease with Sublandlord providing all normal services associated with an office building plus extra services specific to the operation of Subtenant's business as more particularly provided in Section 5.4. Therefore, the parties agree that the following Articles/Sections of the Master Lease shall not apply between them: Section 2.4 - Lease Supplement; Section 3.1 - Rent; Section 3.3 - Supplemental Rent; Section 3.5 - Method of Payment; Section 4.1 - Utility Charges; Article VII - Property Ownership; Section 10.1 - Maintenance and Repair; Return; Section 12.2 - Easements; Section 14.2 - Hazard and Other Insurance; Section 15.1 Casualty; Article XVI - Condemnation; Article XVII - Events of Default; Article XIX - Provisions Relating to Termination; Article XX - Purchase Option; Article XXI - Sale Procedure; Article XXIII - Risk of Loss; Article XXIV--Assignment and Subletting; Article XXIX - Notices and Section 30.8 - Recordation of Lease. Except for the Articles and Sections set forth above, and except as otherwise expressly provided in this Sublease, the covenants, agreements, provisions, and conditions of the Master Lease, to the extent that they relate to the Building and to the extent that they are not inconsistent with the terms of this Sublease, are made a part of and incorporated into this Sublease as if recited in full herein. 2.2 Substitution of Rights. Subject to Section 2.1 above, the rights and obligations of the Master Landlord and the Tenant under the Master Lease shall be deemed the rights and obligations of Sublandlord and Subtenant, respectively, under this Sublease, and shall inure to the benefit of, and be binding on, Sublandlord and Subtenant, respectively. As between the 2 parties to this Sublease only, in the event of a conflict between the terms of the Master Lease and the terms of this Sublease, the terms of this Sublease shall control. In addition, in the event of a conflict between this Sublease and the DA, but (subject only to the immediately preceding sentence) subject to the terms of the Master Lease incorporated in this Sublease by reference, the provisions of the DA shall control 2.3 Termination and/or Replacement of Master Lease. Notwithstanding the foregoing provisions, in the event that the Master Lease terminates but Sublandlord inserts one or more levels of tenancy above this Sublease, replaces the Master Lease with another lease or enters into any other type of financing arrangement (in each case, a "Replacement"), in all such cases, Subtenant's rights hereunder and this Sublease shall continue in full force and effect as between Sublandlord and Subtenant pursuant to each of the terms contained herein; provided, however, Subtenant shall be bound by any change in or additions required in connection with such Replacement equally with Sublandlord and shall execute an amendment to this Sublease or such other documentation to evidence Subtenant's agreement to such changed and/or additional terms and conditions within ten (10) business days after Sublandlord's request therefor (failing which an Event of Default shall have occurred, in connection with which Subtenant shall not have the benefit of the grace period provided in Section 13.1.2 below). In connection with the foregoing, it is acknowledged and agreed that Subtenant's agreement to the immediately preceding sentence has been relied upon by and is material consideration to Sublandlord in connection with the execution and delivery of this Sublease. 3. Term and Termination. 3.1 Base Term. The base term (the "Term") of this Sublease shall commence at 12:01 am on the Effective Date and shall, unless sooner terminated in accordance herewith, continue for a period of five (5) years thereafter. 3.2 Option to Extend Term. Sublandlord grants to Subtenant one (1) option to extend the Term ("Extension Option") for a period of two (2) years ("Option Term"), subject to the conditions described in this Section 3.2. Subtenant shall have no other right to extend the Term beyond the Option Term. 3.2.1 Conditions of Option. The Extension Option is subject to the following conditions: (i) the Extension Option may be exercised only by written notice delivered by Subtenant to Sublandlord as provided in this Section 3.2 and only if, as of the date; the Option Term would commence, no Event of Default has occurred which is continuing; (ii) the rights contained in this Section 3.2 may be exercised by the originally named Subtenant or by any assignee of Subtenant's interest in this Sublease if the assignment has been approved by Sublandlord or is otherwise permitted in Section 12 below; and (iii) if Subtenant properly exercises the Extension Option, the Term of this Sublease shall be extended by the Option Term. The Option Term shall be on all of the terms and conditions of the original Term, except that this Section 3.2 and Exhibit "E" shall have no application thereto. 3.2.2 Option Rent. The Rent payable by Subtenant during the Option Term ("Option Rent") shall be calculated as provided in Section 2.3 and 5.1. 3 3.3 Termination. 3.3.1 Special Circumstances. Sublandlord may terminate this Sublease by providing written notice of such termination to Subtenant upon the occurrence of any of the following: (i) the failure of Rockwell Automation, Inc. ("Rockwell") to agree to leave its guarantee on the Master Lease in place in which case at Sublandlord's option this Sublease shall terminate on the date which is six (6) months from the date Sublandlord notifies Subtenant of its knowledge of such failure; (ii) subject to Section 2.3 above, the failure of Sublandlord to obtain a Replacement, in which case at Sublandlord's option this Sublease shall terminate upon the later of the termination of the Master Lease or the surrender by Sublandlord to Master Landlord of the Building; or (iii) Sublandlord's decision to vacate the Building in which case this Sublease shall terminate on the date which is twelve (12) months from the date Sublandlord notifies Subtenant of its decision. In the event of the occurrence of the termination condition set forth in subclause (ii), Sublandlord agrees to notify Subtenant as soon as reasonably possible of the date Subtenant will be required to surrender the Subleased Premises. 3.3.2 Casualty and Condemnation. (i) Sublandlord shall have the right to terminate this Sublease upon any "Condemnation" or "Casualty" (as defined in the Master Lease) which would give Sublandlord the right or obligation to terminate the Master Lease. (ii) Subject to clause (i) above and Section 9.4 below, in the event the Subleased Premises or the Building, or any portion thereof, is damaged or destroyed by any Casualty that is covered by insurance maintained by Sublandlord, then Sublandlord shall rebuild, repair and restore (collectively, "Repair") the damaged portion thereof, provided that (A) the amount of insurance proceeds available to Sublandlord equals or exceeds the cost of such Repair, (B) such Repair can be completed within sixty (60) days after the work commences in the opinion of a registered architect or engineer appointed by Sublandlord, (C) the Casualty has occurred more than twelve (12) months before the expiration of the Term, and (D) such Repair is then permitted, under applicable Legal Requirements, to be done in such a manner as to return the damaged portion thereof to substantially its condition immediately prior to the Casualty, including, without limitation, the same net rentable floor area. To the extent that insurance proceeds must be paid including, but not limited to, a mortgagee, beneficiary, ground lessor or master lessor (collectively, "Mortgagee") under the Master Lease or any Replacement, or must be applied to reduce any indebtedness secured by, the Master Lease or any Replacement such proceeds, for the purposes of this clause, shall be deemed not available to Sublandlord unless such Mortgagee permits Sublandlord to use such proceeds for the Repair of the damaged portion thereof. Notwithstanding the foregoing, Sublandlord shall have no obligation to repair any damage to, or to replace any of, Subtenant's personal property, furnishings, trade fixtures, equipment or other such property or effects of Subtenant. (iii) In the event the Subleased Premises or the Building, or any portion thereof, is damaged or destroyed by any Casualty to the extent that Sublandlord is not obligated, under clause (ii) above, to Repair the damaged portion thereof, then Sublandlord shall, within sixty (60) days after such Casualty, notify Subtenant of its election, at its option, to either (A) Repair the damaged portions thereof, in which case Sublandlord's notice shall specify the 4 time period within which Sublandlord estimates such Repair can be completed; or (B) terminate this Sublease effective as of the date the Casualty occurred. If Sublandlord does not give Subtenant written notice within sixty (60) days after the Casualty occurs of its election to Repair the damaged portions thereof, Sublandlord shall be deemed to have elected to terminate this Sublease. (iv) There shall be an abatement of rent by reason of Casualty affecting the Subleased Premises or the Building, or any portion thereof, to the extent that Sublandlord receives insurance proceeds for loss of rental income attributable to the Subleased Premises, commencing on the date that the Casualty has occurred. Subtenant shall have no claim against Sublandlord for any damage suffered by Subtenant by reason of any such Casualty or Repair. Subtenant waives the provisions of Civil Code Sections 1932(2) and 1933(4) and any present or future laws or case decisions to the same effect. Upon completion of such Repair, Subtenant shall promptly refixture the Subleased Premises substantially to the condition they were in prior to the Casualty. (v) In connection with any Condemnation, Sublandlord shall be entitled to the entire award in any Condemnation, including, without limitation, any award made for the value of the leasehold estate created by this Sublease. No award for any partial or total Condemnation shall be apportioned, and Subtenant hereby assigns to Sublandlord any award that may be made in such Condemnation, together with any and all rights of Subtenant now or hereafter arising in or to the same or any part thereof. Notwithstanding the foregoing, Subtenant shall have the right to claim and recover from the condemnor, but not from Sublandlord, such compensation as may be separately awarded or recoverable by Subtenant in Subtenant's own right on account of damages to Subtenant's business by reason of the Condemnation and for or on account of any cost or loss to which Subtenant might be put in removing Subtenant's merchandise, furniture and other personal property, fixtures, and equipment. In the event of a partial Condemnation that does not result in a termination of this Sublease as to the entire Subleased Premises pursuant to this clause (v), the Base Rent shall abate in proportion to the portion of the Subleased Premises taken by such Condemnation. If this Sublease is terminated, in whole or in part, pursuant to any of the provisions of this clause (v), the Base Rent payable by Subtenant to Sublandlord hereunder and attributable to the Subleased Premises taken shall be paid up to the date upon which actual physical possession shall be taken by the condemnor. Sublandlord shall be entitled to retain all of the Security Deposit until such time as this Sublease is terminated as to all of the Subleased Premises. 4. Delivery of Building and Furniture, Fixtures and Equipment. 4.1 Delivery. Full possession of the Subleased Premises shall be deemed to have been delivered to Subtenant at 12:01 am on the Effective Date. Except for mutually approved improvements made or to be made by Sublandlord and/or Subtenant pursuant to this Sublease, Sublandlord shall deliver the Building to Subtenant in its current "AS IS" condition. 4.2 Furniture, Fixtures and Equipment. Sublandlord and Subtenant agree that all furniture, fixtures and equipment and any other personal property to be delivered to Subtenant in connection with the Subleased Premises shall be specified and conveyed to Subtenant in the DA. 5 5. Rent. 5.1 Rent. Subtenant shall pay to Sublandlord in monthly installments during the Term of this Sublease on or before the first day of every calendar month during the Term Subtenant's Building Share of any and all costs, expenses, claims, liabilities, losses, actions, causes of action, judgments (as such are internally accounted for by Sublandlord) actually incurred in the ownership, use, maintenance and/or operation of the Building ("Rent"). The parties agree that the Rent charged to Subtenant shall be consistent with Sublandlord's then current accounting practices, which shall be in conformity with GAAP and shall include Subtenant's share of depreciation for capital expenditures. The terms "Building Share" shall mean a fraction, the numerator of which is the number of rentable square feet within the Subleased Premises, and the denominator of which shall be the total number of rentable square feet within the Building. The parties agree that Subtenant's initial Building Share is equal to 52.70% and Subtenant's Building Share as determined herein shall be modified, based on any increase or decrease in the number of rentable square feet within the Subleased Premises as permitted under this Sublease. The parties also agree that, by way of example only and not of limitation, Exhibit "F" attached hereto shows the parties' initial estimate of Rent for the first year of the Term but such Exhibit shall not limit or define Rent, but is merely an illustration as to the calculation of Rent. If Sublandlord obtains a Replacement, Subtenant shall continue its occupancy of the Subleased Premises (pursuant to Section 2.3) for the period, which ends five (5) years after the Effective Date, and Subtenant shall be responsible for paying the newly calculated Rent, which shall include an additional amount equal to Subtenant's Building Share of the costs incurred in connection with the renegotiation, including, without limitation, interest on Sublandlord's equity investment in the Building, interest on any debt encumbering the campus, attorneys' fees, and any and all other costs and expenses incurred by Sublandlord in connection with such Replacement. Upon completion by Sublandlord of "Sublandlord's Work" described in Exhibit "E" hereto, Sublandlord shall determine the amount of depreciation to be taken thereon monthly during the Term in accordance with Sublandlord's accounting policies, which amount shall be added to the Rent payable hereunder. Sublandlord shall provide notice of such monthly increase in Rent, and thereafter Subtenant shall pay Rent in the amount set forth in Sublandlord's notice. In the event such notice is delivered after the Effective Date, Subtenant shall pay to Sublandlord, on the next date on which Rent is due, such additional Rent due for any month prior to and including the month in which such notice is given. In all cases, Subtenant's obligations under this Section 5.1 shall not include any "accelerated" payments related to the amortized costs described herein. 5.2 Accounting and Reconciliation. Within sixty (60) days after the end of each quarter during the Term, Sublandlord shall provide to Subtenant a statement of Rent substantially in the form set forth in Exhibit F actually incurred during the prior quarter ("Quarterly Statement"). If Subtenant owes Sublandlord, payment will be made on the next Rent payment date. If Sublandlord owes Subtenant, such amount will be deducted from the Rent due on the next payment date. If the Term has ended, then payment shall be made promptly. In addition, future months' Rent will be based on the revised amounts set forth in the revised Schedule F delivered to Subtenant at the end of each quarter. Within nine (9) months of each anniversary of the Effective Date and upon reasonable written notice, Subtenant, at its expense, shall have the right to perform an audit of the reasonably necessary books and records of Sublandlord related to the prior four (4) Quarterly Statements for the sole purpose of ensuring compliance with this Section 5. The audit shall be performed by Subtenant itself or an independent certified public account- 6 ant, reasonably acceptable to both Sublandlord and Subtenant, during normal business hours and with a minimum amount of interruption to Sublandlord's business. If the audit reveals that Subtenant has paid more or less than its Building Share of Rent for such year, then payments shall be made as set forth above. In addition, if the audit reveals that Sublandlord has overcharged Subtenant by ten percent (10%) or more for the Quarterly Statements under audit, Sublandlord shall reimburse Subtenant for the reasonable cost of the audit Any information disclosed to Subtenant or a certified public accountant pursuant to this Section will be subject to a confidentiality agreement reasonably acceptable to Sublandlord and signed by Subtenant and its agents, if any. 5.3 Adjustments in Last Year. The parties agree that in the last year of the Term, if Sublandlord voluntarily incurs a capital expense that is out of Sublandlord's ordinary course of business and is greater than $50,000, then Subtenant shall have the right to approve such expense before it is incurred, which approval shall not be unreasonably withheld, delayed or conditioned. 5.4 Additional Services. Attached hereto as Exhibit "C" and incorporated herein is a schedule of seven (7) categories of services, which Subtenant may elect Sublandlord to perform with respect to or for the benefit of the Subleased Premises pursuant to the provisions of this Section (the "Additional Services"). During the first year of the Term, Sublandlord shall provide all of the Additional Services and pay the Additional Services fees set forth in Exhibit F as Rent. By March 31st of each subsequent year during the Term, Sublandlord shall deliver notice to Subtenant, which shall specify the categories of Additional Services available for the year along with the estimated cost of providing the Additional Services to the Subleased Premises. Such costs shall reflect only the actual cost and expense incurred by Sublandlord with respect to providing such Additional Services, whether such Additional Services would be provided by Sublandlord's personnel or by an outside vendor. By April 30th of each year during the Term, Subtenant shall provide Sublandlord with notice as to which, if any, of the categories of Additional Services Subtenant elects Sublandlord to provide during the ensuing year. Such notice is irrevocable during the year such services are requested, except that all Additional Services may be terminated by Subtenant in connection with the expiration or sooner termination of this Sublease, so long as such termination was not caused by a Subtenant Event of Default. The cost of all Additional Services elected by Subtenant to be provided shall be paid monthly by Subtenant together with the payment of all Rent. The provisions of Sections 5.2 and 5.3 shall apply to the payment of all Additional Services. The parties agree that as long as Sublandlord has a cafeteria and/or auditorium at the Newport Beach Campus, then access shall be provided to Subtenant as an Additional Service and that the right to purchase Additional Services is personal to Subtenant and shall not be offered to any subtenant or assignee of Subtenant. 5.5 Utilities. At Sublandlord's option, Subtenant shall pay the cost of all utilities that are separately metered, if any, to the Subleased Premises directly to the utility provider or to Sublandlord as Rent. 5.6 Real Property Taxes and Assessments. Sublandlord shall pay, prior to delinquency, all real property taxes and assessments levied with respect to the Building during the Term. 7 5.7 Security Deposit; Holdover Rent. If, in connection with any Replacement, Sublandlord is required to provide a security deposit, Subtenant shall provide to Sublandlord, Subtenant's portion of such security deposit (calculated by multiplying Subtenant's Building Share by such security deposit), in whatever form and amount as may be required by the Replacement (herein, a "Security Deposit"), and, if Sublandlord exercises such right, Subtenant shall deliver to Sublandlord its portion of the Security Deposit within ten (10) days after Sublandlord's request therefor. It is expressly understood and agreed that such deposit is not an advance rental deposit or a measure of Sublandlord's damages in case of Subtenant's default. If Sublandlord uses all or any portion of Subtenant's portion of the security deposit to cure any Subtenant default under this Sublease, Subtenant shall immediately on demand restore its portion of the security deposit to the original amount. If Subtenant is not in default at the expiration or termination of this Sublease, Sublandlord shall return the Security Deposit to Subtenant. Sublandlord shall not be required to keep the Security Deposit separate from its general funds and Sublandlord, not Subtenant, shall be entitled to all interest, if any, accruing on any such deposit. Upon any sale or transfer of its interest in the Building, to the extent the Security Deposit is transferred to Sublandlord's successor in interest, Sublandlord shall be released from any liability or obligation with respect thereto. In the event that any increased holdover rental or other premium is charged to Sublandlord under a Replacement at the expiration or earlier termination of the term or maturity date thereof (herein, collectively, a "Holdover Premium"), if Subtenant is then in possession of the Subleased Premises or any portion thereof, Subtenant shall be required to pay Subtenant's Building Share thereof. 5.8 Other Rent Concepts. As used in this Sublease, the term "rent" shall mean Rent and additional rent, and the term "additional rent" shall mean all other amounts payable by Subtenant to Sublandlord pursuant to this Sublease other than Rent. Where no other time is stated herein for payment, payment of any amount payable from Subtenant to Sublandlord hereunder shall be due, and made, within thirty (30) days after Subtenant's receipt of Sublandlord's invoice or statement therefor. Rent for any period during the term hereof which is for less than one month shall be a pro rata portion of the monthly installment. Rent shall be payable in lawful money of the United States to Sublandlord at the address stated herein or to such other persons or such other places as Sublandlord may designate in writing. If any payment of Rent is paid by Subtenant to Sublandlord by check, and the check, when tendered for payment to the bank upon which it is drawn, is refused, Sublandlord shall thereafter have the right to require Subtenant to pay all future installments of rent due hereunder by wire transfer of immediately available funds. 6. Use. Subtenant may use the Subleased Premises in accordance with the purposes specified in the Master Lease, and for no other purpose. 6.1 Compliance with Laws. Without in any way limiting Article V above, Subtenant shall be responsible, at its cost and expense, for its Building Share of any and all Modifications to the Building required by any Legal Requirement, including, but not limited to, compliance with the Americans with Disabilities Act. 7. Maintenance; Surrender. 8 7.1 Maintenance. Subtenant shall be responsible, at its cost and expense, for keeping the Subleased Premises in good order, condition and repair and in compliance with all Legal Requirements and Environmental Laws (as defined in the Master Lease) except as otherwise set forth herein. Sublandlord shall be responsible, at its cost and expense, for the maintenance and repair of all structural elements of the Building and the Subleased Premises, the Building's foundation, roof, exterior windows and load bearing interior walls. Subtenant shall reimburse Sublandlord for its Building Share of such expenses as set forth in Section 5.1. 7.2 Surrender. Upon the termination or earlier expiration of this Sublease, Subtenant shall surrender the Subleased Premises in good order, condition and repair, subject to reasonable wear and tear, broom clean. 8. Performance by Sublandlord; Status of Master Lease. 8.1 Sublandlord's Performance Conditioned on Master Landlord's Performance. Subtenant recognizes that Sublandlord is not in a position to render any of the services or to perform any of the obligations required of Master Landlord by the terms of the Master Lease. Therefore, despite anything to the contrary in this Sublease, Subtenant agrees that performance by Sublandlord of its obligations under this Sublease is conditioned on performance by the Master Landlord of its corresponding obligations under the Master Lease, and Sublandlord will not be liable to Subtenant for any default of the Master Landlord under the Master Lease. 8.2 No Claim. Subtenant will not have any claim against Sublandlord based on Master Landlord's failure or refusal to comply with any of the provisions of the Master Lease unless that failure or refusal is a result of Sublandlord's act or failure to act. Despite Master Landlord's failure or refusal to comply with any of the provisions of the Master Lease, this Sublease will remain in full force and effect and Subtenant shall pay all rent and all other charges provided for in this Sublease without any abatement, deduction or setoff so long as Subtenant's use and enjoyment of the Subleased Premises is not disturbed. Except as expressly provided in this Sublease, Subtenant agrees to be subject to, and bound by, all of the covenants, agreements, terms, provisions, and conditions of the Master Lease, as though Subtenant was the tenant under the Master Lease. 8.3 Master Landlord's Consent; Performance. Whenever the consent of Master Landlord is required under the Master Lease, Sublandlord agrees to use its reasonable, good faith efforts to obtain, at Subtenant's sole cost and expense, that consent on behalf of Subtenant. Whenever Master Landlord fails to perform its obligations under the Master Lease, Sublandlord agrees to use its reasonable, good faith efforts to cause Master Landlord to perform such obligations on behalf of both Sublandlord and Subtenant. 8.4 No Existing Defaults. Sublandlord represents and warrants to Subtenant that the Master Lease is in full force and effect, and Sublandlord has neither given nor received a notice of default under the Master Lease. 8.5 Preservation of Master Lease. Except as set forth in Section 2.3, Sublandlord agrees not to modify the Master Lease in a manner that materially adversely affects Subtenant's rights under this Sublease. Subtenant and Sublandlord will each refrain from any act or 9 omission that would result in the failure or breach of any of the covenants, provisions, or conditions of the Master Lease on the part of the Tenant under the Master Lease. Sublandlord agrees to timely perform all of its obligations under the Master Lease, including, without limitation, the payment of all rent thereunder. 9. Insurance; Indemnity; Liability of Sublandlord; Security 9.1 From and after the Effective Date, Subtenant shall, at Subtenant's expense, obtain and keep in force during the term of this Sublease standard form property insurance insuring Subtenant's personal property, trade fixtures, furnishings and equipment located within the Subleased Premises against any perils included within the classification "all risk" as such term is used in the insurance industry and in an amount equal to the full replacement value thereof. 9.2 Except for gross negligence or willful misconduct on the part of any Master Lessor Party or Sublandlord, Subtenant hereby agrees that neither any Master Lessor Party nor Sublandlord shall be liable for injury to Subtenant's business or any loss of income therefrom or for damages to the goods, wares, merchandise or other property of Subtenant or Subtenant's Agents or any other person in or about the Subleased Premises, nor shall any Master Lessor Party nor Sublandlord be liable for injury to the person of Subtenant or Subtenant's Agents, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain or from the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures or from any other cause, whether the same damage or injury results from conditions arising upon the Subleased Premises or upon other portions of the Building or from other sources or places and regardless of whether the cause of such damage or injury or the means of repairing the same is inaccessible to Subtenant, or for any loss or damage to any property or person occasioned by theft, fire, act of God, public enemy, injunction, riot, strike, insurrection, war, court order, requisition, or order of governmental body or authority, or for any damage or inconvenience that may arise through repair or alteration of any part of the Project, the Building or the Subleased Premises, or a failure to make any such repairs, except as expressly provided in this Sublease. Neither any Master Lessor Party nor Sublandlord shall be liable for any damages arising from any act or neglect of any other tenant, if any, of the Building. 9.3 Sublandlord and Subtenant each hereby waives any and all rights of recovery against the other, and against the officers, employees, agents, representatives, customers and business visitors of such other party, for loss of or damage to such waiving party or its property or the property of others under its control arising from any cause insured against under any policy of property insurance required to be carried by such waiving party pursuant to the provisions of this Sublease (or any other policy of property insurance carried by such waiving party in lieu thereof) at the time of such loss or damage. The foregoing waiver shall be effective whether or not a waiving party actually obtains and maintains such insurance which such waiving party is required to obtain and maintain pursuant to this Sublease (or any substitute therefor). Sublandlord and Subtenant shall, upon obtaining the policies of insurance which they are required to maintain hereunder, give notice to their respective insurance carrier or carriers that the foregoing mutual waiver of subrogation is contained in this Sublease. 10 9.4 Except for gross negligence or willful misconduct on the part of any Master Lessor Party or Sublandlord, Subtenant agrees to indemnify, defend and hold Sublandlord, the Master Lessor Parties and its and their officers, directors, partners and employees (collectively, the "Sublandlord Parties") entirely harmless from and against all Liabilities, for injury to or death of any person or for damages to any property or for violation of law arising out of or in any manner connected with (i) the use, occupancy or enjoyment of the Subleased Premises, Building or campus by Subtenant or Subtenant's Agents or any work, activity or other things allowed or suffered by Subtenant or Subtenant's Agents to be done in or about the Subleased Premises, Building or Project, including without limitation with respect to Legal Requirements, Insurance Requirements, Hazardous Activity, Environmental Laws and/or Environmental Violations, (ii) any breach or default in the performance of any obligation of Subtenant under this Sublease, and (iii) any act or failure to act, whether negligent or otherwise tortious, by Subtenant or Subtenant's Agents in or about the Subleased Premises, Building or campus. 9.5 Sublandlord may, but (subject to Section 5.4 above) shall have no obligation to, from time to time, employ one or more persons or entities to patrol or provide security for the Subleased Premises and/or the "Common Areas" which term, as used herein, means all areas, space, equipment and special services provided by Sublandlord or pursuant to the CC&Rs encumbering the Building for the common or joint use and benefit of the tenants, their employees, agents, servants, suppliers, customers and other invitees, including, by way of illustration, but not limitation, retaining walls, fences, landscaped areas, parks, curbs, sidewalks, private roads, restrooms, stairways, elevators, lobbies, hallways, patios, service quarters, parking areas, all common areas and other areas within the exterior of the Building and in the Project. Subtenant and its employees shall cooperate with Sublandlord's security personnel, including those providing Additional Services and/or Common Area security for employees after closure of the Building. Notwithstanding any such activity, Subtenant shall have the sole responsibility of providing security for the Subleased Premises, the persons therein and all vehicles of Subtenant and Subtenant's Agents. 10. Estoppel Certificates. Each party to this Sublease shall, from time to time as requested in writing by the other party and/or Master Landlord or any Replacement, on not less than ten (10) days prior written notice, execute, acknowledge, and deliver to the other party an estoppel certificate ("Estoppel Certificate") in form and substance reasonably satisfactory to the requesting party, which Estoppel Certificate shall include, at a minimum, a statement that this Sublease is unmodified and in full force and effect (or if there have been modifications that this Sublease is in full force and effect as modified and stating the modifications). Such Estoppel Certificate shall also certify the dates to which base rent, additional rent, and any other charges have been paid and state whether, to the knowledge of the person signing the Estoppel Certificate, the other party is in default beyond any applicable grace period provided in this Sublease. If the other party is in default beyond any applicable grace period, the Estoppel Certificate shall specify each default of which the signer then has knowledge. It is intended that each Estoppel Certificate may be relied on by others with whom the party requesting that certificate may be dealing. 11. Signage. Upon written request from Subtenant, Sublandlord agrees to promptly remove its existing sign or signs located on the exterior of the Subleased Premises at its cost and expense. Subtenant shall have the right to place exterior building top signs on the Subleased 11 Premises, subject to complying with any applicable laws. Subtenant shall remove its signs from the exterior of the Subleased Premises upon the termination or expiration of this Sublease. The installation and removal of Subtenant's sign or signs shall be at Subtenant's cost and expense. 12. Assignment or Subleasing. Subject to the rights of Master Landlord or any Replacement, Subtenant may assign this Sublease or further sublet the Subleased Premises to any party after providing Sublandlord with thirty (30) days' prior written notice of such proposed assignment or subletting provided that Subtenant remains bound by and subject to this Sublease. At any time within thirty (30) days after Sublandlord's receipt of Subtenant's notice of assignment or subletting, Sublandlord may, by written notice to Subtenant, elect to terminate this Sublease in full with respect to an assignment or terminate in part with respect to a sublease, and may thereafter in Sublandlord's sole and absolute discretion enter into a lease directly with the proposed assignee or subtenant or any other person and/or itself occupy all of any the portion of the Subleased Premises so recaptured. If Sublandlord exercises its right to recapture all or a portion of the Subleased Premises as set forth above, then Subtenant shall completely vacate and surrender the Subleased Premises in accordance with Section 7.2 within thirty (30) days of its receipt of Sublandlord's recapture notice ("Surrender Date"). Sublandlord shall, within thirty (30) days of its receipt of the Subleased Premises, reduce Subtenant's Building Share by the proportion of the Subleased Premises recaptured effective as of the Surrender Date. 13. Default. 13.1 "Event of Default". Any one or more of the following events shall constitute an "Event of Default" or "Lease Event of Default" (as defined in the Master Lease): 13.1.1 Subtenant shall fail to pay the rent or other charges within five (5) business days after the same become due hereunder, or 13.1.2 Except as provided in Section 2.3 above, Subtenant shall fail to perform or observe any other term or condition contained in this Sublease for thirty (30) days after notice from Sublandlord thereof unless such default is of such nature that it cannot be cured within such 30-day period, in which event no Event of Default shall occur so long as Subtenant shall commence the curing of the default promptly within such 30-day period and shall thereafter promptly and diligently prosecute and complete the curing of the same; or 13.1.3 Except as otherwise provided by applicable law, if the estate hereby created shall be taken on execution or by other process of law, or if Subtenant shall be judicially declared bankrupt or insolvent according to law, or if any assignment shall be made of the property of Subtenant for the benefit of creditors, or if a receiver, guardian, conservator, trustee in involuntary bankruptcy or other similar officer shall be appointed to take charge of all or any substantial part of Subtenant's property by a court of competent jurisdiction, or if a petition shall be filed for the reorganization of Subtenant under any provisions of a law now or hereafter enacted, and such proceeding is not dismissed within ninety (90) days after it is begun, or if Subtenant shall file a petition for such reorganization, or for arrangements under any provisions of such laws providing a plan for a debtor to settle, satisfy or extend the time for the payment of debts. 12 13.2 Remedies. Upon the occurrence and continuance of an Event of Default, Sublandlord, may do any one or more of the following: 13.2.1 Sublandlord may elect to terminate this Sublease and the tenancy created hereby by giving notice of such election to Subtenant; thereupon Sublandlord shall have the right and option to re-enter the Subleased Premises, by summary proceedings or otherwise, and may remove Subtenant and all other persons and property from the Subleased Premises, and may store such property in a public warehouse or elsewhere at the cost of and for the account of Subtenant without resort to legal process and without Sublandlord being deemed guilty of trespass or becoming liable for any loss or damage occasioned thereby. 13.2.2 Sublandlord may exercise any other legal or equitable right or remedy which it may have. Sublandlord's re-entry or taking of possession of the Subleased Premises shall not be construed as an election to terminate this Sublease unless Sublandlord gives written notice of such termination. Any re-entry, or taking of possession by Sublandlord shall not affect or diminish the ongoing obligation or liability of Subtenant for all rent and other obligations due and owing under this Sublease. 13.2.3 Sublandlord may decline to retake possession of the Subleased Premises and may sue for the rent as the same becomes due. 13.2.4 Sublandlord may retake possession of the Subleased Premises, relet the Subleased Premises and sue for damages. During the period of time that Sublandlord is trying to relet the Subleased Premises, Subtenant shall be liable for the full rent. Sublandlord may sue from month to month for the damages which accrue in accordance with this subsection, or may sue for the accelerated balance of the rent and other damages or remedies to which Sublandlord may be entitled in accordance with the measure of damages set forth in Section 13.3. The election of whether to sue on a month-to-month basis or for the total amount shall be at the sole option and discretion of Sublandlord. Acts of maintenance, efforts to relet, and/or the appointment of receiver to protect the Sublandlord's interests, shall not constitute termination of the Subtenant's right to possession. 13.2.5 Notwithstanding anything herein to the contrary, Sublandlord may pursue any other remedy now or hereafter available in law or in equity in the State of California, including without limitation, California Civil Code Sections 1951.2 through 1952.6, inclusive. Any remedies, notice provisions or procedures under this Sublease which are inconsistent with California law shall be deemed modified. 13.2.6 In addition to all other remedies provided in this Sublease, Sublandlord shall be entitled to restrain by injunction any violation, or any attempted or threatened violation, of any of the covenants, conditions, or provisions of this Sublease or to sue for specific performance of any term, covenant or condition to be performed by Subtenant under this Sublease. Sublandlord's remedies hereunder shall be cumulative with any other remedies available to it at law or equity. Sublandlord's remedies hereunder shall be cumulative with any other remedies available to it at law or equity. 13 14. Subordination; Attornment; Non-Disturbance. 14.1 The rights of Subtenant under this Sublease are and shall be, at the option of Sublandlord, either subordinate or superior to the Master Lease and/or any Replacement, or Sublandlord's interest therein or any part thereof, whether the Master Lease and/or Replacement has heretofore been, or may hereafter be, placed upon the Subleased Premises by Sublandlord, except that a non-disturbance must be secured prior to any future subordination of this Sublease as set forth below in Section 14.2. To further assure the foregoing subordination or superiority, Subtenant shall, upon Sublandlord's request, together with the request of Master Landlord or any Mortgagee, execute any instrument (including without limitation an amendment to this Sublease), or instruments intended to subordinate this Sublease, or at the option of Sublandlord, to make it superior to the Master Lease or any Replacement. 14.2 Subtenant agrees (i) to attorn to the Master Landlord and/or any Mortgagee and to any party acquiring title to the Subleased Premises by judicial foreclosure, trustee's sale, or deed in lieu of foreclosure, as the successor to Sublandlord hereunder and/or with respect to an interest in the Building, (ii) to execute any attornment agreement reasonably requested by the Master Landlord and/or a Mortgagee, or party so acquiring title to the Subleased Premises, and (iii) that this Sublease, subject to the rights under any outstanding non-disturbance agreement, at the option of the Master Landlord and/or such Mortgagee or other party, shall remain in force notwithstanding any such judicial foreclosure, trustee's sale, deed in lieu of foreclosure, or merger of titles. Neither the Master Landlord, nor any Mortgagee, nor any party acquiring title to the Subleased Premises by judicial foreclosure, trustee sale, or deed in lieu of foreclosure, as the successor to Sublandlord hereunder, shall be liable or responsible for any breach of a covenant contained in this Sublease that occurred before such party acquired its interest in the Subleased Premises or for any continuing breach thereof until after the successor Sublandlord has received the notice and right to cure as provided herein, and such party shall not be bound by any payment of rent or additional rent for more than two (2) months in advance. 14.3 Upon payment by Subtenant of the rents herein provided, and upon the observance and performance of all the covenants, terms and conditions on Subtenant's part to be observed and performed, Subtenant shall peaceably and quietly hold and enjoy the Subleased Premises for the term hereof without hindrance or interruption by Sublandlord or any other person or persons lawfully or equitably claiming by, through or under Sublandlord, subject, nevertheless, to the terms and conditions of this Sublease, the Master Lease and any Replacement to which this Sublease is subordinate. 14.4 On any act or omission by Sublandlord which might give, or which Subtenant claims or intends to claim gives, Subtenant the right to damages from Sublandlord or the right to terminate this Sublease by reason of a constructive or actual eviction from all or part of the Subleased Premises, or otherwise, Subtenant shall not sue for damages or attempt to terminate this Sublease until it has given written notice of the act or omission to Sublandlord, Master Landlord and/or any Mortgagee as identified by Sublandlord and a reasonable period of time for remedying the act or omission has elapsed following the giving of the notice, during which time Sublandlord, Master Landlord and/or Mortgagee, or any of them, their agents or employees, may enter upon the Subleased Premises and do therein whatever is necessary to remedy the act or omission. During the period after the giving of notice and during the remedying of the act or omission, the Rent payable by Subtenant shall not be abated and apportioned except to the extent that the Subleased Premises are untenantable. 14 15. Miscellaneous Provisions. 15.1 No Brokers. The parties to this Sublease warrant to each other that neither party dealt with any broker or finder in connection with the consummation of this Sublease and each party agrees to protect, defend, indemnify and hold the other party harmless from and against any and all claims or liabilities for brokerage commissions or finder's fees arising out of that party's acts in connection with this Sublease. 15.2 Notices. Any notice that may or must be given by either party under this Sublease shall be delivered: (i) personally, (ii) by certified mail, return receipt requested, or (iii) by a nationally recognized overnight courier, addressed to the party for whom it is intended. Any notice given to Sublandlord or Subtenant shall be sent to the respective address set forth below, or to such other address as that party may designate. A notice sent pursuant to the terms of this section shall be deemed delivered: (A) when delivery is attempted, if delivered personally and during business hours, (B) three (3) business days after deposit into the United States mail, or (C) the business day following deposit with a nationally recognized overnight courier. If to Sublandlord: Conexant Systems, Inc. 4311 Jamboree Road Newport Beach, CA 92660 Attn: Director of Facilities With a copy to: Business law team at the same address If to Subtenant: Mindspeed Technologies, Inc. 4000 MacArthur Boulevard, East Tower Newport Beach, CA 92660 Attn: Facilities Manager With a copy to: Mindspeed Technologies, Inc. 4000 MacArthur Boulevard, East Tower Newport Beach, CA 92660 Attn: Mindspeed Legal Team If to Master Landlord: pursuant to Section 29 of the Master Lease. 15.3 Survival of Provisions. In the event of a termination of this Sublease, Sections 6, 9, 15.13 and 15.14 shall survive and continue to be binding upon the parties for a period of ten (10) years following such termination. 15.4 Entire Agreement; Waiver. This Sublease together with all Exhibits incorporated or referred to herein, constitute the final, complete and exclusive statement between the parties to this Sublease pertaining to the subject matter hereof, supersedes all prior and contemporaneous understandings or agreements of the parties, and is binding on and inures to the benefit of the heirs, representatives, successors, and assigns of the respective parties hereto. No party has been induced to enter into this Sublease by, nor is any party relying on, any representa- 15 tion or warranty outside those expressly set forth in this Sublease. Any agreement made after the date of this Sublease is ineffective to modify, waive, release, terminate, or effect an abandonment of this Sublease, in whole or in part, unless that agreement is in writing, is signed by the parties to this Sublease, and specifically states that that agreement modifies this Sublease. 15.5 Captions. Captions to the sections in this Sublease are included for convenience only and do not modify any of the terms of this Sublease. 15.6 Further Assurances. Each party to this Sublease shall, at its own cost and expense, execute and deliver such further documents and instruments and shall take such other actions as may be reasonably required or appropriate to evidence or carry out the intent and purposes of this Sub-lease. 15.7 Capitalized Terms. All terms spelled with initial capital letters in this Sublease that are not expressly defined in this Sublease will have the respective meanings given such terms in the Master Lease. 15.8 Rules and Regulations. Sublandlord hereby represents that the rules and regulations set forth on Exhibit "D" attached hereto are those currently in effect for Sublandlord and its employees and such rules and regulations are hereby incorporated herein with respect to Subtenant's use and occupancy of the Subleased Premises. Both parties agree to amend said Exhibit "D" if and when such rules and regulations change. 15.9 Access to Subleased Premises. Subject to the terms and conditions of this Sublease, Subtenant shall have the right to access to the Subleased Premises twenty-four (24) hours per day, seven (7) days per week. 15.10 Rooftop Communication Equipment. Subtenant shall have the right to maintain any currently existing rooftop communication equipment, and to install additional rooftop communication equipment on the roof of the east tower of the Building in such locations and pursuant to any existing CC&Rs, rules or regulations on the Subleased Premises as well as any plans and specifications which are reasonably acceptable to Sublandlord, such approval not to be unreasonably withheld or delayed. 15.11 Severability. If any provision of this Sublease or the application of any provision of this Sublease to any person or circumstance is, to any extent, held to be invalid or unenforceable, then unless the severance of such provision could cause material failure of consideration to a party hereto, the remainder of this Sublease or the application of that provision to persons or circumstances other than those as to which it is held invalid or unenforceable, will not be affected, and each provision of this Sublease will be valid and be enforced to the fullest extent permitted by law. 15.12 Tenant Improvement Work. Sublandlord agrees to construct, or cause to be constructed, certain tenant improvement work within the lobby of the Subleased Premises pursuant to the terms and conditions set forth on the Construction Work Letter attached hereto as Exhibit "E". All improvements to be constructed in accordance with Exhibit "E" hereto shall be constructed by Sublandlord at Sublandlord's sole cost and expense. 16 15.13 Attorneys' Fees, Costs and Expenses. In any action or proceeding arising out of this Sublease, or the transactions contemplated hereby, the prevailing party therein shall be entitled to recover from the other party thereto the reasonable attorneys' and paralegals' fees, court costs, filing fees, publication costs and other expenses incurred by the prevailing party in connection therewith, at trial and all appellate proceedings, and in all bankruptcy, administrative and similar proceedings. 15.14 Governing Law. This Sublease shall be governed by, and in all respects construed in accordance with, the laws of the State of New York, without regard for its conflict or choice of laws provisions, except as noted herein or in the Master Lease. 15.15 Escalation. In the event that any dispute claim or controversy ("collectively a "Dispute") arises out of or relates to any provision of this Agreement and is not an Event of Default, the parties agree that an appropriate authorized manager of Sublandlord and an appropriate authorized manager of Subtenant shall attempt a good faith resolution of such Dispute within thirty (30) days after either Party notifies the other of such Dispute. If such Dispute is not resolved within thirty (30) days of such notification, such Dispute will be referred for resolution to the Parties respective senior executives. Should they be unable to resolve such Dispute within thirty (30) days following such referral to them, or within such other time as they may agree, Subtenant and Sublandlord shall submit such Dispute to binding arbitration, initiated and conducted in accordance with the then-existing American Arbitration Association Commercial Arbitration Rules, before a single arbitrator selected jointly by Sublandlord and Subtenant. The arbitration shall be conducted in the County of Orange, California and shall be governed by the United States Arbitration Act, 9 USC Section 116, and judgment upon the award may be entered by any court having jurisdiction thereof. The arbitrator shall have case management authority and shall resolve the Dispute in a final award within one hundred eighty (180) days from the commencement of the arbitration action, subject to any extension of time thereof allowed by the arbitrator upon good cause shown. There shall be no appeal from the arbitral award, except for fraud committed by an arbitrator in carrying out his or her duties under the aforesaid rules; otherwise the Parties irrevocably waive their rights to judicial review of any Dispute arising out of or related to this Sublease. 17 IN WITNESS WHEREOF, the parties hereto, by their duly authorized representatives, have executed this Sublease as of the date last set forth below to be effective as of the Effective Date. SUBLANDLORD SUBTENANT CONEXANT SYSTEMS, INC., MINDSPEED TECHNOLOGIES, INC., a Delaware corporation a Delaware corporation By: /s/ Dennis E. O'Reilly By: /s/ Bradley W. Yates ----------------------------------- --------------------------------- Name: Dennis E. O'Reilly Name: Bradley W. Yates Senior Vice President, General Senior Vice President and Chief Counsel and Secretary Administrative Officer 18 EX-2.5 7 a91233exv2w5.txt EXHIBIT 2.5 Exhibit 2.5 ================================================================================ CREDIT AGREEMENT Dated as of June 27, 2003 among MINDSPEED TECHNOLOGIES, INC., as Borrower, THE SUBSIDIARY GUARANTORS PARTY HERETO, as Guarantors, and CONEXANT SYSTEMS, INC., as Lender ================================================================================ TABLE OF CONTENTS

Page ---- ARTICLE I Defined Terms; Rules of Construction......................................................... 1 SECTION 1.01. Defined Terms............................................................ 1 SECTION 1.02. Rules of Construction.................................................... 1 ARTICLE II The Loans................................................................................... 1 SECTION 2.01. Commitment............................................................... 1 SECTION 2.02. Loans.................................................................... 1 SECTION 2.03. Borrowing Procedure...................................................... 2 SECTION 2.04. Repayment of Loans; Evidence of Debt..................................... 2 SECTION 2.05. Interest on Loans........................................................ 3 SECTION 2.06. Termination and Reduction of Commitment.................................. 4 SECTION 2.07. Optional and Mandatory Prepayments of Loans.............................. 4 SECTION 2.08. Payments Generally....................................................... 5 SECTION 2.09. Taxes.................................................................... 5 ARTICLE III Representations and Warranties............................................................. 7 SECTION 3.01. Organization; Powers..................................................... 7 SECTION 3.02. Authorization; Enforceability............................................ 7 SECTION 3.03. Governmental Approvals; No Conflicts..................................... 8 SECTION 3.04. Financial Statements..................................................... 8 SECTION 3.05. Properties............................................................... 9 SECTION 3.06. Equity Interests and Subsidiaries; Consent............................... 10 SECTION 3.07. No Event of Default...................................................... 10 SECTION 3.08. Agreements............................................................... 11 SECTION 3.09. No Material Misstatements................................................ 11 SECTION 3.10. Solvency................................................................. 11 SECTION 3.11. Security Documents....................................................... 11 SECTION 3.12. Representations and Warranties Concerning Collateral..................... 12 ARTICLE IV Conditions of Lending....................................................................... 14 SECTION 4.01. All Loans................................................................ 14 SECTION 4.02. Closing Date Items....................................................... 15 ARTICLE V Affirmative Covenants........................................................................ 18 SECTION 5.01. Financial Statements, Reports, Etc....................................... 18 SECTION 5.02. Litigation and Other Notices............................................. 20 SECTION 5.03. Existence; Businesses and Properties..................................... 20 SECTION 5.04. Insurance................................................................ 21 SECTION 5.05. Taxes.................................................................... 22 SECTION 5.06. Maintaining Records; Access to Properties and Inspections................ 22

-i- SECTION 5.07. Use of Proceeds.......................................................... 22 SECTION 5.08. Payment of Obligations................................................... 23 SECTION 5.09. Compliance with Laws..................................................... 23 SECTION 5.10. Additional Collateral; Additional Guarantors............................. 23 SECTION 5.11. Security Interests; Further Assurances................................... 28 SECTION 5.12. Post-Closing Matters..................................................... 29 ARTICLE VI Negative Covenants.......................................................................... 29 SECTION 6.01. Indebtedness............................................................. 29 SECTION 6.02. Liens.................................................................... 30 SECTION 6.03. Investments, Loans and Advances.......................................... 33 SECTION 6.04. Mergers, Consolidations, Asset Sales and Purchases of Assets............. 34 SECTION 6.05. Dividends................................................................ 36 SECTION 6.06. Transactions with Affiliates............................................. 36 SECTION 6.07. Limitation on Capital Expenditures....................................... 36 SECTION 6.08. Limitation on Modifications of Indebtedness; Modifications of Certificate of Incorporation, Other Constitutive Documents or Bylaws and Certain Other Agreements, Etc. .......................................... 36 SECTION 6.09. Limitation on Certain Restrictions on Subsidiaries....................... 37 SECTION 6.10. Limitation on Issuance of Capital Stock.................................. 37 SECTION 6.11. Limitation on Creation of Subsidiaries................................... 38 SECTION 6.12. Sale and Leaseback Transactions.......................................... 38 SECTION 6.13. Limitation on Lease Obligations.......................................... 38 SECTION 6.14. Business................................................................. 38 SECTION 6.15. Limitation on Accounting Changes......................................... 38 SECTION 6.16. Restricted Payments...................................................... 38 SECTION 6.17. Fiscal Year.............................................................. 39 SECTION 6.18. Foreign Subsidiaries..................................................... 39 ARTICLE VII Guarantee.................................................................................. 39 SECTION 7.01. The Guarantee............................................................ 39 SECTION 7.02. Obligations Unconditional................................................ 40 SECTION 7.03. Reinstatement............................................................ 42 SECTION 7.04. Subrogation; Subordination............................................... 42 SECTION 7.05. Remedies................................................................. 42 SECTION 7.06. Instrument for the Payment of Money...................................... 43 SECTION 7.07. General Limitation on Guarantee Obligations.............................. 43 SECTION 7.08. Continuing Guarantee..................................................... 43 SECTION 7.09. Release of Guarantors.................................................... 43 ARTICLE VIII Events of Default......................................................................... 44 ARTICLE IX Miscellaneous............................................................................... 47 SECTION 9.01. Notices.................................................................. 47 SECTION 9.02. Waivers; Amendment....................................................... 48 -ii- SECTION 9.03. Expenses; Indemnity...................................................... 49 SECTION 9.04. Successors and Assigns................................................... 50 SECTION 9.05. Survival of Agreement.................................................... 51 SECTION 9.06. Counterparts; Integration; Effectiveness................................. 51 SECTION 9.07. Severability............................................................. 52 SECTION 9.08. Right of Set-off......................................................... 52 SECTION 9.09. Governing Law; Jurisdiction; Consent to Service of Process............... 52 SECTION 9.10. WAIVER OF JURY TRIAL..................................................... 53 SECTION 9.11. Confidentiality.......................................................... 53 Exhibit A Defined Terms; Rules of Construction A-1 -iii-

ANNEXES - ------- Annex I Limitations on Guarantees and Indemnities Under Applicable Foreign Laws Annex II Lenders' Notice Information and Commitments Annex III Foreign Subsidiary Pledge and Guarantee Documentation SCHEDULES Schedule 1.01(a) Immaterial Subsidiaries Schedule 1.01(b) Subsidiary Guarantors Schedule 1.01(d) Certain Foreign Subsidiary Guarantors Schedule 3.03 Governmental Approvals; Compliance with Laws Schedule 3.05(b) Leased Properties Schedule 3.06(a) Subsidiaries; Non-Guarantor Subsidiaries Schedule 3.12(a) Material Items of Collateral Schedule 3.12(b) Location of Certain Collateral Schedule 3.12(c) Location of Loan Parties Schedule 4.02(n) Landlord Lien Waiver and Access Agreement Properties Schedule 5.10(b) Section 5.10(b) Listed Subsidiaries Schedule 5.12 Post-Closing Matters Schedule 6.01 Existing Indebtedness Schedule 6.02 Certain Permitted Liens Schedule 6.03 Existing Investments Schedule 6.13 Existing Lease Obligations EXHIBITS Exhibit A Defined Terms; Rules of Construction Exhibit B Form of Assignment and Acceptance Exhibit C Form of Borrowing Request Exhibit D Form of Monthly Cash Balance Report Exhibit E-1 Form of Agreement and Estoppel Certificate Exhibit E-2 Form of Landlord Lien Waiver and Access Agreement Exhibit F Form of U.S. Security Agreement Exhibit G Form of Intercompany Note Exhibit H Form of Joinder Agreement Exhibit I-1 Form of Perfection Certificate Exhibit I-2 Form of Perfection Certificate Supplement Exhibit J Form of Note Exhibit K Form of Financial Officer's Compliance Certificate

-iv- CREDIT AGREEMENT AGREEMENT, dated as of June 27, 2003 among MINDSPEED TECHNOLOGIES, INC., a Delaware corporation ("BORROWER"); and EACH OF THE SUBSIDIARY GUARANTORS LISTED ON THE SIGNATURE PAGES HERETO OR FROM TIME TO TIME BECOMING A PARTY HERETO BY EXECUTION OF A JOINDER AGREEMENT (together with each other Subsidiary Guarantor from time to time executing a Guarantee (defined herein) as required hereunder, "GUARANTORS"); and CONEXANT SYSTEMS, INC. ("CONEXANT" or "LENDER"). ARTICLE I DEFINED TERMS; RULES OF CONSTRUCTION SECTION 1.01 DEFINED TERMS. In this Agreement, terms defined in Exhibit A shall have the meanings set forth therein, terms defined in the preamble or other sections of this Agreement shall have the meanings set forth therein, terms defined in the UCC and not otherwise defined in this Agreement or the Security Documents shall have the meanings set forth in the UCC, and capitalized terms used but not otherwise defined in this Agreement which are defined in the Security Documents shall have the meanings set forth in the Security Documents. SECTION 1.02. RULES OF CONSTRUCTION. The rules of construction set forth in Exhibit A shall apply to this Agreement and the other Loan Documents. ARTICLE II THE LOANS SECTION 2.01. COMMITMENT. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, Lender agrees to make Loans to Borrower, at any time and from time to time during the Availability Period, in an aggregate principal amount at any time outstanding that will not result in Lender's Exposure exceeding its Commitment. Within the limits set forth above and subject to the terms, conditions and limitations set forth herein, Borrower may borrow, pay or prepay and reborrow Loans. SECTION 2.02. LOANS. (a) Each Loan shall be in an aggregate principal amount that is (i) an integral multiple of $1.0 million and not less than $2.0 million or (ii) equal to the remaining available balance of the Commitment. (b) Lender shall make each Loan to be made by it hereunder not later than 11:00 a.m., Pacific time on the proposed date thereof by wire transfer of immediately available dollars to such bank deposit account in the United States as Borrower may designate in the applicable Borrowing Request. SECTION 2.03. BORROWING PROCEDURE. To request a Loan, Borrower shall notify Lender of such request by delivering a duly completed Borrowing Request not later than 10:30 a.m., Pacific time, three Business Days before the date of the proposed Loan. Each such Borrowing Request shall specify the following information in compliance with Section 2.02: (a) the amount of such Loan; (b) the date of such Loan, which shall be a Business Day; and (c) the location and number of Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.02(b). SECTION 2.04. REPAYMENT OF LOANS; EVIDENCE OF DEBT. (a) Borrower hereby unconditionally promises to pay to Lender the then unpaid principal amount of each Loan on the Final Maturity Date, together with all accrued and unpaid interest on such principal amount to the date of payment. (b) Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of Borrower to Lender resulting from each Loan made by Lender from time to time, including the amounts of principal and interest payable and paid to Lender from time to time under this Agreement, including: (i) the amount and the borrowing date of each Loan made hereunder; (ii) the amount of any principal or interest due and payable or to become due and payable from Borrower to Lender hereunder; (iii) the amount of any principal paid, pre-paid and repaid and the amount of any interest paid by Borrower to Lender or added to principal hereunder; and (iv) the amount of any other sum received by Lender. (c) The entries made in the accounts maintained pursuant to Section 2.04(b) shall be prima facie evidence of the existence and amounts of the obligations therein recorded (in the absence of manifest error); provided, however, that the failure of Lender to maintain such accounts or any error therein shall not in any manner affect the obligations of Borrower to repay the Loans in accordance with their terms. 2 (d) Lender may request that its Loans be evidenced by a Note. In such event, Borrower shall prepare, execute and deliver to Lender a Note payable to the order of Lender (or, if requested by Lender, to Lender and its registered assigns) and substantially in the form of Exhibit J or in a form otherwise approved by Lender. Thereafter, the Loans evidenced by such Note and interest thereon shall at all times (including after assignment pursuant to Section 9.04) be represented by one or more Notes in such form payable to the order of the payee named therein (or, if such Note is a registered note, to such payee and its registered assigns). SECTION 2.05. INTEREST ON LOANS. (a) Subject to Section 2.05(b), the principal amount of Loans, including the amount of any accrued and unpaid interest which is not paid in cash and added to principal as provided in Section 2.05(d), shall bear interest at a rate of ten percent (10%) per annum. (b) Notwithstanding the foregoing, upon the occurrence and during the continuation of any Event of Default, the outstanding principal amount of all Loans and, to the extent permitted by applicable law, any interest thereon and any fees and other amounts payable hereunder, shall thereafter bear interest (including post-petition interest in any proceeding under the Bankruptcy Code or other applicable bankruptcy laws) payable upon demand at a rate that is 12% per annum. Payment or acceptance of the increased rates of interest provided for in this Section 2.05(b) is not a permitted alternative to timely payment and shall not constitute a waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Lender. (c) Accrued interest on each Loan may be paid in arrears on the last Business Day of each calendar quarter and all accrued and unpaid interest shall be paid on the Final Maturity Date and upon termination of the Commitment; provided that, (i) interest accrued pursuant to Section 2.05(b) shall be payable on demand and, (ii) in the event of any repayment or prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment. (d) Accrued interest not paid in cash on the last Business Day of each calendar quarter shall be added to the principal amount outstanding as of the last Business Day of each calendar quarter and thereafter accrue interest (at the applicable interest rate) until paid in cash. Any such capitalized interest shall be treated as principal of Loans for all purposes of the Loan Documents, except that such capitalized interest shall not be deemed Exposure for purposes of determining the amount of principal that may be borrowed pursuant to Section 2.01. (e) All interest hereunder shall be computed on the basis of a year of 365/366 days, and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). 3 (f) Notwithstanding anything herein to the contrary, if at any time the interest rate applicable to any Loan, together with all fees, charges and other amounts that are treated as interest on such Loan under applicable law (collectively the "CHARGES"), shall exceed the maximum lawful rate (the "MAXIMUM RATE") that may be contracted for, charged, taken, received or reserved by Lender in accordance with applicable law, the rate of interest payable in respect of such Loan hereunder, together with all Charges payable in respect thereof, shall be limited to the Maximum Rate and, to the extent lawful, the interest and Charges that would have been payable in respect of such Loan but were not payable as a result of the operation of this Section 2.05(f) shall be cumulated and the interest and Charges payable to such Lender in respect of other Loans or periods shall be increased (but not above the Maximum Rate therefor) until such cumulated amount, together with interest thereon at the Federal Funds Effective Rate to the date of repayment, shall have been received by Lender. SECTION 2.06. TERMINATION AND REDUCTION OF COMMITMENT. (a) The Commitments shall automatically terminate on the Final Maturity Date. (b) Borrower may at any time terminate, or from time to time reduce, the Commitments; provided that, (i) each reduction of the Commitments shall be in an amount that is an integral multiple of $1.0 million and not less than $2.0 million and (ii) the Commitments shall not be terminated or reduced if, after giving effect to any concurrent prepayment of the Loans in accordance with Section 2.07(b), the Exposure would exceed the Commitment. (c) Borrower shall notify Lender of any election to terminate or reduce its Commitment under Section 2.06(b) at least one Business Day prior to the effective date of such termination or reduction, specifying such election and the effective date thereof. Each notice delivered by Borrower pursuant to this Section 2.06(b) shall be irrevocable. Any termination or reduction of the Commitment shall be permanent. (d) The Commitment may be terminated at any time an Event of Default has occurred pursuant to and in accordance with the terms of Article XIII. SECTION 2.07. OPTIONAL AND MANDATORY PREPAYMENTS OF LOANS. (a) OPTIONAL PREPAYMENTS. Borrower shall have the right at any time and from time to time to prepay any Loan, in whole or in part without premium or penalty, subject to the requirements of this Section 2.07; provided that, each partial prepayment shall be in an amount that is an integral multiple of $1.0 million and not less than $2.0 million. 4 (b) COMMITMENT AMOUNT LOAN PREPAYMENTS. In the event of any termination of all the Commitments, Borrower shall, on the date of such termination, repay or prepay all its outstanding Loans. In the event of any partial reduction of the Commitments, if the Exposure would exceed the amount of Commitment after giving effect to such reduction, then Borrower shall, on the date of such reduction, repay or prepay Loans in an amount sufficient to eliminate such excess. (c) CASH BALANCE LOAN PREPAYMENT. Borrower must repay Loans hereunder to the extent its Cash Balance as shown in the most recent Monthly Cash Balance Report exceeds $25,000,000. SECTION 2.08. PAYMENTS GENERALLY. Borrower shall make each payment required to be made by it hereunder or under any other Loan Document (whether of principal, interest, or of amounts payable under Section 2.09, or otherwise) on or before the time expressly required hereunder or under such other Loan Document for such payment (or, if no such time is expressly required, prior to 11:00 a.m., Pacific time), on the date when due, in immediately available dollars, without set-off or counterclaim. Any amounts received after such time on any date may, in the discretion of Lender, be deemed to have been received on the next succeeding Business Day for purposes of calculating interest thereon. All such payments shall be made to Comerica Bank, Detroit, Michigan, ABA # 072000096, Account No. 1850967629 or such other account as Lender may designate from time to time in a written notice given to Borrower not later than two Business Days prior to the date such payment must be made. If any payment under any Loan Document shall be due on a day that is not a Business Day, the date for payment shall be extended to the next succeeding Business Day, and, in the case of any payment accruing interest, interest thereon shall be payable for the period of such extension. All payments under each Loan Document shall be made in dollars. SECTION 2.09. TAXES. (a) Any and all payments by or on account of any obligation of Borrower hereunder or under any other Loan Document shall be made without set-off, counterclaim or other defense and free and clear of and without deduction or withholding for any and all Indemnified Taxes or Other Taxes; provided that, if Borrower shall be required by law to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) the sum payable shall be increased as necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to additional sums payable under this Section 2.09) Lender receives an amount equal to the sum it would have received had no such deductions or withholdings been made, (ii) Borrower shall make such deductions or withholdings and (iii) Borrower shall pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law. (b) In addition, Borrower shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. 5 (c) Borrower shall indemnify Lender, within ten Business Days after written demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by Lender on or with respect to any payment by or on account of any Obligation of Borrower hereunder or under any other Loan Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.09) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. If in the reasonable opinion of Borrower, any amount has been paid to, by or on behalf of Lender pursuant to clause (a), (b) or this (c) of this Section 2.09 with respect to Taxes or Other Taxes which are not correctly or legally asserted, Lender will cooperate with Borrower in seeking to obtain a refund for the benefit of Borrower of such amount, provided that, the rendering of any such cooperation by Lender would not, in the reasonable opinion of Lender (i) cause Lender to incur any expense or liability (which is not otherwise paid in full by Borrower prior to or at the time that such expense or liability is incurred) or (ii) have any adverse effect on Lender. A certificate as to the amount of such payment or liability delivered to Borrower by Lender shall be conclusive absent manifest error. If Lender receives a written notice of Tax assessment from any Governmental Authority regarding any Tax in respect of which indemnification may be required pursuant to this Section 2.09(c), Lender shall notify Borrower within 120 days following the receipt of such notice that such notice has been received; provided, however, that the failure of Lender to provide such notice shall not relieve Borrower of its obligation to make any indemnification payment under this Agreement. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by Borrower to a Governmental Authority, Borrower shall deliver to Lender the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to Lender. (e) On or before the Closing Date in the case of Lender, or on or before the effective date of an Assignment and Acceptance pursuant to which it became a Lender in the case of an assignee, and if otherwise reasonably requested from time to time by Borrower, within 30 days of such request, each Lender which is not a U.S. Person within the meaning of Section 7701(a)(30) of the Tax Code shall provide to Borrower two duly completed and signed copies of Internal Revenue Service Forms W-8BEN, or W-8ECI or successor form(s), as the case may be, certifying as to such Lender's status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to Lender under this Agreement. Until Borrower and Lender have received such forms and indicating that payments under this Agreement are subject to an exemption from or reduction of United States withholding tax, Borrower or Lender (if not withheld by Borrower) shall withhold taxes from such payments at the applicable statutory rate, without any obligation to "gross-up" or make Lender whole under clause (a) of this Section. In 6 case Lender is subject to a reduction of, rather than exemption from, United States withholding tax, the obligation of Borrower to "gross-up" under clause (a) of this Section shall not apply in respect of the amount of United States withholding tax that Lender is subject to at the time they become a party to this Agreement (provided, however, that in the case of an assignee that becomes a Lender pursuant to Section 10.04, the obligation of Borrower to "gross-up" under clause (a) of this Section, or indemnify for Indemnified Taxes under clause (c) of this Section, shall apply in respect of the amount of United States withholding tax that is applicable to payments made on or after the date upon which the assignee first becomes a Lender to the same extent that Borrower would have been obligated to "gross-up" under clause (a) of this Section, or indemnify for Indemnified Taxes under clause (c) of this Section, had Lender not made such assignment to such assignee). (f) If (i) Lender receives a cash refund in respect of an overpayment of Indemnified Taxes or Other Taxes from a Governmental Authority with respect to, and actually resulting from, an amount of Indemnified Taxes or Other Taxes actually paid to or on behalf of Lender by Borrower (a "TAX REFUND") and (ii) Lender determines in its reasonable opinion that such Tax Refund has been correctly paid by such Governmental Authority and will not be required to be repaid to such Governmental Authority, then Lender shall use its reasonable efforts to notify Borrower of such Tax Refund and to forward the proceeds of such Tax Refund (or relevant portion thereof) to Borrower as reduced by any expense or liability incurred by such Lender in connection with obtaining such Tax Refund. ARTICLE III REPRESENTATIONS AND WARRANTIES Each of the Loan Parties, as applicable, represents and warrants to Lender (with references to the Companies being references thereto after giving effect to the Transactions unless otherwise expressly stated) that: SECTION 3.01. ORGANIZATION; POWERS. Each Company (a) is duly organized and validly existing under the laws of the jurisdiction of its organization, (b) has all requisite power and authority to carry on its business as now conducted, and (c) is qualified and in good standing (to the extent such concept is applicable in the applicable jurisdiction) to do business in every jurisdiction where such qualification is required, except in such jurisdictions where the failure to so qualify, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.02. AUTHORIZATION; ENFORCEABILITY. The Transactions to be entered into by each Loan Party are within such Loan Party's powers and have been duly authorized by all necessary action. This Agreement has been duly executed and delivered by each Loan Party and constitutes, and each other Loan Document to which any Loan Party is to be a party, when 7 executed and delivered by such Loan Party, will constitute, a legal, valid and binding obligation of such Loan Party, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally and subject to general principles of equity, regardless of whether considered in a proceeding in equity or at law. SECTION 3.03. GOVERNMENTAL APPROVALS; NO CONFLICTS. Except as set forth on Schedule 3.03, the Transactions: (a) do not require any consent or approval of, registration or filing with, or any other action by, any Governmental Authority, except (i) such as have been obtained or made and are in full force and effect, (ii) filings necessary to perfect Liens created under the Loan Documents, (iii) consents, approvals, registrations, filings or actions the failure of which to obtain or perform could not reasonably be expected to result in a Material Adverse Effect and (iv) registrations and filings contemplated by the Registration Rights Agreement; (b) will not violate (i) any applicable law or regulation except for violations that could not reasonably be expected to result in a Material Adverse Effect, or (ii) the charter, bylaws or other organizational documents of any Company or any order of any Governmental Authority; (c) will not violate, result in a default or require any consent or approval under any indenture, agreement, lease or other instrument binding upon any Company or its assets, or give rise to a right thereunder to require any payment to be made by any Company, except for violations, defaults or the creation of such rights that could not reasonably be expected to result in a Material Adverse Effect; and (d) will not result in the creation or imposition of any Lien on any asset of any Company, except Liens created under the Loan Documents and Permitted Liens. SECTION 3.04. FINANCIAL STATEMENTS. (a) The historical financial statements and the notes thereto included in the Form 10 present fairly in all material respects the consolidated financial position, income statement, cash flows and changes in stockholder's equity of Borrower and its Subsidiaries at the respective dates and for the respective periods indicated. All such financial statements have been prepared in accordance with GAAP applied on a consistent basis throughout the periods presented (except as disclosed therein). The unaudited pro forma financial statements and the notes thereto included in the Form 10 have been prepared on a basis consistent with the historical financial statements of Borrower and its Subsidiaries and give effect to assumptions used in the preparation thereof on a reasonable basis and in good faith and present fairly in all material respects the historical and proposed transactions contemplated by the Form 10; and such pro forma financial statements comply as to form in all material respects with 8 the requirements applicable to pro forma financial statements set forth in Regulation S-X under the Securities Act. The other financial and statistical information and data included in the Form 10 (other than industry and market-related data) are accurately presented in all material respects and prepared on a basis consistent with the financial statements and the books and records of Borrower and its Subsidiaries. (b) Since March 31, 2003, there has been no event, condition or circumstance that could reasonably be expected to result in a Material Adverse Effect. (c) When delivered, each Monthly Cash Balance Report is true and correct and presents fairly Borrower's Cash Balance as of the date indicated therein. SECTION 3.05. PROPERTIES. (a) As of the Closing Date, no Loan Party owns any Real Property. Each Loan Party has valid leasehold interests in or other valid rights to use, all of its Real Property. Each Loan Party has good title, valid leasehold interests in or licenses to or other valid rights to use all of its personal property material to its business. The property of the Companies, taken as a whole, (i) is in good operating order, condition and repair (ordinary wear and tear excepted) and (ii) constitutes all the properties that are required for the business and operations of the Companies as currently conducted. (b) Schedule 3.05(b) contains a true and complete list of (1) each parcel of Real Property leased, subleased or otherwise occupied or utilized by any Loan Party, as lessee or sublessee, as of the Closing Date (each, a "COMPANY FACILITY LEASE"), including a description of the type of interest therein held by such Loan Party and the name of the Loan Party holding such interest; and (2) each lease or license agreement for any property other than Real Property which is material to the business, operations, condition (financial or other), assets or prospects of the Companies, taken as a whole, and in effect as of the Closing Date (each a "COMPANY PROPERTY LEASE"), including a description of the type of property subject to such lease or license agreement, the lessors or licensors parties thereto and the name of the Loan Party that is a party thereto. Each Company Lease is a legal, valid and binding agreement, enforceable in accordance with its terms, of the Loan Party that is a party thereto, and, to the knowledge of Borrower, each of the Lessors or Licensors parties thereto. There is no, nor has any Loan Party received notice of any, default under any Company Lease (or to the knowledge of any Loan Party, any condition or event that, after notice or a lapse of time or both, would constitute a default thereunder). No Loan Party, and, to the knowledge of each Loan Party, no third party to any Company Lease, has assigned any Company Property Lease or sublet any part of the property covered thereby or exercised any renewal or purchase option thereunder. None of the Loan Parties has granted any options or rights of first refusal, or rights of first offer to third parties to purchase or otherwise acquire an interest in any of the property subject to any Company Property Lease. True and complete copies of all 9 Company Leases, together with all modifications, extensions, amendments and assignments thereof have heretofore been made available to Lender. All improvements required to be made by any Loan Party under any Company Facility Lease have been completed and fully paid for. (c) Each Company owns, or is licensed to use, all Intellectual Property used in the conduct of its business as currently conducted, except for those the failure to own or license that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. No claim has been asserted and is pending by any person challenging or questioning the use of any such Intellectual Property or the validity or effectiveness of any such Intellectual Property, nor does any Company know of any valid basis for any such claim. The use of such Intellectual Property by each Company does not infringe the rights of any person, except for such claims and infringements that, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. SECTION 3.06. EQUITY INTERESTS AND SUBSIDIARIES; CONSENT. (a) Schedule 3.06(a) sets forth a list, as of the Closing Date, of (i) all Subsidiaries of Borrower and their jurisdiction of organization; (ii) the number of shares of each class of its Equity Interests authorized, and the number outstanding, and the number of shares covered by all outstanding options, warrants, rights of conversion or purchase and similar rights of each such Subsidiary; and (iii) a designation as to whether such Subsidiary constitutes a Non-Guarantor Subsidiary. All Equity Interests of each Subsidiary of Borrower are duly and validly issued, are fully paid and non-assessable and, except as disclosed on Schedule 3.06(a), are owned directly or indirectly by Borrower. Each Loan Party is the record and beneficial owner of, and has good and marketable title to, the Equity Interests pledged by it under the applicable Security Agreement, free of any and all Liens, rights or claims of other persons, except for the security interest created by the Security Agreements. (b) No consent of any person including any other general or limited partner, any other member of a limited liability company, any other shareholder or any trust beneficiary is necessary or desirable in connection with the creation, perfection or first priority status of the security interest of Lender in any Equity Interests pledged to Lender under any Security Agreement or the exercise by Lender of the voting or other rights provided for in any Security Agreement or the exercise of remedies in respect thereof. SECTION 3.07. NO EVENT OF DEFAULT. No Default or Event of Default has occurred and is continuing. 10 SECTION 3.08. AGREEMENTS. (a) No Company is a party to any agreement or instrument or subject to any corporate or other constitutional restriction that has resulted or could reasonably be expected to result in a Material Adverse Effect. (b) No Company is in default in any manner under any provision of any indenture or other agreement or instrument evidencing Indebtedness, or any other agreement, lease or instrument to which it is a party or by which it or any of its property are or may be bound, where such default could reasonably be expected to result in a Material Adverse Effect. SECTION 3.09. NO MATERIAL MISSTATEMENTS. None of any information, report, financial statement, exhibit or schedule furnished by or on behalf of any Company to Lender in connection with the negotiation of any Loan Document or included therein or delivered pursuant thereto (including the Form 10), taken together with all related information so furnished, contained, contains or will contain any material misstatement of fact or omitted, omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not misleading as of the date such information is dated or certified; provided that, to the extent any such information, report, financial statement, exhibit or schedule was based upon or constitutes a forecast, projection or pro forma adjustment, each Company represents only that it acted in good faith and utilized reasonable assumptions and due care in the preparation of such information, report, financial statement, exhibit or schedule (it being understood that, with respect to projected financial information, actual results may vary significantly from such projected results). SECTION 3.10. SOLVENCY. Immediately after the consummation of the Transactions to occur on the Closing Date, (a) the fair value of the assets of the Loan Parties, taken as a whole, will exceed their debts and liabilities, subordinated, contingent or otherwise; (b) the present fair saleable value of the property of the Loan Parties, taken as a whole, will be greater than the amount that will be required to pay the probable liability of their collective debts and other liabilities, subordinated, contingent or otherwise, as such debts and other liabilities become absolute and matured; (c) the Loan Parties, taken as a whole, will be able to pay their debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become absolute and matured; and (d) the Loan Parties, taken as a whole, will not have unreasonably small capital with which to conduct the business in which they are engaged as such business is now conducted and is proposed to be conducted following the Closing Date. SECTION 3.11. SECURITY DOCUMENTS. (a) The Security Agreements are effective to create in favor of Lender, a legal, valid and enforceable security interest in and Lien on the Security Agreement Collateral and, when (i) financing statements and other filings in appropriate form are filed in the offices specified in Section III.B of the Perfection Certificate and (ii) the Loan Parties have complied with Article III of the U.S. Security Agreement, the U.S. 11 Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in such Collateral (other than (A) the Intellectual Property (as defined in the U.S. Security Agreement) and (B) such Collateral in which a security interest cannot be perfected under the Uniform Commercial Code as in effect at the relevant time in the relevant jurisdiction for filing), in each case subject to no Liens other than Permitted Liens. (b) When the U.S. Security Agreement is filed in the United States Patent and Trademark Office and the United States Copyright Office, the U.S. Security Agreement shall constitute a fully perfected Lien on, and security interest in, all right, title and interest of the grantors thereunder in the Intellectual Property (as defined in the U.S. Security Agreement), in each case subject to no Liens other than Permitted Liens (it being understood that subsequent recordings in the United States Patent and Trademark Office and the United States Copyright Office may be necessary to perfect a Lien on registered trademarks, trademark applications and copyrights acquired by the grantors after the Closing Date). (c) Each Security Document delivered pursuant to Section 5.10 will, upon execution and delivery thereof, be effective to create in favor of Lender a legal, valid and enforceable Lien on all of the Loan Parties' right, title and interest in and to the Collateral described therein, and when such Security Document is filed or recorded in the appropriate offices as may be required under applicable law, such Security Document will constitute a fully perfected Lien on, and security interest in, all right, title and interest of the Loan Parties in such Security Agreement Collateral, in each case subject to no Liens other than the applicable Permitted Liens. SECTION 3.12. REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL. (a) TYPES OF COLLATERAL. Set forth in Schedule 3.12(a) is a complete and accurate description of each Material Item of Collateral in which any Loan Party has any right, title or interest on the Closing Date that is: (1) Real Property, Fixtures or an interest therein; (2) Deposit Accounts, Security Accounts or similar accounts maintained with financial institutions in the United States; (3) Investment Property (other than Security Accounts), including Pledged Equity Interests; (4) Letter-of-Credit Rights held by or on behalf of any Loan Party in the United States; (5) Instruments held by or on behalf of any Loan Party in the United States; 12 (6) Patents; (7) registered Trademarks or applications for registration that have been filed in the United States Patent and Trademark Office; and (8) registered Copyrights or applications for registration that have been filed in the United States Copyright Office. (b) LOCATION OF CERTAIN COLLATERAL. Set forth in Schedule 3.12(b) is a complete and accurate description for each Material Item of Collateral located in the United States in which any Loan Party has any right, title or interest on the Closing Date, of: (1) the location of any Real Property or Fixture; (2) the jurisdiction of any bank or other financial institution at which each Deposit Account or similar account is maintained, determined in accordance with Section 9-304 of the UCC; (3) the jurisdiction in which any certificated security is located, the jurisdiction of the issuer of any uncertificated security, the jurisdiction of any securities intermediary at which any security entitlement or securities account is held, and the jurisdiction of any commodity intermediary at which any commodity account or commodity contract is held, determined in each case in accordance with Section 9-305 of the UCC; (4) the jurisdiction of the issuer or nominated person in respect of any Letter-of-Credit Rights, determined in accordance with Section 9-306 of the UCC; and (5) the jurisdiction where any Instrument is located. (c) LOCATION OF LOAN PARTIES. Set forth in Schedule 3.12(c) is the location of each Loan Party, determined in accordance with Section 9-307 of the UCC. (d) NO LIENS. None of the Collateral is subject to any Lien of any kind, other than Permitted Liens. As of the Closing Date, there is no financing statement (or similar statement or instrument under the laws of any jurisdiction in the United States) covering or purporting to cover any interest of any kind in the Collateral, other than financing statements filed pursuant to this Agreement or the other Security Documents or in respect of (i) Permitted Liens or financing statements for which proper termination statements have been delivered to Lender for filing or (ii) other obligations which in the aggregate do not exceed $10,000. 13 (e) PLEDGED EQUITY INTERESTS. So long as Lender has possession of the Pledged Equity Interests, it will have a fully perfected, first priority security interest in the Pledged Equity Interests of the Domestic Subsidiaries. No filings or recordings are required to perfect (or maintain the perfection or priority of) the security interests created in the Pledged Equity Interests of the Domestic Subsidiaries. Lender will have a fully perfected pledge of the Pledged Equity Interests of the Foreign Subsidiaries upon compliance by Borrower and such Foreign Subsidiaries with Section 4.02(h)(ix). (f) INVESTMENT PROPERTY. Upon execution and delivery of the Control Agreements by each of the parties thereto, and assuming compliance by each securities intermediary or commodity intermediary which is a party thereto, Lender will have (x) "control" within the meaning of Section 9-106 of the UCC of each account referred to in such agreements and all security entitlements or commodity contracts carried in such accounts and (y) a fully perfected, first priority security interest in each account referred to therein and all Investment Property credited to any such account subject to such Control Agreement. (g) DEPOSIT ACCOUNTS; BANK ACCOUNTS. Upon execution and delivery of the Control Agreements by each of the parties thereto, and assuming compliance by each bank or depositary which is a party thereto, Lender will have (x) "control" within the meaning of Section 9-104 of the UCC with respect to each Deposit Account subject to such Control Agreement, (y) exclusive dominion and control with respect to each bank or depositary account subject to such Control Agreement which is not a Deposit Account or Securities Account, and (z) a fully perfected, first priority security interest in all funds held in each account subject to such Control Agreement. ARTICLE IV CONDITIONS OF LENDING The obligation of Lender to make Loans hereunder is subject to the satisfaction of the following conditions: SECTION 4.01. ALL LOANS. On the date of each Loan: (a) Lender shall have received a Borrowing Request in accordance with Section 2.03. (b) Borrower and each other Loan Party shall be in compliance with all the terms and provisions set forth herein and in each other Loan Document on its part to be observed or performed, including its obligation to deliver Monthly Cash Balance Reports pursuant to Section 5.01(d). 14 (c) At the time of and immediately after such Loan, no Default or Event of Default shall have occurred and be continuing. (d) Each of the representations and warranties set forth in Article III hereof or in any other Loan Document shall be true and correct in all material respects (except that any representation and warranty that is qualified as to "materiality" or "Material Adverse Effect" shall be true and correct in all respects) on and as of the date of such Loan with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall have been true and correct in all material respects (except that those that are qualified as to "materiality" or "Material Adverse Effect" shall be true and correct in all respects) on and as of such earlier date). (e) After giving effect to the Loan, Borrower's Cash Balance shall not exceed $25,000,000. Each Loan shall be deemed to constitute a representation and warranty by Borrower and each other Loan Party on the date of such Loan as to the matters specified in paragraphs (b) through (e) above. SECTION 4.02. CLOSING DATE ITEMS. On the Closing Date: (a) LOAN DOCUMENTS. All legal matters incident to this Agreement, the Loans hereunder and the other Loan Documents shall be satisfactory to Lender and there shall have been delivered to Lender an executed counterpart of each of the Loan Documents, including this Agreement, each Security Agreement, the Perfection Certificate and each other applicable Loan Document and each of such agreements shall be in full force and effect. (b) CORPORATE DOCUMENTS. Lender shall have received: (i) a certificate of the Secretary or Assistant Secretary of each Loan Party dated the Closing Date and certifying (A) that attached thereto is a true and complete copy of the certificate or articles of incorporation or other constitutive documents, including all amendments thereto certified as of a recent date by the Secretary of State (or like official) of the jurisdiction of its organization (if such document is of a type that may be so certified), (B) that attached thereto is a true and complete copy of the bylaws or other organizational documents of each Loan Party as in effect on the Closing Date and at all times since a date prior to the date of the resolutions described in clause (C) below, (C) that attached thereto is a true and complete copy of resolutions duly adopted by the Board of Directors or other governing body of such person authorizing the execution, delivery and performance of the Loan Documents to which such person is a party and, in the case of Borrower, the borrowings hereunder, and that 15 such resolutions have not been modified, rescinded or amended and are in full force and effect, and (D) as to the incumbency and specimen signature of each officer executing any Loan Document or any other document delivered in connection herewith on behalf of such person (together with a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate in this clause (i)); (ii) a long form certificate as to the good standing of each Loan Party as of a recent date, from the Secretary of State (or like official) of the jurisdiction of its organization, to the extent such certificates or their equivalent are issued by such jurisdiction; and (iii) such other documents as Lender may reasonably request. (c) OFFICER'S CERTIFICATE. Lender shall have received a certificate, dated the Closing Date and signed by a Financial Officer or the Chief Executive Officer of Borrower, confirming compliance with the conditions precedent set forth in paragraphs (b), (c) and (d) of Section 4.01, to the extent applicable. (d) INDEBTEDNESS. After giving effect to the Transactions and the other transactions contemplated hereby, no Company shall have outstanding any Indebtedness, preferred stock or minority interests other than (i) the Loans hereunder and (ii) the minority interests described on Schedule 3.06(a) attached hereto. (e) REQUIREMENTS OF LAW. Lender shall be satisfied that the Transactions shall be in full compliance with all material Requirements of Law. (f) CONSENTS. Lender shall be satisfied that all material consents and approvals required from Governmental Authorities and third parties in connection with the Transactions have been obtained and remain in effect, and there shall be no governmental or judicial action (or any adverse development therein), actual or threatened, that Lender shall reasonably determine has or could have, singly or in the aggregate, a material adverse effect on the Transactions. (g) LITIGATION. There shall be no litigation, public or private, or administrative proceedings, governmental investigation or other legal or regulatory developments that, singly or in the aggregate, could reasonably be expected to result in a Material Adverse Effect, or could materially and adversely affect the ability of any Company to fully and timely perform its respective obligations under the Transaction Documents, or the ability of the parties to consummate the financings contemplated hereby or the other Transactions. (h) PERSONAL PROPERTY REQUIREMENTS. Lender shall have received from each Loan Party (other than any Non-Guarantor Subsidiary): 16 (i) all certificates, agreements or instruments representing or evidencing the Pledged Equity Interests and the Pledged Intercompany Debt accompanied by instruments of transfer and stock powers endorsed in blank shall have been delivered to Lender; (ii) all other certificates, agreements, including Control Agreements, or instruments necessary to perfect security interests in all Chattel Paper, all Instruments, all Deposit Accounts and all Investment Property of each Loan Party (as each such term is defined in the U.S. Security Agreement and to the extent required by the terms of the U.S. Security Agreement); (iii) UCC financing statements in appropriate form for filing under the UCC and such other documents under applicable Requirements of Law in each jurisdiction as may be necessary or appropriate to perfect the Liens created, or purported to be created, by the Security Documents; (iv) certified copies of Requests for Information (Form UCC-11), tax lien, judgment lien, bankruptcy and pending lawsuit searches or equivalent reports or lien search reports, each of a recent date listing all effective financing statements, lien notices or comparable documents that name (A) any domestic Loan Party as debtor and that are filed in those state and county jurisdictions in which any of the property of such domestic Loan Party is located and the state and county jurisdictions in which such domestic Loan Party's principal place of business is located, and (B) any foreign Loan Party, to the extent obtainable from the District of Columbia, none of which encumber the Collateral covered or intended to be covered by the Security Documents (other than those relating to Liens acceptable to Lender); (v) evidence of the completion of all recordings and filings of, or with respect to, each Security Agreement, including filings with the United States Patent, Trademark and Copyright Offices, and the execution and/or delivery of such other security and other documents, and the taking of all actions as may be necessary or, in the reasonable opinion of Lender, desirable, to perfect the Liens created, or purported to be created, by the Security Agreements, except for any of the foregoing to be provided after the Closing Date pursuant to Section 5.12 hereof; (vi) any documents required to be submitted to Lender by the Loan Parties as may be necessary or desirable to perfect the security interest of Lender pursuant to each Foreign Security Agreement, except for any of the foregoing to be provided after the Closing Date pursuant to Section 5.12 hereof; (vii) with respect to each Real Property located in the United States in which a Loan Party holds the tenant's interest thereunder set forth on Schedule 4.02(n) where the Loan Parties maintain Collateral having a value in excess of 17 $1.0 million (other than the MacArthur Sublease) or which Real Property is operationally significant to such Loan Party's business, as reasonably determined by Lender, a Landlord Lien Waiver and Access Agreement and a Collateral Assignment of Lease, except for any of the foregoing to be provided after the Closing Date pursuant to Section 5.12 hereof; (viii) evidence acceptable to Lender of payment by the Loan Parties of all applicable recording taxes, fees, charges, costs and expenses required for the recording of the Security Documents, except for any of the foregoing to be provided after the Closing Date pursuant to Section 5.12 hereof; and (ix) with respect to Pledged Equity Interests issued by Foreign Subsidiaries, the documentation specified in Annex III. (i) INSURANCE. Lender shall have received a copy of, or a certificate as to coverage under, the insurance policies required by Section 5.04 and the applicable provisions of the Security Documents, each of which (other than directors' and officers' liability insurance policies) shall be endorsed or otherwise amended to include a "standard" or "New York" lender's loss payable endorsement and to name Lender as additional insured, in form and substance satisfactory to Lender. (j) SUBSIDIARY GUARANTORS. Each Subsidiary Guarantor listed on Schedule 1.01(b) that is a Foreign Subsidiary and is not a signatory to this Agreement shall have executed and delivered a Guarantee in form and substance satisfactory to Lender. ARTICLE V AFFIRMATIVE COVENANTS Each Loan Party covenants and agrees with Lender that so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan and all other expenses or amounts payable under any Loan Document shall have been paid in full, unless Lender shall otherwise consent in writing, each Loan Party will, and will cause each of its Subsidiaries to: SECTION 5.01. FINANCIAL STATEMENTS, REPORTS, ETC. In the case of Borrower, furnish to Lender: (a) ANNUAL REPORTS. Within 90 days after the end of each fiscal year, or such other period in which the Borrower must file its Form 10-K with the Securities and Exchange Commission, the consolidated balance sheet of Borrower as of the end of such fiscal year and related consolidated statements of income, cash flows and stockholders' equity for such fiscal year, and notes thereto, all prepared in 18 accordance with Regulation S-X under the Securities Act and in a manner acceptable to the Securities and Exchange Commission and accompanied by an opinion of Deloitte & Touche or other independent public accountants of recognized national standing satisfactory to Lender (which opinion shall not be qualified as to scope or contain any going concern or other qualification), stating that such financial statements fairly present, in all material respects, the consolidated financial condition, results of operations, cash flows and changes in stockholders' equity of the Consolidated Companies as of the end of and for such fiscal year in accordance with GAAP; (b) QUARTERLY REPORTS. Commencing with the filing of Borrower's Form 10-Q for the fiscal quarter ending June 30, 2003, within 45 days after the end of each of the first three fiscal quarters of each fiscal year, or such other period in which the Borrower must file its Form 10-Q with the Securities and Exchange Commission, the consolidated balance sheet of Borrower as of the end of such fiscal quarter and related consolidated statements of income and cash flows for such fiscal quarter and for the then elapsed portion of the fiscal year, in comparative form with the consolidated statements of income and cash flows for the comparable periods in the previous fiscal year, and notes thereto, all prepared in accordance with Regulation S-X under the Securities Act and in a manner acceptable to the Securities and Exchange Commission and accompanied by a certificate of a Financial Officer stating that such financial statements fairly present, in all material respects, the consolidated financial condition, results of operations and cash flows of the Consolidated Companies as of the date and for the periods specified in accordance with GAAP and on a basis consistent with the audited financial statements referred to in Section 5.01(a), subject to normal year-end audit adjustments and the absence of footnotes; (c) FINANCIAL OFFICER'S COMPLIANCE CERTIFICATE. Concurrently with any delivery of financial statements under Sections 5.01(a) and (b), a certificate of a Financial Officer, substantially in the form of Exhibit K attached hereto, certifying that no Default has occurred or, if such a Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto; (d) MONTHLY CASH BALANCE REPORT. Within ten (10) Business Days of the end of each fiscal month, a report signed by a Financial Officer of Borrower setting forth Borrower's Cash Balance as of the last Business Day of such month substantially in the form of Exhibit D hereto, appropriately completed and signed by a Financial Officer of the Borrower (the "MONTHLY CASH BALANCE REPORT"); (e) PERFECTION CERTIFICATE SUPPLEMENT. Concurrently with any delivery of financial statements under Sections 5.01(a) and (b), a Perfection Certificate Supplement; 19 (f) PUBLIC REPORTS. Promptly after the same become publicly available, copies of all periodic and other reports, proxy statements and other materials filed by any Company with the Securities and Exchange Commission, or any Governmental Authority succeeding to any or all of the functions of said Commission, or with any national securities exchange, or distributed to holders of its Indebtedness pursuant to the terms of the documentation governing such Indebtedness (or any trustee, agent or other representative therefor), as the case may be; (g) MANAGEMENT LETTERS. Promptly after the receipt thereof by any Company, a copy of any "management letter" received by any such person from its certified public accountants and management's responses thereto; and (h) OTHER INFORMATION. Promptly, from time to time, such other information regarding the operations, property, business affairs and financial condition of any Company, or any Collateral, or compliance with the terms of any Loan Document, as Lender may reasonably request. SECTION 5.02. LITIGATION AND OTHER NOTICES. Furnish to Lender prompt written notice upon any Responsible Officer of a Loan Party becoming aware of the following: (a) the filing or commencement of, or any threat or notice of intention of any person to file or commence, any action, suit or proceeding, whether at law or in equity by or before any Governmental Authority (i) against any Company (or any Affiliate thereof) that could reasonably be expected to result in a Material Adverse Effect or (ii) with respect to any Loan Document; (b) any Default, specifying the nature and extent thereof and the corrective action (if any) taken or proposed to be taken with respect thereto; (c) any development that has resulted in, or could reasonably be expected to result in, a Material Adverse Effect; (d) the occurrence of a Casualty Event in excess of $500,000; and (e) the incurrence of any Lien (other than Permitted Liens) on, or claim asserted against, any Material Item of Collateral. SECTION 5.03. EXISTENCE; BUSINESSES AND PROPERTIES. (a) Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence, except as otherwise expressly permitted under Section 6.05 or, in the case of any Subsidiary, where the failure to perform such obligations, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect. 20 (b) Do or cause to be done all things necessary to obtain, preserve, renew, extend and keep in full force and effect the rights, licenses, permits, franchises, authorizations, patents, copyrights, trademarks and trade names material to the conduct of its business; (c) Maintain and operate its business in substantially the manner in which it is presently conducted and operated; (d) Pay and perform its obligations under all Company Leases; and (e) Maintain and preserve all property material to the conduct of such business and keep such property in good repair, working order and condition and from time to time make, or cause to be made, all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times; provided, however, that nothing in this Section 5.03 shall prevent (i) sales of assets, consolidations or mergers by or involving any Company in accordance with Section 6.04; (ii) the withdrawal by any Company of its qualification as a foreign corporation, partnership or company in any jurisdiction where such withdrawal, individually or in the aggregate, could not reasonably be expected to result in a Material Adverse Effect; or (iii) the abandonment by any Company of any property, rights, franchises, licenses, trademarks, tradenames, copyrights or patents that such person reasonably determines are not useful to its business. SECTION 5.04. INSURANCE. (a) Keep its insurable property adequately insured at all times by financially sound and reputable insurers; maintain such other insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies in the same or similar businesses operating in the same or similar locations, including public liability insurance against claims for personal injury or death or property damage occurring upon, in, about or in connection with the use of any property owned, occupied or controlled by it, to the extent obtainable on commercially reasonable terms; and maintain such other insurance as may be required by law; and, with respect to any Mortgaged Real Property, otherwise maintain all insurance coverage required under the applicable Mortgage, such policies to be in such form and amounts and having such coverage as may be reasonably satisfactory to Lender; provided, that, unless a Default has occurred and is continuing, any proceeds of insurance policies (x) insuring the Collateral may be applied by the Borrower to promptly replace, rebuild or restore such Collateral and (y) insuring liabilities to third parties may be applied by the Borrower to promptly pay, discharge or bond such liabilities, in each case on commercially reasonable terms. 21 (b) Assure that all such insurance shall (i) provide that no cancellation, material reduction in amount or material change in coverage thereof shall be effective until at least 30 days after receipt by Lender of written notice thereof; (ii) name Lender as insured party or loss payee; (iii) if reasonably requested by Lender, include a breach-of-warranty clause; and (iv) be reasonably satisfactory in all other respects to Lender. (c) Notify Lender immediately whenever any separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 5.04 is taken out by any Company; and promptly deliver to Lender a duplicate original copy of, or a certificate as to coverage under, such policy or policies. (d) Deliver to Lender a report of a reputable insurance broker annually with respect to such insurance and such supplemental reports with respect thereto as Lender may from time to time reasonably request. SECTION 5.05. TAXES. File or cause to be filed all federal Tax Returns and all material state, local and foreign Tax Returns or materials required to have been filed by it and pay and discharge promptly when due all Taxes before the same shall become delinquent or in default; provided, however, that such payment and discharge shall not be required with respect to any such Taxes so long as the validity or amount thereof shall be contested in good faith by appropriate proceedings and the applicable Company shall have set aside on its books adequate reserves with respect thereto in accordance with GAAP and such proceedings (or orders entered in connection with such proceedings) operate to prevent the forfeiture or sale of the property or assets subject to any such Lien and suspend collection of the contested Tax and enforcement of a Lien and, in the case of Collateral, the applicable Company shall have otherwise complied with the provisions of the applicable Security Document in connection with such nonpayment. SECTION 5.06. MAINTAINING RECORDS; ACCESS TO PROPERTIES AND INSPECTIONS. Keep proper books of record and account (i) in which full, true and correct entries are made in conformity with GAAP and all Requirements of Law, and (ii) in which all material dealings and transactions in relation to its business and activities are recorded. Each Company will permit any representatives designated by Lender to visit and inspect the financial records and the property of such Company at reasonable times during normal business hours and upon reasonable advance notice and to make extracts from and copies of such financial records, and permit any representatives designated by Lender to discuss the affairs, finances and condition of any Company with and be advised as to the same by the officers thereof and the independent accountants therefor. SECTION 5.07. USE OF PROCEEDS. Use the proceeds of the Loans only to maintain Cash Balances, subject to the limitations on the amount of such Cash Balances set forth in this Agreement. No part of the proceeds of any Loan will be used in any manner, whether directly or indirectly, for any purpose that violates, or that is inconsistent with, the provisions of Regulation T, U or X. Subject to the limitations in this Agreement and the other Loan Documents proceeds 22 of Loans may be used for general corporate purposes of Borrower and its Subsidiaries, including working capital expenditures. SECTION 5.08. PAYMENT OF OBLIGATIONS. Pay and discharge at or before maturity, all its respective material obligations and liabilities (including, without limitation, claims of materialmen, warehousemen and the like or for labor, materials or supplies or other obligations which if unpaid would reasonably be expected to give rise to a Lien), except where the same may be contested in good faith by appropriate proceedings (including administrative proceedings), and appropriate reserves are maintained for the accrual of any of the same. SECTION 5.09. COMPLIANCE WITH LAWS. Comply with all applicable Requirements of Law and decrees and orders of Governmental Authorities, now or hereafter in effect, except where the failure to so comply, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. SECTION 5.10. ADDITIONAL COLLATERAL; ADDITIONAL GUARANTORS. (a) Subject to this Section 5.10 and except to the extent Lender, in its sole discretion, otherwise determines, with respect to any assets acquired after the Closing Date by Borrower or any other Loan Party that are intended to be subject to the Lien created by any of the Security Documents but that are not so subject, and with respect to any assets held by Borrower or any other Loan Party on the Closing Date not made subject to a Lien created by any of the Security Documents but of a type intended to be subject to the Lien created by the applicable Security Documents, promptly (and in any event within 30 days after the acquisition thereof or upon Lender's request): (i) execute and deliver to Lender such amendments or supplements to the relevant Security Documents or such other documents (including, without limitation, a Mortgage or Collateral Assignment of Lease) as Lender shall deem necessary or advisable to grant to Lender, for its benefit, a Lien on such properties or assets (including using its reasonable efforts to deliver a Landlord Lien Waiver and Access Agreement with respect to each Real Property located in the United States in which a Loan Party holds the tenant's interest thereunder and where the Loan Parties maintain Collateral having a value in excess of $1.0 million (other than with respect to the MacArthur Sublease) or which Real Property is operationally significant to such Loan Party's business as reasonably determined by Lender), subject to no Liens other than Permitted Liens, and (ii) take all actions necessary to cause such Lien to be duly perfected to the extent required by such Security Document in accordance with all applicable Requirements of Law, including the filing of a Mortgage or Collateral Assignment of Lease and financing statements in such jurisdictions as may be reasonably requested by Lender. Borrower shall otherwise take such actions and execute and/or deliver to Lender such documents as Lender shall require to confirm the validity, perfection and priority of the Lien of Security Documents against such after-acquired properties or assets, and such assets held on the Closing Date not made subject to a Lien created by any of the Security Documents. For purposes of this Section 5.10(a), Lender and Borrower agree that the Lien referred to in this Section 23 5.10(a) is intended to cover all assets and properties of Borrower and all other Loan Parties whether now owned or hereafter acquired, except for such properties or assets which are expressly excluded pursuant to the terms of this Agreement. (b) For any person that is a Wholly Owned Subsidiary of Parent or any of its Subsidiaries that are listed on Schedule 5.10(b) (a "SECTION 5.10(b) LISTED SUBSIDIARY"), and any person that becomes a Wholly Owned Subsidiary of Borrower or any of its Subsidiaries after the Closing Date (a "NEW WHOLLY OWNED SUBSIDIARY"), promptly (and in any event (x) in the case of a New Wholly Owned Subsidiary, no later than 30 days after each such person becomes a New Wholly Owned Subsidiary, and (y) in the case of each Section 5.10(b) Listed Subsidiary or a New Wholly Owned Subsidiary that is required to become a Guarantor, or the stock or assets of which are required to be pledged, pursuant to clauses (i) and (ii) immediately below, no later than 30 days following the Closing Date), cause such Subsidiary (i) to become a Guarantor and deliver to Lender the certificates representing the Equity Interests of such Subsidiary (provided that, in no event shall the stock of any such Subsidiary be required to be pledged if such pledge is illegal under applicable law and no reasonable alternative structure can be devised having substantially the same effect as such pledge that would not be illegal under applicable law), together with undated stock powers executed and delivered in blank by a duly authorized officer of such Subsidiary's parent, as the case may be, and all Intercompany Notes owing from such Subsidiary to any Loan Party; and (ii) (A) to execute a Joinder Agreement or such comparable documentation, in form and substance reasonably satisfactory to Lender, and (B) to take all actions reasonably necessary or advisable to cause the Lien created by each Security Agreement to be duly perfected to the extent required by such agreement in accordance with all applicable Requirements of Law, including the filing of financing statements in such jurisdictions as may be reasonably requested by Lender (provided that any such Subsidiary shall not be required to comply with clause (ii)(A) and (B) above if satisfying such requirements is illegal under applicable law and no reasonable alternative structure can be devised having substantially the same effect as such pledge that would not be illegal under applicable law). (c) Notwithstanding anything to the contrary contained herein: (i) in the case of any (x) Section 5.10(b) Listed Subsidiary and New Wholly Owned Subsidiary that has not previously become a Guarantor and (y) other Non-Guarantor Subsidiary, 100% of the Equity Interests of any such Subsidiary, except in the case of any Foreign Subsidiary where a security interest of 100% of its Equity Interests could reasonably be expected to have a material adverse effect on the tax position of Borrower or such Foreign Subsidiary, in which case 65% of the Equity Interests of such Foreign Subsidiary, shall be subject to a Lien and be required to be pledged under the applicable Loan Document except to the extent Lender, in its sole discretion, otherwise determines; and 24 (ii) notwithstanding clause (c)(i) immediately above and as of the end of any fiscal quarter of Borrower: (1) if the aggregate consolidated revenues of the Non-Guarantor Subsidiaries exceeds 10.0% of Borrower's consolidated revenues, then within 60 days of such date Borrower shall cause a sufficient number of the Non-Guarantor Subsidiaries to become Guarantors hereunder so that, after giving pro forma effect to such action, the aggregate consolidated revenues of the Subsidiaries remaining as Non-Guarantor Subsidiaries is less than 10.0% of Borrower's consolidated revenues; or (2) if the aggregate consolidated sum of the Non-Guarantor Subsidiaries' fixed assets, receivables and inventories exceeds 10.0% of the aggregate consolidated sum of Borrower's fixed assets, receivables and inventories (which fixed assets, receivables and inventories shall be computed after eliminating intercompany profit), then within 60 days of such date Borrower shall cause a sufficient number of the Non-Guarantor Subsidiaries to become Guarantors hereunder so that, after giving pro forma effect to such action, the aggregate consolidated sum of fixed assets, receivables and inventories of the Subsidiaries remaining as Non-Guarantor Subsidiaries is less than 10.0% of the aggregate consolidated sum of Borrower's fixed assets, receivables and inventories. If the condition set forth in clause (ii)(1) or (ii)(2) above is established, Borrower shall, or shall cause the applicable Foreign Subsidiaries to, take all such further action and execute and deliver all such further agreements or documents as Lender deems necessary or advisable to receive the full benefits of the Guarantees and Security Documents to be entered into by such Foreign Subsidiaries to the extent necessary to preclude the 10.0% thresholds set forth in the immediately preceding clauses (ii)(1) and (ii)(2) from being exceeded, except to the extent such actions, executions, or, deliveries are illegal under applicable law, and no reasonable alternative structure can be devised having substantially the same effect as such actions, executions, or deliveries that would not be illegal under applicable law. (d) Upon the written request of Lender, each Loan Party will promptly grant to Lender, within 30 days of such request, security interests and Mortgages in such owned or leased Real Property of such Loan Party located in the United States as is acquired or leased by such Loan Party after the Closing Date by Borrower or such Subsidiary and has a value as determined in good faith by Lender in excess of $1.0 million or is otherwise material to the business operations of Borrower or such Subsidiary, as additional security for the Secured Obligations (unless (i) the subject 25 property is already mortgaged to a third party to the extent permitted by Section 6.02 or (ii) if the encumbrancing of such leased Real Property requires the consent of any applicable lessor, where Borrower and its Subsidiaries have attempted in good faith, but are unable, to obtain such lessor's consent). Such Mortgages shall be granted pursuant to documentation reasonably satisfactory in form and substance to Lender and shall constitute valid and enforceable perfected Liens subject only to Permitted Liens and such other Liens reasonably acceptable to Lender. The Mortgages or instruments related thereto shall be duly recorded or filed in such manner and in such places as are required by law to establish, perfect, preserve and protect the Liens in favor of Lender required to be granted pursuant to the Mortgages and all taxes, fees and other charges payable in connection therewith shall be paid in full by such Loan Party. Such Loan Party shall otherwise take such actions and execute and/or deliver to Lender such documents as Lender shall require to confirm the validity, perfection and priority of the Lien of any existing Mortgage or new Mortgage against such after-acquired Real Property within 30 days of the written request of Lender, including the following: (i) Mortgages encumbering each Mortgaged Real Property in favor of Lender, duly executed and acknowledged by the Loan Party that is the owner of or holder of an interest in such Mortgaged Real Property, and otherwise in form for recording in the recording office of each political subdivision where each such Mortgaged Real Property is situated, and such certificates, affidavits, questionnaires or returns as shall be required in connection with the recording or filing thereof to create a Lien under applicable law, and such UCC financing statements and fixture filings, all of which shall be in form and substance reasonably satisfactory to Lender, and any other instruments necessary to grant a mortgage lien under the laws of any applicable jurisdiction; (ii) with respect to each Mortgaged Real Property for which a Mortgage is obtained in accordance with clause (i) above, an Agreement and Estoppel Certificate executed by the applicable Loan Party and fee interest holder, and such other consents, approvals, amendments, supplements, memoranda of lease estoppels, tenant non-disturbance or subordination agreements or other instruments as shall reasonably be deemed necessary by Lender in order for the owner or holder of the fee or leasehold interest constituting such Mortgaged Real Property to grant the Lien contemplated by the Mortgage with respect to such Mortgaged Real Property; (iii) with respect to each Mortgage, a policy of title insurance insuring the Lien of such Mortgage as a valid first mortgage Lien on the Real Property and fixtures described therein in an amount equal to 115% of the fair market value of the fee or leasehold interest, as applicable, of such Real Property which policies (each, a "TITLE POLICY") shall (A) be issued by the Title Company, (B) to the extent necessary, include such reinsurance arrangements (with provisions for direct access, if necessary) as shall be reasonably acceptable to 26 Lender, (C) contain a "tie-in" or "cluster" endorsement (if available under applicable law) (i.e., policies that insure against losses regardless of location or allocated value of the insured property up to a stated maximum coverage amount), (D) have been supplemented by such endorsements (or where such endorsements are not available, opinions of special counsel, architects or other professionals reasonably acceptable to Lender to the extent that such opinions can be obtained at a cost that is reasonable with respect to the value of the Real Property subject to such Mortgage) as shall be requested by Lender, to the extent such endorsements are available in the applicable jurisdiction (including endorsements on matters relating to usury, first loss, last dollar, zoning, contiguity, revolving credit, doing business, non-imputation, public road access, survey, variable rate, environmental lien and so-called comprehensive coverage over covenants and restrictions), and (E) contain no exceptions to title other than exceptions for the Permitted Liens applicable to such Mortgaged Real Property and otherwise acceptable to Lender; (iv) with respect to each Mortgaged Real Property for which a Mortgage is obtained in accordance with clause (i) above, such affidavits, certificates, information (including financial data) and instruments of indemnification (including a so-called "gap," "mechanics lien," and "owner's" indemnifications and affidavits) as shall be required to induce the Title Company to issue the Title Policy/ies and endorsements contemplated in clause (iii) above; (v) evidence reasonably acceptable to Lender of payment by Borrower of all Title Policy premiums, escrow, search and examination charges, and related charges, mortgage recording taxes, fees, charges, costs and expenses required for the recording of the Mortgages and issuance of the Title Policies referred to in clause (iii) above; (vi) with respect to each Real Property or Mortgaged Real Property, copies of all Leases in which Borrower or any Subsidiary holds the lessor's interest or other agreements relating to possessory interests, if any. To the extent any of the foregoing affect any Mortgaged Real Property for which a Mortgage is obtained in accordance with clause (i) above, such agreement shall be subordinate to the Lien of the Mortgage to be recorded against such Mortgaged Real Property, either expressly by its terms or pursuant to a subordination, non-disturbance and attornment agreement, and shall otherwise be acceptable to Lender; (vii) with respect to each Mortgaged Real Property for which a Mortgage is obtained in accordance with clause (i) above, Borrower and each Subsidiary shall have made all notification, registrations and filings, to the extent required by, and in accordance with, all Requirements of Law; and 27 (viii) with respect to each Mortgaged Real Property for which a Mortgage is obtained in accordance with clause (i) above, an Officers' Certificate or other evidence reasonably satisfactory to Lender that as of the date thereof (A) there is no outstanding citation, violation or similar notice indicating that the Mortgaged Real Property contains conditions that are not in compliance in any material respect with local codes or ordinances relating to building or fire safety or structural soundness, (B) there has not occurred any taking or destruction of any Mortgaged Real Property and (C) there are no material disputes regarding boundary lines, location, encroachment or possession of such Mortgaged Real Property, and to the best knowledge of Borrower or any Subsidiary that is the owner of or holder of an interest in such Mortgaged Real Property, no state of facts exist that could give rise to any such claim. SECTION 5.11. SECURITY INTERESTS; FURTHER ASSURANCES. Each Loan Party shall, at its own cost and expense, take any and all actions necessary to defend title to the Collateral against all persons and to defend the security interest of Lender in the Collateral and the priority thereof against any Lien not expressly permitted pursuant to Section 6.02. Promptly, upon the reasonable request of Lender, at Borrower's expense, execute, acknowledge and deliver, or cause the execution, acknowledgment and delivery of, and thereafter register, file or record, or cause to be registered, filed or recorded, in an appropriate governmental office, any document or instrument supplemental to or confirmatory of the Security Documents or otherwise deemed by Lender reasonably necessary or desirable for the continued validity, perfection and priority of the Liens on the Collateral covered thereby superior and prior to the rights of all third persons other than the holders of Permitted Liens and subject to no other Liens except as permitted by the Security Documents, or obtain any consents, including landlord or similar Lien waivers and consents, as may be necessary or appropriate in connection therewith, to the extent contemplated hereby. Each Loan Party shall, at its own cost and expense, deliver or cause to be delivered to Lender from time to time such other documentation, consents, authorizations, approvals and orders in form and substance reasonably satisfactory to Lender as Lender shall deem necessary to perfect or maintain the Liens on the Collateral pursuant to the Security Documents. Upon the exercise by Lender of any power, right, privilege or remedy pursuant to any Loan Document that requires any consent, approval, registration, qualification or authorization of any Governmental Authority or any other person, execute and deliver and/or obtain all applications, certifications, instruments and other documents and papers that Lender may be so required to obtain. Notwithstanding anything to the contrary contained herein, if an Event of Default has occurred and is continuing, Lender shall have the right to require any Loan Party to execute and deliver documentation, consents, authorizations, approvals and orders in form and substance reasonably satisfactory to Lender as Lender shall deem necessary to grant to Lender, for its benefit, a valid and perfected Lien subject to no Liens other than Permitted Liens on such assets and properties not otherwise required hereunder, except to the extent such requirements are illegal under applicable law, and no reasonable alternative structure can be devised having substantially the same effect as such actions that would not be illegal under applicable law. If Lender determines that it is required by law or regulation to have appraisals prepared in respect of the Real Property of any Loan Party constituting Collateral, Borrower shall provide to Lender appraisals that satisfy the applicable requirements of the Real Estate Appraisal Reform Amendments of the Federal 28 Institutions Reform, Recovery and Enforcement Act of 1989 and are in form and substance satisfactory to Lender. SECTION 5.12. POST-CLOSING MATTERS. Execute and deliver the documents and complete the tasks set forth on Schedule 5.12, in each case within the time limits specified on such schedule. Notwithstanding any other provision in this Agreement, the Availability Period shall not commence and Borrower shall have no right to borrow under this Agreement until such time as the Loan Parties have executed and delivered the documents and completed the tasks set forth on Schedule 5.12. ARTICLE VI NEGATIVE COVENANTS Each Loan Party covenants and agrees with Lender that, so long as this Agreement shall remain in effect and until the Commitments have been terminated and the principal of and interest on each Loan and all other expenses or amounts payable under any Loan Document have been paid in full, unless Lender shall otherwise consent in writing, no Loan Party will, nor will any Loan Party cause or permit any of its Subsidiaries to: SECTION 6.01. INDEBTEDNESS. Incur, create, assume or permit to exist, directly or indirectly, any Indebtedness, except: (a) Indebtedness incurred pursuant to this Agreement and the other Loan Documents; (b) Indebtedness under Hedging Agreements entered into from time to time by any Company in accordance with Section 6.03(c); (c) intercompany Indebtedness of the Companies outstanding to the extent permitted by Sections 6.03(d), (g) and (k) and Section 6.18; (d) Indebtedness in respect of workers' compensation claims, self-insurance obligations, performance bonds, surety, appeal or similar bonds and completion guarantees provided by a Company in the ordinary course of its business consistent with past practices; (e) (i) Indebtedness actually outstanding on the Closing Date and listed on Schedule 6.01, provided that, any such scheduled Indebtedness that constitutes intercompany Indebtedness (A) must be subordinated to the Obligations of the Loan Parties in accordance with a subordination agreement in form and substance reasonably satisfactory to Lender, and (B) except for any intercompany Indebtedness of the Companies permitted by Section 6.01(c), shall not be repaid, prepaid, refinanced or renewed unless the repayment, prepayment, refinancing or renewal 29 thereof is treated as an Investment and permitted under Section 6.03; and (ii) refinancings or renewals thereof, provided that, (A) any such refinancing Indebtedness is in an aggregate principal amount not greater than the aggregate principal amount of the Indebtedness being renewed or refinanced, plus the amount of any premiums required to be paid thereon and fees and expenses associated therewith, (B) such refinancing Indebtedness has a later or equal final maturity and longer or equal weighted average life than the Indebtedness being renewed or refinanced and (C) the covenants, events of default, subordination and other provisions thereof (including any guarantees thereof) shall be, in the aggregate, no less favorable to the Loan Parties than those contained in the Indebtedness being renewed or refinanced; (f) Indebtedness to the extent permitted as part of a Permitted Refinancing; and (g) other Indebtedness, including Purchase Money Obligations and Capital Lease Obligations, of Borrower and its Subsidiaries not to exceed $10 million in aggregate principal amount at any time outstanding. SECTION 6.02. LIENS. Create, incur, assume or permit to exist, directly or indirectly, any Lien on any property now owned or hereafter acquired by it or on any income or revenues or rights in respect of any thereof, except (each of the following being the "PERMITTED LIENS"): (a) inchoate Liens for Taxes not yet due and payable or delinquent and Liens for Taxes that (i) are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings (or orders entered in connection with such proceedings) have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien, or (ii) in the case of any such charge or claim that has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions; (b) Liens imposed by law that were incurred in the ordinary course of business consistent with past practices of the Companies and do not secure Indebtedness for borrowed money, such as carriers', warehousemen's, materialmen's, landlords', workmen's, suppliers', repairmen's and mechanics' Liens and other similar Liens arising in the ordinary course of business consistent with past practices of the Companies (i) for amounts not yet overdue or (ii) for amounts that are overdue and that are being contested in good faith by appropriate proceedings, so long as (A) adequate reserves have been established in accordance with GAAP, and (B) in the case of any such Lien that has or may become a Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions; 30 (c) easements, rights-of-way, restrictions (including zoning restrictions), covenants, encroachments, protrusions and other similar charges or encumbrances, and minor title deficiencies on or with respect to any Real Property, in each case whether now or hereafter in existence, not (i) securing Indebtedness and (ii) individually or in the aggregate materially interfering with the conduct of the business of the Companies at such Real Property; (d) Liens arising out of judgments or awards not resulting in an Event of Default and in respect of which such Company shall in good faith be prosecuting an appeal or proceedings for review in respect of which there shall be secured a subsisting stay of execution pending such appeal or proceedings; (e) Liens (other than any Lien imposed by ERISA or Section 401(a)(29) or 412(n) or the Tax Code) (i) imposed by law or deposits made in connection therewith in the ordinary course of business consistent with past practices in connection with workers' compensation, unemployment insurance and other types of social security; (ii) incurred in the ordinary course of business consistent with past practices to secure the performance of tenders, statutory obligations (other than excise taxes), surety, stay, customs and appeal bonds, statutory bonds, bids, leases, government contracts, trade contracts, performance and return of money bonds and other similar obligations (including obligations imposed by the applicable laws of foreign jurisdictions and exclusive of obligations for the payment of borrowed money); or (iii) arising by virtue of deposits made in the ordinary course of business consistent with past practices to secure liability for premiums to insurance carriers; provided that, (x) with respect to clauses (i), (ii) and (iii) above such Liens are set amounts not yet due and payable or delinquent or, to the extent such amounts are so due and payable, such amounts are being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, which proceedings for orders entered in connection with such proceedings have the effect of preventing the forfeiture or sale of the property or assets subject to any such Lien, (y) to the extent such Liens are not imposed by Law, such Liens shall in no event encumber any property other than cash and cash equivalents, and (z) in the case of any such Lien against any of the Collateral, such Lien and the contest thereof shall satisfy the Contested Collateral Lien Conditions; (f) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of goods entered into by any of the Companies in the ordinary course of business in accordance with the past practices of the Companies; (g) Liens arising pursuant to Purchase Money Obligations or Capital Lease Obligations incurred pursuant to Section 6.01(f); provided that, (i) the Indebtedness secured by any such Lien (including refinancings thereof) does not exceed 100% of the cost (including financing cost) of the property being acquired or leased at the time of the incurrence of such Indebtedness and (ii) any such Liens 31 attach only to the property being financed pursuant to such Purchase Money Obligations or Capital Lease Obligations and directly related assets, such as proceeds (including insurance proceeds), products, accessions and substitutions, and do not encumber any other property of any Company; (h) bankers' Liens, rights of set-off and other similar Liens existing solely with respect to cash and cash equivalents on deposit in one or more accounts maintained by any of the Companies, in each case granted in the ordinary course of business consistent with past practices in favor of the bank or banks with which such accounts are maintained, securing amounts owing to such bank with respect to cash management and operating account arrangements, including those involving pooled accounts and netting arrangements; provided that, in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness; (i) Liens on assets of a person existing at the time such person is acquired or merged with or into or consolidated with Borrower or any of its Subsidiaries (and not created in anticipation or contemplation thereof); provided that, such Liens do not extend to assets not subject to such Liens at the time of acquisition (other than improvements thereon) and are no more favorable to the lienholders than the existing Lien; (j) Liens pursuant to the Security Documents; (k) Liens in existence on the Closing Date and set forth on Schedule 6.02; provided that, (i) the aggregate principal amount of the Indebtedness, if any, secured by such Liens does not increase; and (ii) such Liens do not encumber any property other than the property subject thereto on the Closing Date; (l) Liens on cash and cash equivalents securing reimbursement obligations to financial institutions that have issued letters of credit or guarantees to secure obligations of any Loan Party or its subsidiaries under leases or licensing agreements entered into in the ordinary course of business, consistent with past practice; provided, however, that the amount of cash and cash equivalents subject to such Liens, when taken together with fair market value of any property subject to Liens set forth on Schedule 6.02, shall not exceed the sum of (i) $2,000,000 plus (ii) the face amount of any letter of credit issued to or for the benefit of Lender; (m) Licenses of Intellectual Property granted by any of the Companies in the ordinary course of business and not interfering in any material respect with the ordinary conduct of the business consistent with past practices of the Companies; and (n) restrictions on transfers of securities imposed by applicable securities laws; 32 provided, however, that no Liens shall be permitted to exist, directly or indirectly, on any Securities Collateral (as defined in the U.S. Security Agreement) except to the extent permitted under Section 6.02(n) above). SECTION 6.03. INVESTMENTS, LOANS AND ADVANCES. Directly or indirectly, lend money or credit or make advances to any person, or purchase or acquire (using money, securities, obligations or property of any kind) any stock, obligations or securities of, or any Equity Interests or other interest in, or make any capital contribution to, any other person, or purchase or own a futures or forward contract or otherwise become liable for the purchase or sale of commodities at a future date in the nature of a futures or forward contract (all of the foregoing, collectively, "INVESTMENTS"), except that the following shall be permitted: (a) the Companies may consummate the Transactions in accordance with the provisions of the Transaction Documents; (b) any Company may (i) acquire and hold accounts receivables owing to any of them if created or acquired in the ordinary course of business consistent with past practices and payable or dischargeable in accordance with customary terms, (ii) acquire and hold cash and cash equivalents, (iii) endorse negotiable instruments for collection in the ordinary course of business consistent with past practices, or (iv) make lease, utility and other similar deposits in the ordinary course of business consistent with past practices; (c) any Company may enter into and perform its obligations under Hedging Agreements entered into in the ordinary course of business consistent with past practices and so long as any such Hedging Agreement is not speculative in nature and is (i) related to income related to foreign currency exposure of any Company or otherwise related to purchases permitted hereunder from foreign suppliers or (ii) entered into to protect such Companies against fluctuations in the prices of raw materials used in their businesses or changes in interest rates on Indebtedness that (x) is permitted under Section 6.01 and (y) bears interest at a fluctuating rate per annum; (d) any Company may make intercompany loans and advances to any Loan Party and any Loan Party may make intercompany loans and advances to any other Loan Party, and any Subsidiary that is not a Loan Party may make intercompany loans and advances to any other Subsidiary that is not a Loan Party; provided that, (i) no Loan Party may make loans to any Foreign Subsidiary or Non-Guarantor Subsidiary pursuant to this Section 6.03(d) unless otherwise permitted under this Section 6.03 or Section 6.18, and (ii) any loan or loans made by any Foreign Subsidiary or Non-Guarantor Subsidiary to any Loan Party pursuant to this Section 6.03(d) shall be subordinated to the obligations of the Loan Parties pursuant to an Intercompany Note if any such loan or loans, individually or in the aggregate to any one Loan Party, has an outstanding principal amount in excess of $1.0 million; 33 (e) any Company may make Investments in the form of advances to employees for travel, relocation and like expenses, in each case, in the ordinary course of business and consistent with such Company's past practices; (f) any Company may sell or transfer amounts to the extent permitted by Section 6.04; (g) Investments (other than as described in Section 6.03(d)) (i) by Borrower in any existing Subsidiary Guarantor, (ii) by any Company in Borrower or any existing Subsidiary Guarantor, and (iii) by a Subsidiary Guarantor in another existing Subsidiary Guarantor (in each case only for so long as a Subsidiary Guarantor remains a Guarantor); (h) Investments in securities of trade creditors or customers in the ordinary course of business and consistent with such Company's past practices that are received in the settlement of bona fide disputes or pursuant to any plan of reorganization or liquidation or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers; (i) Investments made by any Company as a result of consideration received in connection with an Asset Sale or other transaction effected in compliance with Section 6.04; (j) Investments outstanding on the Closing Date and identified on Schedule 6.03; (k) any Company may make loans, advances or capital contributions to any Wholly Owned Foreign Subsidiary in accordance with Section 6.18; and (l) any Company may make Permitted Acquisitions. SECTION 6.04. MERGERS, CONSOLIDATIONS, ASSET SALES AND PURCHASES OF ASSETS. Wind up, liquidate or dissolve its affairs or enter into any transaction of merger or consolidation, or make any Asset Sale or purchase or otherwise acquire (in one or a series of related transactions) any part of the property or assets (other than purchases or other acquisitions of inventory, equipment or other assets used or useful in the Companies' business, but not (x) Investments or (y) all or any material part of a person's assets) of any person (or agree to do any of the foregoing at any future time), except that: (a) Capital Expenditures by any Company shall be permitted to the extent permitted by Section 6.07; (b) (i) Asset Sales of used, worn out, obsolete or surplus property by any Company in the ordinary course of business consistent with past practices and the abandonment or other Asset Sale of Intellectual Property that is, in the reasonable judgment of Borrower, no longer economically practicable to maintain or useful in 34 the conduct of the business of the Companies taken as a whole shall be permitted; and (ii) any other Asset Sale shall be permitted if (1) the aggregate consideration received or value of property disposed of (based on the value thereof shown on the Borrower's balance sheet prepared in accordance with GAAP) in respect of all Asset Sales pursuant to this clause (ii) does not exceed $5.0 million in any four consecutive fiscal quarters of Borrower (excluding for purposes of this amount, any property sold by a Non-Guarantor Subsidiary in connection with its liquidation and dissolution, the proceeds of which are promptly distributed to the Borrower or another Loan Party), (2) such property is sold for cash or cash equivalents, (3) such property is sold for at least eighty percent (80%) of its Fair Market Value, and (4) such property is not a Business Unit; (c) Investments shall be permitted to the extent permitted by Section 6.03; (d) any Company may sell cash equivalents in the ordinary course of business consistent with past practices; (e) any Company may lease (as lessee or lessor) real or personal property to the extent permitted by Section 6.12 and Section 6.13; (f) the Transactions shall be permitted; (g) any Subsidiary may be merged into Borrower (as long as Borrower is the surviving corporation of such merger) or any other Wholly Owned Subsidiary Guarantor; provided, however, that the Lien on and security interest in such property granted in favor of Lender under the Security Documents shall be maintained in accordance with the provisions of Section 5.10; (h) any Subsidiary may convey, sell, transfer, assign or otherwise dispose of assets to Borrower or any other Loan Party, subject, in the case of any sale by a Foreign Subsidiary, to Section 6.18; (i) Permitted Acquisitions and Consent Acquisitions shall be permitted; (j) Permitted Business Dispositions shall be permitted; (k) any Company may settle or release tort or other litigation claims in the ordinary course of business consistent with past practices; and (l) any Immaterial Subsidiary may voluntarily dissolve, liquidate or wind up. To the extent Lender waives the provisions of this Section 6.04 with respect to the sale of any Collateral, or any Collateral is sold as permitted by this Section 6.04, such Collateral (unless sold to a Company) shall be sold free and clear of the Liens created by the Security Documents, and Lender shall take all actions deemed appropriate to release such Liens. 35 SECTION 6.05. DIVIDENDS. Authorize, declare or pay, directly or indirectly, any Dividends with respect to any Company, except that any Subsidiary of Borrower may pay cash Dividends to (x) Borrower, (y) any Guarantor Subsidiary or (z) any Non-Guarantor Subsidiary, provided that, in the case of clause (z), any such Dividend is distributed within ten Business Days of receipt thereof by such Non-Guarantor Subsidiary to Borrower or any other Loan Party. SECTION 6.06. TRANSACTIONS WITH AFFILIATES. Enter into, directly or indirectly, any transaction or series of related transactions with any Affiliate of any Company, other than in the ordinary course of business consistent with past practices and on terms and conditions substantially as favorable to such Company as would reasonably be obtained by such Company at that time in a comparable arm's-length transaction with a person other than an Affiliate, except that: (a) Dividends may be paid to the extent provided in Section 6.05; (b) loans may be made and other transactions may be entered into between and among any Company and its Affiliates to the extent permitted by Sections 6.01, 6.03 and 6.18; (c) customary fees may be paid to non-officer directors of the Loan Parties, and customary indemnities may be provided to all directors of the Loan Parties; (d) the Transactions may be effected; and (e) payments may be made between Loan Parties pursuant to the Tax Sharing Agreement. SECTION 6.07. LIMITATION ON CAPITAL EXPENDITURES. Make or commit to make any Capital Expenditures, other than Capital Expenditures made or committed to be made by Borrower and its Consolidated Subsidiaries which in the aggregate do not exceed during any fiscal year of the Borrower $25 million multiplied by the Pro Rata Percentage for such fiscal year, reduced dollar for dollar by the Purchase Price for any Permitted Acquisitions made during such period. Notwithstanding anything to the contrary contained in the prior sentence, to the extent that the Capital Expenditures made by Borrower and its Consolidated Subsidiaries in any fiscal year are less than the amount permitted to be made in such period (without giving effect to any additional amount available as a result of this sentence), the amount of such difference may be carried forward and used to make Capital Expenditures in the next succeeding fiscal year of Borrower, but only to such next succeeding fiscal year. SECTION 6.08. LIMITATION ON MODIFICATIONS OF INDEBTEDNESS; MODIFICATIONS OF CERTIFICATE OF INCORPORATION, OTHER CONSTITUTIVE DOCUMENTS OR BYLAWS AND CERTAIN OTHER AGREEMENTS, ETC. (i) Amend or modify, or permit the amendment or modification of, any provision of any existing Indebtedness, any Transaction Document, or Borrower's investment policy statement as in effect on the Closing Date, other than any amendments or modifications to 36 any Indebtedness, any Transaction Document, or such corporate policy that do not in any way adversely affect the interests of Lender; (ii) amend, modify or change its articles of incorporation or other constitutive documents (including by the filing or modification of any certificate of designation) or bylaws, or any agreement entered into by it, with respect to its capital stock (including any shareholders' agreement), or enter into any new agreement with respect to its capital stock, other than any amendments, modifications, agreements or changes pursuant to this clause (ii) or any such new agreements pursuant to this clause (ii) that do not in any way adversely affect the interests of Lender; or (iii) amend or terminate any Company Lease relating to any Mortgaged Property other than any amendments or terminations that do not in any way adversely affect the interests of Lender or take any action or fail to take any action that, with or without either notice or lapse of time, would constitute a default under any Company Lease relating to any Mortgaged Real Property. SECTION 6.09. LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES. Directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to: (a) pay dividends or make any other distributions on its capital stock or any other interest or participation in its profits owned by Borrower or any Subsidiary of Borrower, or pay any Indebtedness owed to Borrower or a Subsidiary of Borrower; (b) make loans or advances to Borrower or any of Borrower's Subsidiaries; or (c) transfer any of its properties to Borrower or any of Borrower's Subsidiaries, except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) this Agreement and the other Loan Documents, (iii) customary provisions restricting subletting or assignment of any lease governing a leasehold interest of Borrower or a Subsidiary of Borrower, or (iv) customary provisions with respect to the disposition or distribution of assets in joint venture agreements and other similar agreements (to the extent otherwise permitted by this Agreement) relating solely to the assets subject to such agreement. SECTION 6.10. LIMITATION ON ISSUANCE OF CAPITAL STOCK. Issue any Equity Interest of any Subsidiary (including by way of sales of treasury stock) or any options or warrants to purchase, or securities convertible into, Equity Interests of any Subsidiary, except (i) for stock splits, stock dividends and additional Equity Interest issuances that do not decrease the percentage ownership of Borrower or any Subsidiary in any class of the Equity Interest of such Subsidiary; (ii) Borrower Common Stock may be issued, at then Fair Market Value, to pay (in whole or in part) the purchase price for any Permitted Acquisition; (iii) Subsidiaries of Borrower formed after the Closing Date pursuant to Section 6.11 may issue Equity Interests to Borrower or the Subsidiary of Borrower that is to own such stock; (iv) the Borrower or any Subsidiary of the Borrower may issue Equity Interests to the extent permitted as part of a Permitted Refinancing; and (v) only to the extent required in accordance with applicable law, any Foreign Subsidiary 37 may issue directors' qualifying shares. All Equity Interests issued in accordance with this Section 6.10 shall, to the extent required by Section 5.10 or the applicable Security Agreement, be delivered to Lender for pledge pursuant to the applicable Security Agreement. SECTION 6.11. LIMITATION ON CREATION OF SUBSIDIARIES. Establish, create or acquire any additional Subsidiaries without the prior written consent of Lender, except that (i) Borrower may acquire one or more Wholly Owned Subsidiaries in any Permitted Acquisition and (ii) Borrower may establish or create one or more Wholly Owned Subsidiaries of Borrower or one of its Wholly Owned Subsidiaries without such consent so long as (except to the extent any of the following is expressly exempted or otherwise limited pursuant to Section 5.10(b), but subject, in any event, to the requirements of Section 5.10(c)): (a) 100% of the Equity Interest of any new Subsidiary is upon the acquisition, creation or establishment of any such new Subsidiary pledged and delivered to Lender for its benefit under the applicable Security Agreement; and (b) upon the acquisition, creation or establishment of any such new Subsidiary, such Subsidiary becomes a party to the applicable Security Documents and shall become a Subsidiary Guarantor hereunder and execute a Joinder Agreement and other applicable Loan Documents all in accordance with Section 5.10(b); and (c) any Investment made in any such Subsidiary is permitted under Section 6.03. SECTION 6.12. SALE AND LEASEBACK TRANSACTIONS. Enter into any arrangement, directly or indirectly, with any person whereby it shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred, except such transactions among Loan Parties, unless (i) the sale of such property is permitted by Section 6.04 and (ii) any Liens arising in connection with its use of such property are permitted by Section 6.02. SECTION 6.13. LIMITATION ON LEASE OBLIGATIONS. Incur, create, assume or permit to exist, directly or indirectly, any obligation as a lessee in an amount exceeding, during any fiscal year of Borrower, $2 million multiplied by the Pro Rata Percentage for such fiscal year in respect of any lease obligation other than (i) a Capital Lease Obligation, (ii) obligations under the MacArthur Sublease, and (iii) lease obligations under leases in effect on the Closing Date and set forth on Schedule 6.13. SECTION 6.14. BUSINESS. Unless otherwise expressly provided herein, engage (directly or indirectly) in any business other than those businesses in which Borrower and its Subsidiaries are engaged on the Closing Date (or that are complementary or substantially related thereto or are reasonable extensions thereof). SECTION 6.15. LIMITATION ON ACCOUNTING CHANGES. Make or permit any change in accounting policies or reporting practices without the consent of Lender except changes that are required by GAAP. SECTION 6.16. RESTRICTED PAYMENTS. Redeem, retire, purchase or otherwise acquire, directly or indirectly, for any consideration, any shares of any class of its capital stock or 38 interest of any of its shareholders, in each case now or hereafter outstanding (or any options or warrants issued by Borrower or any of its Subsidiaries with respect to Borrower or any of its Subsidiaries' capital stock); except that Borrower and its Subsidiaries may redeem, retire, purchase or otherwise acquire any of Borrower's Subsidiaries' capital stock. SECTION 6.17. FISCAL YEAR. Change its fiscal year-end from that in effect on the Closing Date. SECTION 6.18. FOREIGN SUBSIDIARIES. Sell, lease, contribute, loan, advance, assign or otherwise transfer any property that is Collateral to any Foreign Subsidiary, except that: (a) Borrower or any of its Subsidiaries may make loans, capital contributions or advances to any Wholly Owned Foreign Subsidiary, in the ordinary course of business consistent with past practice, to fund working capital, operating expenses and, to the extent permitted by this Agreement, Capital Expenditures, of any such Wholly Owned Foreign Subsidiary, required in the ordinary course of business consistent with past practice, in no event to exceed $8 million in the aggregate for any fiscal quarter (excluding any amounts invested in any Wholly Owned Foreign Subsidiary that is as of the Closing Date or subsequently becomes a Guarantor (effective only upon such person being or becoming a Guarantor and only for so long as such person remains a Guarantor)); and provided further that, any such investment in excess of $1.0 million must be in the form of an intercompany loan to such Wholly Owned Foreign Subsidiary and shall be evidenced by an Intercompany Note pledged (and delivered) by the Loan Party that is the lender of such intercompany loan as Collateral pursuant to the applicable Security Agreement. (b) Borrower or any of its Subsidiaries may sell for cash (but not otherwise transfer) any property that is Collateral to any Foreign Subsidiary to the extent that any such sale would be a sale of assets permitted by Section 6.04(b)(ii). ARTICLE VII GUARANTEE SECTION 7.01. THE GUARANTEE. The Guarantors hereby irrevocably and unconditionally, jointly and severally guarantee as primary obligors and not as sureties to Lender and its successors and assigns the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) of the principal of and interest on (including any interest, fees, costs or charges that would accrue but for the provisions of Title 11 of the United States Code after any bankruptcy or insolvency petition under Title 11 of the United States Code) the Loans made by Lender to, and the Notes held by Lender of, Borrower, and all other Obligations from time to time owing to Lender by any Loan Party under any Loan Document strictly in accordance with the terms thereof (such obligations being herein collectively called the "GUARANTEED OBLIGATIONS"). The Guarantors hereby irrevocably and unconditionally, jointly and severally agree that if 39 Borrower or other Guarantor(s) shall fail to pay in full when due (whether at stated maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the Guarantors will promptly pay the same, without any demand or notice whatsoever, and that in the case of any extension of time of payment or renewal of any of the Guaranteed Obligations, the same will be promptly paid in full when due (whether at extended maturity, by acceleration or otherwise) in accordance with the terms of such extension or renewal. SECTION 7.02. OBLIGATIONS UNCONDITIONAL. The obligations of the Guarantors under Section 7.01 shall constitute a guaranty of payment (and not of collection) and are absolute, irrevocable and unconditional, joint and several (except to the extent otherwise limited in accordance with applicable Requirements of Law as described in Annex I attached hereto or in any other Guarantee required by applicable Requirements of Law), irrespective of the value, genuineness, validity, regularity or enforceability of the Guaranteed Obligations of Borrower under this Agreement, the Notes, if any, or any other agreement or instrument referred to herein or therein, or any substitution, release or exchange of any other guarantee of or security for any of the Guaranteed Obligations and, to the fullest extent permitted by applicable law, irrespective of any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge or defense of a surety or Guarantor (except for payment in full). Without limiting the generality of the foregoing, it is agreed that the occurrence of any one or more of the following shall not alter or impair the liability of the Guarantors hereunder, which shall remain absolute, irrevocable and unconditional under any and all circumstances as described above: (i) at any time or from time to time, without notice to the Guarantors, the time for any performance of or compliance with any of the Guaranteed Obligations shall be extended, or such performance or compliance shall be waived; (ii) any of the acts mentioned in any of the provisions of this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein shall be done or omitted; (iii) the maturity of any of the Guaranteed Obligations shall be accelerated, or any of the Guaranteed Obligations shall be amended in any respect, or any right under the Loan Documents or any other agreement or instrument referred to herein or therein shall be amended or waived in any respect or any other guarantee of any of the Guaranteed Obligations or any security therefor shall be released or exchanged in whole or in part or otherwise dealt with; (iv) any Lien or security interest granted to, or in favor of, Lender as security for any of the Guaranteed Obligations shall fail to be perfected; or (v) the release of any other Guarantor. 40 The Guarantors hereby expressly waive diligence, presentment, demand of payment, protest and all notices whatsoever, and any requirement that any Loan Party exhaust any right, power or remedy or proceed against Borrower under this Agreement or the Notes, if any, or any other agreement or instrument referred to herein or therein, or against any other person under any other guarantee of, or security for, any of the Guaranteed Obligations. The Guarantors waive any and all notice of the creation, renewal, extension, waiver, termination or accrual of any of the Guaranteed Obligations and notice of or proof of reliance by Lender upon this Guarantee or acceptance of this Guarantee, and the Guaranteed Obligations, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Guarantee, and all dealings between Borrower and Lender shall likewise be conclusively presumed to have been had or consummated in reliance upon this Guarantee. This Guarantee shall be construed as a continuing, absolute, irrevocable and unconditional guarantee of payment without regard to any right of offset with respect to the Guaranteed Obligations at any time or from time to time held by Lender, and the obligations and liabilities of the Guarantors hereunder shall not be conditioned or contingent upon the pursuit by Lender or any other person at any time of any right or remedy against Borrower or against any other person that may be or become liable in respect of all or any part of the Guaranteed Obligations or against any collateral or guarantee therefor or right of offset with respect thereto. This Guarantee shall remain in full force and effect and be binding in accordance with and to the extent of its terms upon the Guarantors and the successors and assigns thereof, and shall inure to the benefit of Lender, and its successors and assigns, notwithstanding that from time to time during the term of this Agreement there may be no Guaranteed Obligations outstanding. For purposes of this paragraph only, references to the "principal" include each Loan Party and references to the "creditor" includes Lender and its successors and permitted assigns. In accordance with Section 2856 of the California Civil Code, each Guarantor waives all rights and defenses (i) available to such Guarantor by reason of Sections 2787 through 2855, 2899, and 3433 of the California Civil Code, including all rights or defenses such Guarantor may have by reason of protection afforded to the principal with respect to any of the Guaranteed Obligations, or to any other guarantor of any of the Guaranteed Obligations with respect to any of such guarantor's obligations under its guarantee, in either case in accordance with the antideficiency or other laws of the State of California limiting or discharging the principal's Indebtedness or such other guarantor's obligations, including Sections 580a, 580b, 580d and 726 of the California Code of Civil Procedure; and (ii) arising out of an election of remedies by the creditor, even though such election, such as a nonjudicial foreclosure with respect to security for any Guaranteed Obligation (or any obligation of any other guarantor of any of the Guaranteed Obligations), has destroyed such Guarantor's right of subrogation and reimbursement against the principal (or such other guarantor) by the operation of Section 580d of the California Code of Civil Procedure or otherwise. No other provision of this Guarantee shall be construed as limiting the generality of any of the covenants and waivers set forth in this paragraph. As provided below, this Agreement shall be governed by, and shall be construed and enforced in accordance with the laws of the State of New York. This paragraph is included solely out of an abundance of caution, and shall not be construed to mean that any of the above-referenced provisions of California law are in any way applicable to this Agreement or to any of the Guaranteed Obligations. 41 SECTION 7.03. REINSTATEMENT. The obligations of the Guarantors under this Article VII shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of Borrower or any other Loan Party in respect of the Guaranteed Obligations is rescinded or must be otherwise restored by any holder of any of the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy or reorganization or otherwise. The Guarantors jointly and severally (except to the extent otherwise limited in accordance with applicable Requirements of Law as described in Annex I attached hereto or in any other Guarantee required by applicable Requirements of Law) agree that they will indemnify Lender on demand for all reasonable costs and expenses (including reasonable fees of counsel) incurred by Lender in connection with such rescission or restoration, including any such costs and expenses incurred in defending against any claim alleging that such payment constituted a preference, fraudulent transfer or similar payment under any bankruptcy, insolvency or similar law, other than any costs or expenses resulting from the gross negligence, bad faith or willful misconduct of Lender. SECTION 7.04. SUBROGATION; SUBORDINATION. Each Guarantor hereby agrees that until the indefeasible payment and satisfaction in full in cash of all Guaranteed Obligations and the expiration and termination of the Commitment of Lender under this Agreement it shall not exercise any right or remedy arising by reason of any performance by it of its guarantee in Section 7.01, whether by subrogation or otherwise, against Borrower or any other Guarantor of any of the Guaranteed Obligations or any security for any of the Guaranteed Obligations. The payment of any amounts due with respect to any Indebtedness of Borrower or any other Guarantor now or hereafter owing to any Guarantor or Borrower by reason of any payment by such Guarantor under the Guarantee in this Article VII is hereby subordinated to the prior indefeasible payment in full in cash of the Guaranteed Obligations. In addition, any Indebtedness of the Borrower or any Subsidiary now or hereafter held by any Guarantor is hereby subordinated in right of payment in full in cash to the Guaranteed Obligations. Each Guarantor agrees that it will not demand, sue for or otherwise attempt to collect any such Indebtedness of Borrower or any Subsidiary to such Guarantor until the Obligations shall have been indefeasibly paid in full in cash. If, notwithstanding the preceding sentence, any Guarantor shall, prior to the indefeasible payment in full in cash of the Guaranteed Obligations, collect, enforce or receive any amounts in respect of such indebtedness, such amounts shall be collected, enforced and received by such Guarantor as trustee for Lender and be paid over to Lender on account of the Guaranteed Obligations without affecting in any manner the liability of such Guarantor under the other provisions of the guaranty contained herein. Each Subsidiary of Borrower which (x) is not a Guarantor and (y) holds outstanding Indebtedness of another Subsidiary of Borrower shall execute an agreement, in form and substance reasonably satisfactory to Lender, subordinating such indebtedness to the prior indefeasible payment in full in cash of the Guaranteed Obligations. Solely for the purposes of this Section 7.04, the term "Indebtedness" shall not include intercompany advances and amounts for goods or services sold or rendered in the ordinary course of business, consistent with past practices, owed by any Subsidiary to any Guarantor. SECTION 7.05. REMEDIES. The Guarantors jointly and severally (except to the extent otherwise limited in accordance with applicable Requirements of Law as described in Annex I attached hereto) agree that, as between the Guarantors and the Lenders, the obligations of Borrower under this Agreement and the Notes, if any, may be declared to be forthwith due and 42 payable as provided in Article VIII (and shall be deemed to have become automatically due and payable in the circumstances provided in said Article VIII) for purposes of Section 7.01, notwithstanding any stay, injunction or other prohibition preventing such declaration (or such obligations from becoming automatically due and payable) as against Borrower and that, in the event of such declaration (or such obligations being deemed to have become automatically due and payable), such obligations (whether or not due and payable by Borrower) shall forthwith become due and payable by the Guarantors for purposes of Section 7.01. SECTION 7.06. INSTRUMENT FOR THE PAYMENT OF MONEY. Each Guarantor hereby acknowledges that the guarantee in this Article VII constitutes an instrument for the payment of money, and consents and agrees that Lender, at its sole option, in the event of a dispute by such Guarantor in the payment of any moneys due hereunder, shall have the right to bring a motion-action under New York CPLR Section 3213 to the extent permitted thereunder. SECTION 7.07. GENERAL LIMITATION ON GUARANTEE OBLIGATIONS. In any action or proceeding involving any state corporate law, or any state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of any Guarantor under Section 7.01 would otherwise be held or determined to be void, voidable, invalid or unenforceable, or subordinated to the claims of any other creditors, on account of the amount of its liability under Section 7.01, then, notwithstanding any other provision to the contrary, the amount of such liability shall, without any further action by such Guarantor, any Loan Party or any other person, be automatically limited and reduced to the highest amount that is valid and enforceable and not subordinated to the claims of other creditors as determined in such action or proceeding. SECTION 7.08. CONTINUING GUARANTEE. The Guarantees in this Article VII are continuing guarantees of payment, and shall apply to all Guaranteed Obligations whenever arising. SECTION 7.09. RELEASE OF GUARANTORS. If at any time after the Closing Date and in connection with the Guarantee of any Loan Party in this Article VII (i) subject to the requirements of Section 5.10(c), in the case of a Foreign Subsidiary, Lender (after consultation with Borrower) determines that in the case of any existing Guarantor, it would not be commercially reasonable for such Guarantor to remain a Guarantor (taking into account the expense (including taxes), the ability of Borrower or such Guarantor to obtain any necessary approvals or consents required to be obtained under applicable law (but have not been previously obtained) in connection therewith, and the effectiveness and enforceability thereof under applicable law) or (ii) such Guarantee becomes illegal under applicable law and such Loan Party delivers to Lender a legal opinion from its counsel to such effect, and no reasonable alternative structure can be devised having substantially the same effect as the issuance of a Guarantee that would not be illegal under applicable law, then, in case of each of the immediately preceding clauses (i) and (ii), Lender shall (at the expense of Borrower) take all action necessary to release its security interest in that portion of the Security Agreement Collateral owned by such Guarantor (provided, however, that any Equity Interests of such Guarantor subject to the Lien of the Lender shall not be released from the Security Agreement Collateral), and such Guarantor shall be 43 released from its obligations in respect of the Guarantees in this Article VII (such Guarantor being hereinafter referred to as a "RELEASED GUARANTOR," so long as it continues to be a Non-Guarantor Subsidiary), which release from such Guarantees, in the case of an event described in the immediately preceding clause (i), shall become effective as of the closing of the last day of the taxable year that immediately precedes the date that Lender makes a determination described in such clause (i). ARTICLE VIII EVENTS OF DEFAULT In case of the happening of any of the following events ("EVENTS OF DEFAULT"): (a) default shall be made in the payment of any principal of any Loan when and as the same shall become due and payable, whether at the due date thereof or by acceleration thereof or otherwise; (b) default shall be made in the payment of any interest on any Loan (other than any amount added to principal of Loans pursuant to Section 2.05(d)) or any other amount (other than an amount referred to in paragraph (a) above) due under any Loan Document, when and as the same shall become due and payable, and such default shall continue unremedied for a period of five Business Days; (c) any representation or warranty made or deemed made in or in connection with any Loan Document or the borrowings hereunder, or any representation, warranty, statement or information contained in any report, certificate, financial statement or other instrument furnished in connection with or pursuant to any Loan Document, shall prove to have been false or misleading in any material respect when so made, deemed made or furnished; (d) default shall be made in the due observance or performance by any Company of any covenant, condition or agreement contained in Section 5.01, 5.03 or 5.07 or in Article VI; (e) default shall be made in the due observance or performance by any Company of any covenant, condition or agreement contained in any Loan Document (other than those specified in paragraph (a), (b) or (d) above), and such default shall continue unremedied or shall not be waived for a period of 30 days after the earlier of (i) an officer of such Company becoming aware of such default or (ii) receipt by Borrower and such Company of notice from Lender of such default; (f) any Company (other than any Immaterial Subsidiary) shall (i) fail to pay any principal or interest, regardless of amount, due in respect of any Indebtedness (other than the Obligations) when and as the same shall become due 44 and payable (after all applicable grace periods have expired); or (ii) fail to observe or perform any other term, covenant, condition or agreement contained in any agreement or instrument evidencing or governing any such Indebtedness if the effect of any failure referred to in this clause (ii) is to cause, or to permit the holder or holders of such Indebtedness or a trustee on its or their behalf (with or without the giving of notice, the lapse of time or both) to cause, such Indebtedness to become due prior to its stated maturity; provided that, it shall not constitute an Event of Default pursuant to this paragraph (f) unless the aggregate amount of all such Indebtedness referred to in clauses (i) and (ii) exceeds $1.0 million at any one time; (g) an involuntary proceeding shall be commenced or an involuntary petition shall be filed in a court of competent jurisdiction seeking (i) relief in respect of any Company (other than any Immaterial Subsidiary), or of a substantial part of the property or assets of any Company (other than any Immaterial Subsidiary), under the Bankruptcy Code, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law; (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Company (other than any Immaterial Subsidiary) or for a substantial part of the property or assets of any Company; or (iii) the winding-up or liquidation of any Company (other than any Immaterial Subsidiary); and such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; (h) any Company (other than any Immaterial Subsidiary) shall (i) voluntarily commence any proceeding or file any petition seeking relief under the Bankruptcy Code, or any other federal, state or foreign bankruptcy, insolvency, receivership or similar law; (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or the filing of any petition described in paragraph (g) above; (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for any Company (other than any Immaterial Subsidiary) or for a substantial part of the property or assets of any Company (other than any Immaterial Subsidiary); (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding; (v) make a general assignment for the benefit of creditors; (vi) become unable, admit in writing its inability or fail generally to pay its debts as they become due; (vii) take any action for the purpose of effecting any of the foregoing; or (viii) wind up or liquidate; (i) one or more judgments for the payment of money in an aggregate amount in excess of $1.0 million shall be rendered against any Company or any combination thereof and the same shall remain undischarged for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to levy upon assets or properties of any Company to enforce any such judgment; 45 (j) an ERISA Event occurs, an event of noncompliance with respect to any Foreign Plan occurs or, if the present value of the accrued benefit liabilities (whether or not vested) under any Foreign Plan that is funded, determined as of the end of the most recently ended fiscal year of the respective Loan Party on the basis of actuarial assumptions proper under applicable foreign law, exceeds the current value of the assets of such Foreign Plan by more than $1.0 million, that in the opinion of Lender, when taken together with all other such ERISA Events, noncompliance and underfunding, could reasonably be expected to result in liability to any Company or its ERISA Affiliates in an aggregate amount exceeding $1.0 million; (k) any security interest and Lien purported to be created by any Security Document shall cease to be in full force and effect, or shall cease to give Lender, for its benefit, the Liens, rights, powers and privileges purported to be created and granted under such Security Documents (including a perfected first priority security interest in and Lien on all of the Collateral thereunder (except as otherwise expressly provided in such Security Documents)) in favor of Lender, or shall be asserted by Borrower or any other Loan Party not to be a valid, perfected, first priority (except as otherwise expressly provided in this Agreement or such Security Document) security interest in or Lien on the Collateral covered thereby; (l) the Guarantees or any Security Document shall cease to be in full force and effect, except to the extent expressly permitted to be released hereunder in accordance with Section 7.09; (m) any Loan Document or any material provisions thereof shall at any time and for any reason be declared by a court of competent jurisdiction to be null and void, or a proceeding shall be commenced by any Loan Party or any other person, or by any Governmental Authority, seeking to establish the invalidity or unenforceability thereof (exclusive of questions of interpretation of any provision thereof), or any Loan Party shall repudiate or deny that it has any liability or obligation for the payment of principal or interest or other obligations purported to be created under any Loan Document; (n) there shall have occurred a Change of Control; or (o) the Distribution shall not have occurred on the Closing Date in accordance with the terms and conditions of the Distribution Agreement; then, and in every such event (other than an event described in paragraph (g) or (h) above), and at any time thereafter during the continuance of such event, Lender may by notice to Borrower, take either or both of the following actions, at the same or different times: (i) terminate forthwith the Commitment in whole or in part; and (ii) declare the Loans then outstanding to be forthwith due and payable in whole or in part, whereupon the principal of the Loans so declared to be due and payable, together with accrued interest thereon and all other liabilities of Borrower accrued hereunder and under any other Loan Document, shall become forthwith due and payable, without 46 presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by Borrower and the Guarantors, anything contained herein or in any other Loan Document to the contrary notwithstanding. In any event described in paragraph (g) or (h) above, the Commitment shall automatically terminate and the principal of the Loans then outstanding, together with accrued interest thereon and all other liabilities of Borrower accrued hereunder and under any other Loan Document, shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by Borrower and the Guarantors, anything contained herein or in any other Loan Document to the contrary notwithstanding. ARTICLE IX MISCELLANEOUS SECTION 9.01. Notices. Notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows: (a) if to any Loan Party, to Borrower at: Mindspeed Technologies, Inc. 4000 MacArthur Boulevard Newport Beach, California 92660-3095 Attention: Simon Biddiscombe Phone: (949) 579-3000 Telecopy No.: (949) 579-5289; With a courtesy copy to: Chadbourne & Parke LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Peter R. Kolyer, Esq. Phone: (212) 408-5100 Telecopy No.: (212) 541-5369 47 (b) if to Conexant, to it at: Conexant Systems, Inc. 4311 Jamboree Road Newport Beach, California 92660-3095 Attention: Dennis E. O'Reilly, Esq., Senior Vice President, General Counsel and Secretary Phone: (949) 483-4600 Telecopy No.: (949) 483-6388; With a courtesy copy to: Chadbourne & Parke LLP 30 Rockefeller Plaza New York, New York 10112 Attention: Peter R. Kolyer, Esq. Phone: (212) 408-5100 Telecopy No.: (212) 541-5369 (c) if to a Lender other than Conexant, to it at its address (or telecopy number) set forth in the Assignment and Acceptance pursuant to which such Lender shall have become a party hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt if delivered by hand or overnight courier service or sent by telecopy or by certified or registered mail, in each case delivered, sent or mailed (properly addressed) to such party as provided in this Section 9.01 or in accordance with the latest unrevoked direction from such party given in accordance with this Section 9.01, and failure to deliver courtesy copies of notices and other communications shall in no event affect the validity or effectiveness of such notices and other communications. SECTION 9.02. WAIVERS; AMENDMENT. (a) No failure or delay by Lender in exercising any right or power hereunder or under any other Loan Document shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such a right or power, preclude any other or further exercise thereof or the exercise of any other right or power. The rights and remedies of Lender hereunder and under the other Loan Documents are cumulative and are not exclusive of any rights or remedies that they would otherwise have. No waiver of any provision of any Loan Document or consent to any departure by any Loan Party therefrom shall in any event be effective unless the same shall be permitted by Section 9.02(b), and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. Without limiting the 48 generality of the foregoing, the making of a Loan shall not be construed as a waiver of any Default, regardless of whether Lender may have had notice or knowledge of such Default at the time. (b) Neither this Agreement nor any other Loan Document nor any provision hereof or thereof may be waived, amended or modified except, in the case of this Agreement, pursuant to an agreement or agreements in writing entered into by Borrower and Lender or, in the case of any other Loan Document, pursuant to an agreement or agreements in writing entered into by Lender and the Loan Party or Loan Parties that are parties thereto. SECTION 9.03. EXPENSES; INDEMNITY. (a) Borrower agrees to pay all reasonable out-of-pocket expenses (including reasonable legal fees and expenses of counsel, expenses incurred in connection with due diligence and travel, courier, reproduction, printing and delivery expenses) incurred by Lender in connection with the preparation, execution and delivery, administration of this Agreement and the other Loan Documents or in connection with any amendments, modifications, enforcement costs or waivers of the provisions hereof or thereof (whether or not the transactions hereby or thereby contemplated shall be consummated), or incurred by Lender, in connection with the enforcement or protection of its rights in connection with this Agreement and the other Loan Documents or in connection with the Loans made hereunder, including the reasonable fees, charges and disbursements of Chadbourne & Parke LLP, special counsel for Lender (and one local counsel in each foreign jurisdiction where Lender deems such local counsel advisable and any additional counsel to Lender required in the event of a conflict of interest), and, in connection with any such enforcement or protection, the fees, charges and disbursements of any consultants and advisors in connection with any out of court workout or in any bankruptcy case. (b) Except to the extent otherwise limited in accordance with applicable Requirements of Law as described in Annex I attached hereto, the Loan Parties agree, jointly and severally, to indemnify Lender, each Affiliate of Lender, and each of their respective directors, officers, trustees, employees and agents (each such person being called an "INDEMNITEE") against, and to hold each Indemnitee harmless from, all reasonable out-of-pocket costs and any and all losses, claims, damages, liabilities and related expenses, including reasonable counsel fees, charges and disbursements, incurred by or asserted against any Indemnitee arising out of, in any way connected with, or as a result of (i) any actual or proposed use of the proceeds of the Loans; or (ii) any claim, litigation, investigation or proceeding relating to any of the foregoing, whether or not any Indemnitee is a party thereto; or (iii) any Transaction Document; provided that, such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are determined by a court of competent jurisdiction by final and nonappealable judgment 49 to have resulted from the bad faith, gross negligence or willful misconduct of such Indemnitee. (c) The provisions of this Section 9.03 shall remain operative and in full force and effect regardless of the expiration of the term of this Agreement, the consummation of the Transactions contemplated hereby, the repayment of any of the Loans, the expiration of the Commitment, the invalidity or unenforceability of any term or provision of this Agreement or any other Loan Document, or any investigation made by or on behalf of Lender. All amounts due under this Section 9.03 shall be payable on written demand therefor accompanied by reasonable documentation with respect to any reimbursement, indemnification or other amount requested. SECTION 9.04. SUCCESSORS AND ASSIGNS. (a) The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted hereby, except that no Loan Party may assign or otherwise transfer any of its rights or obligations hereunder without the prior written consent of Lender (and any attempted assignment or transfer by any Loan Party without such consent shall be null and void). Nothing in this Agreement, express or implied, shall be construed to confer upon any person (other than the parties hereto, their respective successors and assigns permitted hereby and, to the extent expressly contemplated hereby, the Indemnitees) any legal or equitable right, remedy or claim under or by reason of this Agreement. (b) Lender may assign to one or more assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that, (i) except in the case of an assignment to an Affiliate of a Lender, Borrower must give its prior written consent to such assignment (which consent shall not be unreasonably withheld or delayed); (ii) except in the case of an assignment of the entire remaining amount of the assigning Lender's Commitment or Loans, the amount of the Commitment or Loans of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Acceptance with respect to such assignment is delivered to the Borrower) shall be in a principal amount that is an integral multiple of $500,000 and not less than $1.0 million, unless Borrower otherwise consents; (iii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender's rights and obligations under this Agreement; and (iv) the parties to each assignment shall execute and deliver to Borrower an Assignment and Acceptance; provided further that, any consent of Borrower otherwise required under this Section 9.04(b) shall not be required if a Default or an Event of Default under Article VIII has occurred and is continuing. Subject to acceptance, from and after the effective date specified in each Assignment and Acceptance, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and 50 obligations of Lender under this Agreement (provided that, any liability of Borrower to such assignee under Section 2.09 shall be limited to the amount, if any, that would have been payable thereunder by Borrower in the absence of such assignment), and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Acceptance, be released from its obligations under this Agreement (and, in the case of an Assignment and Acceptance covering all of the assigning Lender's rights and obligations under this Agreement, such Lender shall cease to be a party hereto but shall continue to be entitled to the benefits of Sections 2.09 and 9.03). (c) Upon its receipt of a duly completed Assignment and Acceptance executed by an assigning Lender and an assignee, the assignee's completed Administrative Questionnaire, and any written consent to such assignment required by Section 9.04(b), such Assignment and Acceptance shall become effective for all purposes. (d) Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure its obligations, including any pledge or assignment to secure obligations to a Federal Reserve Bank, and the other provisions of this Section 9.04 shall not apply to any such pledge or assignment of a security interest; provided that, no such pledge or assignment of a security interest shall release Lender from any of its obligations hereunder or substitute any such pledgee or assignee for Lender as a party hereto. SECTION 9.05. SURVIVAL OF AGREEMENT. All covenants, agreements, representations and warranties made by the Loan Parties in the Loan Documents and in the certificates or other instruments delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by the other parties hereto and shall survive the execution and delivery of the Loan Documents and the making of any Loans, regardless of any investigation made by any such other party or on its behalf and notwithstanding that Lender may have had notice or knowledge of any Default or incorrect representation or warranty at the time any credit is extended hereunder, and shall continue in full force and effect as long as the principal of or any accrued interest on any Loan or any fee or any other amount payable under this Agreement is outstanding and unpaid and so long as the Commitments have not expired or terminated. The provisions of Sections 2.09 and 9.03 shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby, the repayment of the Loans, the expiration or termination of the Commitments or the termination of this Agreement or any provision hereof. SECTION 9.06. COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. This Agreement and the other Loan Documents constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. Except as provided in 51 Article IV, this Agreement shall become effective when it shall have been executed by the parties hereto, and thereafter shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. Delivery of an executed counterpart of a signature page of this Agreement by telecopy shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.07. SEVERABILITY. Any provision of this Agreement held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction. SECTION 9.08. RIGHT OF SET-OFF. If an Event of Default shall have occurred and be continuing, Lender and each of its Affiliates are hereby authorized at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (general or special, time or demand, provisional or final (other than deposits in trust accounts)) at any time held and other obligations at any time owing by Lender or Affiliate to or for the credit or the account of any Loan Party against any of and all the obligations of any Loan Party now or hereafter existing under this Agreement held by Lender, irrespective of whether or not Lender shall have made any demand under this Agreement and although such obligations may be unmatured. The rights of Lender under this Section 9.08 are in addition to other rights and remedies (including other rights of set-off) that Lender may have. SECTION 9.09. GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS. (a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK). (b) Each Loan Party hereby irrevocably and unconditionally submits, for itself and its property, to the nonexclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to any Loan Document, or for recognition or enforcement of any judgment, and each of the parties hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding may be heard and determined in such New York State or, to the extent permitted by law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Nothing in this Agreement or any other Loan Document shall affect any right that any Lender may otherwise have to bring any action or proceeding relating to this Agreement or any other Loan Document against any Loan Party or its properties in the courts of any jurisdiction. 52 (c) Each Loan Party hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection that it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or any other Loan Document in any court referred to in Section 9.09(b). Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court. (d) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.01. Nothing in this Agreement or any other Loan Document will affect the right of any party to this Agreement to serve process in any other manner permitted by law. SECTION 9.10. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.10. SECTION 9.11. CONFIDENTIALITY. Lender agrees to maintain the confidentiality of the Information (as defined below), except that Information may be disclosed (a) to its Affiliates' directors, officers, employees and agents, including accountants, legal counsel and other advisors (it being understood that the persons to whom such disclosure is made will be informed of the confidential nature of such Information and instructed to keep such Information confidential pursuant to the terms hereof); (b) to the extent requested by any regulatory authority; (c) to the extent required by applicable laws or regulations or by any subpoena or similar legal process; (d) to any other party to this Agreement; (e) in connection with the exercise of any remedies hereunder or any suit, action or proceeding relating to this Agreement or any other Loan Document or the enforcement of rights hereunder or thereunder; (f) subject to an agreement containing provisions substantially the same as those of this Section 9.11, to any assignee of, or any prospective assignee of, any of its rights or obligations under this Agreement; (g) with the consent of Borrower; or (h) to the extent such Information (i) is publicly available at the time of disclosure or becomes publicly available other than as a result of a breach of this Section 9.11, or (ii) becomes available to Lender on a nonconfidential basis from a source other than Borrower or any Subsidiary. For the purposes of this Section 9.11, "INFORMATION" shall mean all information received from Borrower or any Subsidiary on a confidential basis relating to Borrower or any 53 Subsidiary or its business, other than any such information that is available to any Lender on a nonconfidential basis prior to disclosure by Borrower or any Subsidiary. Any person required to maintain the confidentiality of Information as provided in this Section 9.11 shall be considered to have complied with its obligation to do so if such person has exercised the same degree of care to maintain the confidentiality of such Information as such person would accord to its own confidential information. [signature pages follow] 54 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written. MINDSPEED TECHNOLOGIES, INC., as Borrower By: /s/ Simon Biddiscombe ---------------------------------------- Name: Simon Biddiscombe Title: Senior Vice President, Chief Financial Officer and Treasurer APPLIED TELECOM, INC., as a Guarantor By: /s/ Balakrishnan S. Iyer ---------------------------------------- Name: Balakrishnan S. Iyer Title: Vice President HOTRAIL, INC., as a Guarantor By: /s/ Balakrishnan S. Iyer ----------------------------------- Name: Balakrishnan S. Iyer Title: President CONEXANT SPINCO TECHNOLOGIES, LLC, as a Guarantor By: Steven W. Sprecher ---------------------------------------- Name: Steven W. Sprecher Title: Manager MAKER COMMUNICATIONS, INC., as a Guarantor By: /s/ Jasmina Theodore Boulanger ---------------------------------------- Name: Jasmina Theodore Boulanger Title: Assistant Secretary BROOKTREE CORPORATION, as a Guarantor By: /s/ Balakrishnan S. Iyer -------------------------------------- Name: Balakrishnan S. Iyer Title: Vice President CONEXANT SYSTEMS, INC., as Lender By: /s/ Kerry K. Petry ---------------------------------------- Name: Kerry K. Petry Title: Vice President and Treasurer EXHIBIT A DEFINED TERMS RULES OF CONSTRUCTION 1.01. DEFINED TERMS. "AFFILIATE" means, when used with respect to a specified person, another person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the person specified; provided, however, that, for purposes of Section 6.06, the term "AFFILIATE" shall also include any person, other than Conexant, that directly or indirectly owns more than 10% of any class of Equity Interests of the person specified or that is an officer or director of the person specified. "AGREEMENT" means this Agreement, as amended, restated, supplemented or otherwise modified from time to time. "AGREEMENT AND ESTOPPEL CERTIFICATE" means any Agreement and Estoppel Certificate between a Loan Party, as tenant, and the applicable holder of the fee interest, as landlord, substantially in the form of Exhibit E-1. "ASSET SALE" means (a) any conveyance, sale, lease, sublease, assignment, transfer, license or other disposition (including by way of merger or consolidation and including any sale and leaseback transaction) of any property (including stock of any Subsidiary by the holder thereof) by Borrower or any of its Subsidiaries to any person other than a Loan Party (other than sales and other dispositions of inventory, and licensing of Intellectual Property in the ordinary course of business consistent with past practices) and (b) any issuance or sale by any Subsidiary of its Equity Interests to any person other than a Loan Party. "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered into by Lender and its assignee, in the form of Exhibit B, or such other form as shall be approved by Borrower. "ATTRIBUTABLE INDEBTEDNESS" means, when used with respect to any sale and leaseback transaction, as at the time of determination, the present value (discounted at a rate equivalent to Borrower's then-current weighted-average cost of funds for borrowed money as at the time of determination, compounded on a semi-annual basis) of the total obligations of the lessee for rental payments during the remaining term of the lease included in any such sale and leaseback transaction. "AVAILABILITY PERIOD" means the period from and including the Closing Date (subject to the last sentence in Section 5.12 and the satisfaction of all the conditions to Loans in Article IV) to the first to occur of (x) the Final Maturity Date, (y) any termination of the Commitment pursuant to Section 2.06 or Article VIII hereof and (z) the date the Borrower enters into any binding commitment for a Consent Acquisition which either (i) is not approved by Lender as provided in the definition of "Consent Acquisition" or (ii) is effected pursuant to the waiver contained in the proviso clause in paragraph (3) of the definition of "Consent Acquisition". A-1 "BANKRUPTCY CODE" means Title 11 of the United States Code entitled "Bankruptcy," as now and hereafter in effect, or any successor statute. "BOARD" means the Board of Governors of the Federal Reserve System of the United States of America. "BORROWER" has the meaning assigned to such term in the preamble hereto. "BORROWER COMMON STOCK" means the common stock $0.01 par value per share of Borrower, together with the associated preferred share purchase rights. "BORROWING REQUEST" means a request for a Loan by Borrower in accordance with the terms of Section 2.03 and substantially in the form of Exhibit C, or such other form as shall be approved by Lender, appropriately completed in conformity with this Agreement and signed by the Chief Executive Officer or Chief Financial Officer of Borrower. "BUSINESS DAY" means any day other than a Saturday, Sunday or day on which banks in California or Michigan are authorized or required by law to close. "BUSINESS UNIT" means, with respect to Borrower or any Subsidiary, (i) any "segment," as defined by GAAP, reflected in Borrower's financial statements included in filings made under the Exchange Act and (ii) any business unit, product line or product, or any combination thereof, that, consistent with past practice under Borrower's internal controls and procedures for accounting matters, separately reports Revenue for purposes of preparing Borrower's financial statements under GAAP. "CAPITAL EXPENDITURES" means, with respect to any person, for any period, the aggregate of all expenditures of such person and its Consolidated Subsidiaries for the acquisition of fixed or capital assets which should be capitalized under GAAP on a consolidated balance sheet of such person and its Consolidated Subsidiaries. "CAPITAL LEASE OBLIGATIONS" of any person means the obligations of such person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "CASH BALANCE" means the sum, as of the last Business Day of a fiscal month, of all cash and all Permitted Investments, as shown on the Borrower's balance sheet for such fiscal month, and for this purpose, all amounts of cash and Permitted Investments held by Borrower and its Subsidiaries shall be included in the Cash Balance, without regard to any characterization or treatment of such amounts (whether as cash and cash equivalents, short-term investments, or other assets) on Borrower's balance sheet or under GAAP. "CASUALTY EVENT" means, with respect to any property (including Real Property) of any person, any loss of title with respect to such property or any loss of or damage to or destruction A-2 of, or any condemnation or other taking (including by any Governmental Authority) of, such property for which such person or any of its subsidiaries receives insurance proceeds or proceeds of a condemnation award or other compensation. "CASUALTY EVENT" includes any taking of all or any part of any Real Property of any person or any part thereof, in or by condemnation or other eminent domain proceedings pursuant to any law, or by reason of the temporary requisition of the use or occupancy of all or any part of any Real Property of any person or any part thereof by any Governmental Authority, civil or military. "CHANGE OF CONTROL" shall have the meaning assigned to such term in the By-Laws of the Borrower as in effect on the Closing Date, without giving effect to any amendment thereof after the Closing Date. "CHARGES" has the meaning assigned to such term in Section 2.05(f). "CLOSING DATE" means June 27, 2003. "COLLATERAL" means all of the Security Agreement Collateral, any Mortgaged Real Property and all other property of whatever kind and nature pledged as collateral under any Security Document. "COLLATERAL ASSIGNMENT OF LEASE" means a Collateral Assignment of Lease in form and substance reasonably satisfactory to Lender. "COMMITMENT" means Lender's commitment to make Loans hereunder in the amount set forth on Annex II, or in the Assignment and Acceptance pursuant to which such Lender assumed its Commitment, as applicable, as the same may be (a) reduced from time to time pursuant to Section 2.06 and (b) reduced or increased from time to time pursuant to assignments pursuant to Section 9.04. The initial aggregate amount of Lender's Commitment is $50.0 million. "COMPANIES" means Borrower and its Subsidiaries; and "COMPANY" means any one of them. "COMPANY FACILITY LEASE" has the meaning assigned to such term in Section 3.05(b). "COMPANY LEASE" means any Company Facility Lease and any Company Property Lease, individually and collectively. "COMPANY PROPERTY LEASE" has the meaning assigned to such term in Section 3.05(b). "CONSENT ACQUISITION" means any Investment, merger, consolidation, or purchase of property, in one or a series of transactions, which has been approved in writing by the Lender, which approval shall not be unreasonably withheld or delayed if all the following conditions are satisfied: (1) after giving effect to the acquisition, (x) there is no Change of Control and (y) either: A-3 (i) Borrower Controls each other person that is a party to the transaction, or (ii) in the case of a merger or consolidation to which the Borrower is a party, the management of the surviving or resulting corporation consists of (A) in the case of directors, at least a majority of persons who were directors of Borrower prior to the merger or consolidation, and (B) in the case of officers, at least the chief executive officer and chief financial officer and a majority of the other executive officers (as defined in Rule 405 under the Securities Act) who held such positions (or substantially similar positions) with Borrower prior to the merger or consolidation, or (iii) all property or assets acquired in connection with the acquisition are owned by Borrower or a Subsidiary Guarantor. (2) Borrower has delivered to Lender, not less than thirty days prior to the time Borrower proposes to enter into any binding commitment for any such acquisition, pro forma financial statements which (x) have been prepared in accordance with GAAP applied on a basis consistent with Borrower's past practice in respect of pro forma financial statements; (y) give effect to the acquisition as of the date of the most recent quarterly financial statements delivered to Lender under this Agreement, and (z) include: (i) pro forma consolidated balance sheets and consolidated statements of income and cash flows for such fiscal quarter, the current fiscal year to date and as at the end of the immediately preceding fiscal year of Borrower; (ii) a forecast, for each of the four fiscal quarters following such fiscal quarter of the pro forma consolidated balance sheets and consolidated and consolidating (at least for (1) any person acquired in the acquisition and (2) the Borrower and those persons that were Subsidiaries prior to the acquisition) statements of income and cash flows for such periods and showing in reasonable detail any adjustments or eliminations made in preparing the consolidated statements; and (iii) a reasonably detailed statement of the assumptions and critical accounting estimates used to prepare the financial statements referred to in clauses (i) and (ii), all in such detail as Lender may reasonably request. (3) the financial statements referred to in clause (2) above show that, on a pro forma basis: (x) the Net Cash Position (as hereinafter defined) after giving effect to the acquisition is not less than the Net Cash Position (as hereinafter defined) immediately prior to the acquisition, where Net Cash Position means an amount equal to: (i) the sum of cash and cash equivalents of Borrower and its consolidated Subsidiaries, plus, for purposes of determining the Net Cash Position after giving effect to the acquisition, all cash and cash equivalents of each person acquired and its A-4 consolidated Subsidiaries, as such amounts would be shown on a pro forma balance sheet prepared in accordance with GAAP (except as expressly provided herein), consistent with the past practices of the Borrower, immediately after giving effect to the acquisition, minus (ii) the sum of all Indebtedness of the Borrower and its consolidated Subsidiaries, plus, for purposes of determining the Net Cash Position after giving effect to the acquisition, all Indebtedness of each person acquired and its consolidated Subsidiaries, as such amounts would be shown on a pro forma balance sheet prepared in accordance with GAAP (except as expressly provided herein), consistent with the past practices of the Borrower, immediately after giving effect to the acquisition; and (iii) in each case where the Net Cash Position is to be determined after giving effect to the acquisition, such determination will be made on a pro forma basis that, without duplication, treats: (A) all monetary payment obligations incurred or required to be paid in connection with the acquisition (including any payments of amounts included in the definition of Purchase Price (as defined below in clause (d) of the definition of "Permitted Acquisition," but substituting the phrase "person or property acquired" for the term "Acquired Business" in that definition), any dividends or other distributions to be made to shareholders or other persons, any sales, documentary, transfer, income, gain or other taxes of any kind, and any fees, costs or expenses of any kind associated with the acquisition, in each case to the extent payable in cash or cash equivalents) of the Borrower and its subsidiaries and each person acquired, whether paid or accrued, and without regard to the time when any such amount becomes due and payable or any contingency associated with any such payment obligation, as a reduction of the amount of cash and cash equivalents, on a dollar for dollar basis, effective immediately after giving effect to the acquisition; and (B) all Indebtedness incurred, assumed, guaranteed or required to be paid in connection with the acquisition by the Borrower, any Subsidiary of the Borrower and each person acquired in connection with the acquisition, other than any Indebtedness actually paid or discharged in connection with the acquisition, as Indebtedness outstanding effective immediately after giving effect to the acquisition; and (iv) in each case where the Net Cash Position is to be determined immediately prior to giving effect to the acquisition, such determination will be made on a pro forma basis that excludes from the computations all amounts referred to in clause (iii) above; and (y) no later than the fourth fiscal quarter following the acquisition, the sum of (A) the operating profit before amortization of goodwill of each person acquired, plus (B) the amount of A-5 any identified cost savings to Borrower as a direct result of acquiring such person, is positive; provided, however, that the requirements in clause (x) and (y) shall be waived if the Borrower shall deliver to Lender not less than thirty days prior to the time Borrower proposes to enter into any binding commitment for any such acquisition: (i) an irrevocable notice of prepayment of all outstanding Loans and termination of the entire Commitment to become effective, automatically and without further notice or action of any kind by Borrower, Lender or any other person, 180 days following the date of any such acquisition; and (ii) a reasonably detailed business plan (including the assumptions and estimates made in preparing such business plan) that shows, with reasonable certainty, that Borrower will be able to prepay all outstanding Loans and terminate the entire Commitment 180 days following the date of any such acquisition, which plan must be satisfactory to Lender in its discretion. (4) the acquisition does not result in any Loan Party, incurring, creating, assuming, permitting to exist or otherwise having any liability for, directly or indirectly, any Liens (other than Permitted Liens). (5) the acquisition does not result in any Default or Event of Default. (6) the acquisition does not have a Material Adverse Effect. (7) upon the consummation of any acquisition that results in a person becoming a Subsidiary of a Loan Party, immediately following such acquisition: (i) such Subsidiary is a Domestic Subsidiary; and (ii) 100% of the Equity Interest of any such new Subsidiary is pledged and delivered to Lender for its benefit under the applicable Security Agreement; and (iii) such Subsidiary becomes a party to the applicable Security Documents and becomes a Subsidiary Guarantor hereunder and executes a Joinder Agreement and other applicable Loan Documents all in accordance with Section 5.10(b). (8) upon the consummation of any acquisition that results in any Loan Party acquiring any assets that are not then subject to a perfected first priority security interest or Lien of the Lender under the Security Documents, immediately following such acquisition, the Loan Parties shall execute and deliver to Lender such agreements and other instruments, record such Mortgages and financing statements or other documents and take such other actions as may be required so that Lender has a perfected, first priority security interest in or Lien on all such acquired assets, subject to no Liens other than Permitted Liens. (9) upon the consummation of any merger or consolidation of any Loan Party with another person in which the Loan Party is not the surviving or resulting corporation, or the A-6 Lender otherwise does not have a perfected, first priority security interest or Lien under the Security Documents covering all the assets of such surviving or resulting corporation, immediately following such acquisition, each surviving or resulting corporation shall execute and deliver to Lender a Joinder Agreement and other applicable Loan Documents and such agreements and other instruments as Lender may reasonably request, record such Mortgages and financing statements or other documents and take such other actions as may be required so that Lender has a perfected, first priority security interest in or Lien on all such acquired assets, subject to no Liens other than Permitted Liens. (10) the Purchase Price (as defined below in clause (d) of the definition of "Permitted Acquisition," but excluding for this purpose any amounts referred to in clause (2) of that definition, and substituting the phrase "person or property acquired" for the term "Acquired Business" in that definition) paid for the acquisition of such person or property (x) is solely of Borrower Common Stock and (y) is greater than $25,000,000. "CONSOLIDATED COMPANIES" means Borrower and its Consolidated Subsidiaries. "CONSOLIDATED SUBSIDIARIES" means, as to any person, all subsidiaries of such person that are consolidated with such person for financial reporting purposes in accordance with GAAP. "CONSOLIDATED TANGIBLE NET WORTH" means, at any time: (a) the total assets of Borrower and its Subsidiaries which would be shown as assets on a consolidated balance sheet of Borrower and its Subsidiaries as of such time prepared in accordance with GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the stock and surplus of Subsidiaries, minus (b) the total liabilities of Borrower and its Subsidiaries which would be shown as liabilities on a consolidated balance sheet of Borrower and its Subsidiaries as of such time prepared in accordance with GAAP, minus (c) the net book value of all assets, after deducting any reserves applicable thereto, which would be treated as intangible under GAAP, including, without limitation, good will, trademarks, trade names, service marks, brand names, copyrights, patents and unamortized debt discount and expense, organizational expenses and the excess of the equity in any Subsidiary over the cost of the investment in such Subsidiary. "CONTESTED COLLATERAL LIEN CONDITIONS" means, with respect to any Permitted Lien of the type described in Sections 6.02(a), (b) and (e), the following conditions: (a) any proceeding instituted contesting such Lien shall conclusively operate to stay the sale or forfeiture of any portion of the Collateral on account of such Lien; A-7 (b) at the option and upon request of Lender, the appropriate Loan Party shall maintain cash reserves in an amount sufficient to pay and discharge such Lien and Lender's reasonable estimate of all interest and penalties related thereto; and (c) such Lien shall in all respects be subject and subordinate in priority to the Lien and security interest created and evidenced by the Security Documents, except if and to the extent that the law or regulation creating, permitting or authorizing such Lien provides that such Lien is or must be superior to the Lien and security interest created and evidenced by the Security Documents. "CONTINGENT OBLIGATION" means, as to any person, any obligation of such person guaranteeing or intended to guarantee any Indebtedness, leases, dividends or other obligations ("PRIMARY OBLIGATIONS") of any other person (the "PRIMARY OBLIGOR") in any manner, whether directly or indirectly, including any obligation of such person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor; (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; or (d) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term "CONTINGENT OBLIGATION" shall not include (w) endorsements of instruments for deposit or collection in the ordinary course of business consistent with past practices, (x) any product warranties issued on products by Borrower or any of its Subsidiaries in the ordinary course of business consistent with past practices, (y) any obligation to buy back products in the ordinary course of business consistent with past practices made pursuant to the buyback policy of Borrower and its Subsidiaries or pursuant to applicable Requirements of Law, and (z) any operating lease guarantees (other than in respect of Synthetic Lease Obligations) executed by Borrower in the ordinary course of business consistent with past practices. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such person may be liable pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such person is required to perform thereunder) as determined by such person in good faith. "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of voting securities, by contract or otherwise, and the terms "CONTROLLING" and "CONTROLLED" have meanings correlative thereto. "CONTROL AGREEMENT" has the meaning assigned to such term in the U.S. Security Agreement. A-8 "DEFAULT" means any event or condition that is, or upon notice or lapse of time or both would constitute, an Event of Default. "DISCONTINUED REVENUE" means, with respect to any Business Unit sold or proposed to be sold in a Permitted Business Disposition, the Revenue of such Business Unit for the twelve consecutive fiscal month period preceding the date a binding commitment is made for the sale of such Business Unit. "DISTRIBUTION" means the distribution by Conexant to its shareholders of shares of Borrower Common Stock as provided in the Form 10. "DISTRIBUTION AGREEMENT" means the distribution agreement between Conexant and Borrower, dated June 27, 2003. "DISTRIBUTION DATE" means the date of the Distribution. "DIVIDEND" with respect to any person means that such person has declared or paid a dividend or returned any equity capital to its stockholders or authorized or made any other distribution, payment or delivery of property (other than common stock of such person) or cash to its stockholders as such, or redeemed, retired, purchased or otherwise acquired, directly or indirectly, for consideration any shares of any class of its capital stock outstanding on or after the Closing Date (or any options or warrants issued by such person with respect to its capital stock), or set aside any funds for any of the foregoing purposes, or shall have permitted any of its subsidiaries to purchase or otherwise acquire for a consideration any shares of any class of the capital stock of such person outstanding on or after the Closing Date (or any options or warrants issued by such person with respect to its capital stock). Without limiting the foregoing, "DIVIDEND" with respect to any person also includes all payments made or required to be made by such person with respect to any stock appreciation rights, plans, equity incentive or achievement plans or any similar plans or setting aside of any funds for the foregoing purposes. "DOLLARS" or "$" means the lawful money of the United States of America. "DOMESTIC SUBSIDIARY" means any Subsidiary organized under the laws of the United States of America, any state thereof or the District of Columbia. "DOMESTICATED FOREIGN SUBSIDIARY" means a Foreign Subsidiary which has become domesticated into the United States of America. "EQUITY INTEREST" means, with respect to any person, any and all shares, interests, participations or other equivalents, including membership interests (however designated, whether voting or non-voting), of capital of such person, including, if such person is a partnership, partnership interests (whether general or limited) and any other interest (other than an interest constituting Indebtedness) or participation that confers on a person the right to receive a share of the profits and losses of, or distributions of assets of, such partnership, whether outstanding on or issued after the date hereof. A-9 "ERISA" means the Employee Retirement Income Security Act of 1974, as the same may be amended from time to time. "ERISA AFFILIATE" means any trade or business (whether or not incorporated) that, together with Borrower, is treated as a single employer under Section 414(b), (c), (m) or (o) of the Tax Code. "ERISA EVENT" means (a) any "reportable event," as defined in Section 4043 of ERISA or the regulations issued thereunder, with respect to a Plan (other than an event for which the 30-day notice period is waived by regulation); (b) the existence with respect to any Plan of an "accumulated funding deficiency" (as defined in Section 412 of the Tax Code or Section 302 of ERISA), whether or not waived, the failure to make by its due date a required installment under Section 412(m) of the Tax Code with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan; (c) the filing pursuant to Section 412(d) of the Tax Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by any Company or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by any Company or any of its ERISA Affiliates from the PBGC or a plan administrator of any notice relating to the intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan, or the occurrence of any event or condition that could reasonably be expected to constitute grounds under ERISA for the termination of, or the appointment of a trustee to administer, any Plan; (f) the incurrence by any Company or any of its ERISA Affiliates of any liability with respect to the withdrawal from any Plan or Multiemployer Plan; (g) the receipt by any Company or its ERISA Affiliates of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA; (h) the making of any amendment to any Plan that could result in the imposition of a lien or the posting of a bond or other security; (i) the occurrence of a nonexempt prohibited transaction (within the meaning of Section 4975 of the Tax Code or Section 406 of ERISA) that could result in a Material Adverse Effect; (j) the imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Tax Code or pursuant to ERISA with respect to any Plan; and (k) the assertion of a material claim (other than routine claims for benefits) against any Plan or the assets thereof, or against any Company or any ERISA Affiliates in connection with any Plan. "EVENT OF DEFAULT" has the meaning assigned to such term in Article VIII. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCLUDED TAXES" means, with respect to any payment to Lender made by or on account of any obligation of Borrower hereunder, federal, state or local income or franchise taxes imposed on (or measured by) Lender's net income by the United States of America or by any other jurisdiction in which Lender is organized. "EXPOSURE" means, with respect to Lender at any time, the aggregate principal amount at such time of all outstanding Loans of Lender excluding from principal, for purposes of this A-10 definition, any amount of interest which has been capitalized and become principal as provided in Section 2.05(d). "FAIR MARKET VALUE" means on the day of valuation, for (a) any Equity Interest, with respect to each share, interest, participation or other equivalent (i) the last reported sale price regular way or, in case no such sale takes place on such day, the average of the closing bid and asked prices regular way, in either case as reported on the principal national securities exchange on which the share, interest, participation or other equivalent is listed or admitted for trading or (ii) if the share, interest, participation or other equivalent is not listed or admitted for trading on any national securities exchange, the last reported sale price or, in case no such sale takes place on such day, the average of the highest reported bid and the lowest reported asked quotation for the share, interest, participation or other equivalent, in either case as quoted on the NASDAQ National Market System or the NASDAQ Small Cap Market or (iii) if the share, interest, participation or other equivalent is not listed or admitted for trading on any national securities exchange or quoted on the NASDAQ National Market System or the NASDAQ Small Cap Market, the last reported sale price or, in case no such sale takes place on such day, the average of the highest reported bid and the lowest reported asked quotation for the share, interest, participation or other equivalent, in either case as reported on NASDAQ or a similar service if NASDAQ is no longer reporting such information; and (b) any asset other than an Equity Interest and any Equity Interest for which prices can not be obtained in accordance with clause (a) above, the fair market value thereof as determined in good faith by an independent auditor mutually agreed to by the Borrower and Lender. "FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for the day for such transactions received by the Lender from three federal funds brokers of recognized standing selected by it. "FINAL MATURITY DATE" means June 29, 2007. "FINANCIAL OFFICER" of any person means the chief financial officer, principal accounting officer, treasurer or controller of such person. "FOREIGN PLAN" means any employee benefit plan, program, policy, arrangement or agreement that would be an "employee pension benefit plan" under Section 3(2) of ERISA if such plan, program, policy, arrangement or agreement was not maintained outside the United States primarily for the benefit of persons substantially all of whom are nonresident aliens with respect to which any Company could incur liability. "FOREIGN SECURITY AGREEMENTS" means each security, pledge or similar agreement necessary or desirable to evidence the grant of a security interest or pledge of assets of any Subsidiary Guarantor that is a Foreign Subsidiary and that is required hereunder, in each case in A-11 form and substance satisfactory to Lender and as such agreement may thereafter be amended, supplemented or otherwise modified from time to time. "FOREIGN SUBSIDIARY" means a Subsidiary that is organized under the laws of a jurisdiction other than the United States or any state thereof or the District of Columbia. "FORM 10" means the registration statement on Form 10 filed by Borrower with the Securities and Exchange Commission as effective June , 2003, as amended. "GAAP" means generally accepted accounting principles in the United States. "GOVERNMENTAL AUTHORITY" means any federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body. "GUARANTEED OBLIGATIONS" has the meaning assigned to such term in Section 7.01. "GUARANTEES" means the guarantees issued pursuant to Article VII (or pursuant to any other form of guarantee required by applicable Requirements of Law and in form and substance reasonably satisfactory to Lender) by Borrower and the Subsidiary Guarantors. "GUARANTORS" has the meaning assigned to such term in the preamble hereof. "HEDGING AGREEMENT" means any interest rate derivative contract, foreign currency exchange agreement, commodity price protection agreement or other interest or currency exchange rate or commodity price hedging arrangement. "IMMATERIAL SUBSIDIARY" means a Subsidiary that has less than $1.0 million in assets (based on the amounts thereof reflected on such Subsidiary's most recent balance sheet prepared in accordance with GAAP) and generates less than $1.0 million of net revenues during any fiscal year (based on the amount thereof reflected on such Subsidiary's most recent income statement prepared in accordance with GAAP) or, in the case of a Subsidiary without prior operating history, is reasonably projected by Borrower to generate less than $1.0 million of net revenues during its first full year of operation. All Immaterial Subsidiaries in existence on the Closing Date are identified on Schedule 1.01(a). "INDEBTEDNESS" of any person means, without duplication, (a) all obligations of such person for borrowed money; (b) all obligations of such person evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of such person upon which interest charges are customarily paid or accrued; (d) all obligations of such person under conditional sale or other title retention agreements relating to property purchased by such person; (e) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding trade accounts payable incurred in the ordinary course of business on normal trade terms and not overdue by more than 90 days or, if overdue for more than 90 days, as to which a dispute exists and adequate reserves in conformity with GAAP have been established); (f) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such person, whether A-12 or not the obligations secured thereby have been assumed; (g) all Capital Lease Obligations, Purchase Money Obligations and Synthetic Lease Obligations of such person; (h) all obligations of such person in respect of Hedging Agreements; provided that, the amount of Indebtedness of the type referred to in this clause (h) of any person shall be zero unless and until such Indebtedness shall be terminated, in which case the amount of such Indebtedness shall be the then termination payment due thereunder by such person; (i) all obligations of such person as an account party in respect of letters of credit, letters of guaranty and bankers' acceptances; (j) all Attributable Indebtedness of such person; and (k) all Contingent Obligations of such person in respect of Indebtedness or obligations of others of the kinds referred to in clauses (a) through (j) above. The Indebtedness of any person shall include the Indebtedness of any other entity (including any partnership in which such person is a general partner) to the extent such person is liable therefor as a result of such person's ownership interest in or other relationship with such entity, except to the extent that the terms of such Indebtedness provide that such person is not liable therefor. "INDEMNIFIED TAXES" means Taxes other than Excluded Taxes. "INDEMNITEE" has the meaning assigned to such term in Section 9.03(b). "INFORMATION" has the meaning assigned to such term in Section 9.11. "INTELLECTUAL PROPERTY" has the meaning assigned to such term in the U.S. Security Agreement. "INTERCOMPANY NOTE" means a promissory note, substantially in the form of Exhibit G, evidencing Indebtedness payable by a payor Company to a payee Loan Party. "INTEREST PAYMENT DATE" means with respect to any Loan, the last Business Day of each March, June, September and December to occur during the period that such Loan is outstanding and the Final Maturity Date. "INVESTMENTS" has the meaning assigned to such term in Section 6.03. "JOINDER AGREEMENT" means a joinder agreement substantially in the form of Exhibit H. "LANDLORD LIEN WAIVER AND ACCESS AGREEMENT" means the Landlord Lien Waiver and Access Agreement, substantially in the form of Exhibit E-2 or otherwise in form and substance reasonably satisfactory to Lender. "LEASES" means any and all leases, subleases, tenancies, options, concession agreements, rental agreements, occupancy agreements, franchise agreements, access agreements and any other agreements (including all amendments, extensions, replacements, renewals, modifications and/or guarantees thereof), whether or not of record and whether now in existence or hereafter entered into, affecting the use or occupancy of all or any portion of any Real Property. A-13 "LENDER" means Lender and any other person that has become a party hereto pursuant to an Assignment and Acceptance. "LIEN" means, with respect to any property, (a) any mortgage, deed of trust, lien, pledge, encumbrance, claim, charge, assignment, hypothecation, security interest or encumbrance of any kind, any other type of preferential arrangement in respect of such property or any filing of any financing statement under the UCC or any other similar notice of Lien under any similar notice or recording statute of any Governmental Authority, including any easement, right-of-way or other encumbrance on title to Real Property, in each of the foregoing cases whether voluntary or imposed by law, and any agreement to give any of the foregoing; (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such property; and (c) in the case of securities, any transfer restriction (other than restrictions on transfer arising solely by virtue of registration, qualification or similar requirements under the securities laws of any jurisdiction), purchase option, call or similar right of a third party with respect to such securities. "LOAN" means a Loan made by Lender to Borrower pursuant to Section 2.01. "LOAN DOCUMENTS" means this Agreement, each Guarantee, the Notes (if any), the Warrant, the Registration Rights Agreement and the Security Documents. "LOAN PARTIES" means Borrower and the Subsidiary Guarantors. "MACARTHUR SUBLEASE" means the sublease between Lender and Borrower of the Real Property located at 4000 MacArthur Boulevard, Newport Beach, California. "MATERIAL ADVERSE EFFECT" means (a) a material adverse effect on the business, property, results of operations, prospects or condition (financial or otherwise), of Borrower and its Subsidiaries, taken as a whole; (b) material impairment of the ability of the Loan Parties to perform any of their obligations under any Loan Document; (c) material impairment of the rights of or benefits or remedies available to the Lender under any Loan Document; or (d) a material adverse effect on the Collateral or the Liens in favor of Lender on the Collateral or the priority of such Liens. "MATERIAL ITEM" shall mean any property that is Collateral except for any particular property that (x) is not material to the business, operations or condition (financial or other) of any Loan Party and (y) has a book value of less than $100,000, as shown on the most recent balance sheet of any Loan Party prepared in accordance with GAAP. "MAXIMUM RATE" has the meaning assigned to such term in Section 2.05(f). "MONTHLY CASH BALANCE REPORT" has the meaning assigned to such term in Section 5.01(d). A-14 "MORTGAGE" means an agreement, including a mortgage, deed of trust or any other document, creating and evidencing a Lien on a Real Property, which shall be in form and substance reasonably satisfactory to Lender, with such schedules and including such provisions as shall be necessary to conform such document to applicable or local law or as shall be customary under local law, as the same may at any time be amended in accordance with the terms thereof and hereof. "MORTGAGED REAL PROPERTY" means any Real Property that shall be subject to a Mortgage delivered after the Closing Date pursuant to Section 5.10(d). "MULTIEMPLOYER PLAN" means a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA (a) to which any Company or any ERISA Affiliate is then making or accruing an obligation to make contributions, (b) to which any Company or any ERISA Affiliate has within the preceding five plan years made contributions, or (c) with respect to which any Company or any ERISA Affiliate could incur liability. "NASDAQ" shall mean the Automatic Quotation System of the National Association of Securities Dealers, Inc. "NEW WHOLLY OWNED SUBSIDIARY" has the meaning assigned to such term in Section 5.10(b). "NON-GUARANTOR SUBSIDIARY" means (a) all of the Companies listed on Schedule 3.06(a) (as in effect on the Closing Date), (b) each Subsidiary that has been and remains released from its Guarantee in accordance with Section 7.09 hereof, and (c) each New Wholly Owned Subsidiary that is not required to become a Guarantor hereunder in accordance with Section 5.10. "NOTES" means any notes evidencing the Loans issued pursuant to this Agreement, if any, substantially in the form of Exhibit J. "OBLIGATIONS" means (a) obligations of each Loan Party from time to time arising under or in respect of the due and punctual payment of (i) the principal of and premium, if any, and interest (including interest accruing during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding) on the Loans, when and as due, whether at maturity, by acceleration, upon one or more dates set for prepayment or otherwise, and (ii) all other monetary obligations, including fees, costs, expenses and indemnities, whether primary, secondary, direct, contingent, fixed or otherwise (including monetary obligations incurred during the pendency of any bankruptcy, insolvency, receivership or other similar proceeding, regardless of whether allowed or allowable in such proceeding), of each Loan Party under this Agreement and the other Loan Documents; and (b) the due and punctual performance of all covenants, agreements, obligations and liabilities of each Loan Party under or pursuant to this Agreement and the other Loan Documents. "OTHER TAXES" means any and all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under any A-15 Loan Document or from the execution, delivery or enforcement of, or otherwise with respect to, any Loan Document. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA. "PERFECTION CERTIFICATE" means a certificate in the form of Exhibit I-1 or any other form approved by Lender, as the same shall be supplemented from time to time by a Perfection Certificate Supplement. "PERFECTION CERTIFICATE SUPPLEMENT" means a certificate supplement in the form of Exhibit I-2 or any other form approved by Lender. "PERMITTED ACQUISITION" means any Investment, merger, consolidation, or purchase of property, in one or a series of transactions, that satisfies all of the following conditions: (a) results in a Loan Party owning either (x) all of the outstanding Equity Interests of another person that was not a Subsidiary of Borrower prior to such transaction or (y) all or substantially all of the business, operations and assets of another person that was not a Subsidiary of Borrower prior to such transaction (the "ACQUIRED BUSINESS"); (b) does not result in any Loan Party, incurring, creating, assuming, guaranteeing, permitting to exist or otherwise having any liability for, directly or indirectly, any Indebtedness or any Liens (other than Permitted Liens); (c) does not result in any Default or Event of Default; (d) The Purchase Price (as defined below) for all Acquired Businesses acquired in any fiscal year of the Borrower does not exceed, for any fiscal year, $25,000,000 multiplied by the Pro Rata Percentage for such fiscal year, reduced dollar for dollar by the amount of any Capital Expenditures made or committed to be made by Borrower or any other Loan Party in such fiscal year accounted for in accordance with GAAP, and for purposes of this definition, the Purchase Price for any Acquired Business shall be allocated to the fiscal year in which a binding commitment is made to acquire the Acquired Business, without regard to when (1) the acquisition of the Acquired Business is consummated or (2) the Purchase Price is actually paid, and without regard to when or how such Purchase Price may be accounted for in accordance with GAAP; For purposes of this definition, PURCHASE PRICE shall mean the Fair Market Value of the property (whether cash, cash equivalents, Equity Interests, or other property) used, directly or indirectly, to pay (1) the purchase price, merger consideration, tender offer or exchange offer consideration, license or cross-license fees or other consideration (including any (x) contingent consideration, A-16 valued for this purpose assuming the maximum amount of contingent consideration will be paid, and (y) any compensation, bonus or other payment made to any shareholder, director, officer or employee of the Acquired Business other than ordinary course of business compensation for services to be performed following the acquisition of the Acquired Business) for the acquisition of the Acquired Business, and (2) all out-of-pocket costs and expenses incurred in connection with the acquisition of the Acquired Business (including any investment banker, finder or broker fee or commission and any accounting, legal or other professional expenses), without regard to whether such costs and expenses would be accounted for as purchase price in accordance with GAAP. Notwithstanding anything to the contrary contained in clause (d)(ii) of this definition, to the extent that the Permitted Acquisitions made by Borrower and its Consolidated Subsidiaries in any fiscal year are less than the amount permitted to be made in such period (without giving effect to any additional amount available as a result of this sentence), the amount of such difference may be carried forward and used to make Permitted Acquisitions in the next succeeding fiscal year of Borrower but only to such next succeeding fiscal year. (e) does not have a Material Adverse Effect; (f) upon the consummation of any acquisition that results in a person becoming a Subsidiary of a Loan Party, immediately following such acquisition: (i) 100% of the Equity Interest of any such new Subsidiary is pledged and delivered to Lender for its benefit under the applicable Security Agreement; and (ii) such Subsidiary becomes a party to the applicable Security Documents and becomes a Subsidiary Guarantor hereunder and executes a Joinder Agreement and other applicable Loan Documents all in accordance with Section 5.10(b); (g) upon the consummation of any acquisition that results in any Loan Party acquiring any assets that are not then subject to a perfected first priority security interest or Lien of the Lender under the Security Documents, immediately following such acquisition, the Loan Parties shall execute and deliver to Lender such agreements and other instruments, record such Mortgages and financing statements or other documents and take such other actions as may be required so that Lender has a perfected, first priority security interest in or Lien on all such acquired assets, subject to no Liens other than Permitted Liens. "PERMITTED BUSINESS DISPOSITION" means any Asset Sale that satisfies all of the following conditions: A-17 (a) the Equity Interest or other property sold is a Business Unit; (b) the Business Unit is sold for cash or cash equivalents; (c) the Asset Sale increases Borrower's Consolidated Tangible Net Worth; (d) the Asset Sale does not result in any Default or Event of Default; and (e) the aggregate amount of Discontinued Revenue for such Business Unit and for all other Business Units for which binding commitments for Asset Sales have been made after the Closing Date, is less than 25% of Borrower's consolidated Revenue for the 12 consecutive fiscal months immediately preceding the month in which any binding commitment is or may be made for such Asset Sale. "PERMITTED INVESTMENT" means any investment that Borrower is permitted to make for the investment of surplus cash under Borrower's investment policy statement as in effect on the Closing Date. "PERMITTED LIENS" has the meaning assigned to such term in Section 6.02. "PERMITTED REFINANCING" means any (i) issuance by the Borrower or any Subsidiary of the Borrower of securities (whether constituting debt or equity securities or securities exchangeable, exercisable or convertible for debt or equity securities) or (ii) incurrence of Indebtedness by the Borrower or any Subsidiary of the Borrower or (iii) obtaining by the Borrower or any Subsidiary of the Borrower of any credit facility, line of credit, loan or financing agreement or other credit arrangement providing, among other things, for borrowings or other extensions of credit to finance working capital requirements, inventory or equipment purchases or for other general corporate purposes (other than arrangements referred to in clause (g) of the definition of Indebtedness), whether or not such facility includes a binding commitment to make loans or otherwise extend credit, in each case that satisfies all the following conditions: (a) Borrower reduces the Commitment in accordance with Section 2.06(b), effective not later than immediately prior to any such issuance of securities or incurrence of Indebtedness or obtaining other credit arrangements, by an amount equal to (1) in the case of any issuance of securities or incurrence of Indebtedness, an amount, without duplication, equal to the net cash proceeds to the Borrower or its Subsidiaries, after (x) payment of all discounts, commissions, fees, expenses, taxes and other liabilities incurred in connection with the issuance of such securities or incurrence of Indebtedness and (y) funding any reserve, special deposit, sinking fund, prepayment, security deposit or other similar requirement, and (2) in the case of obtaining other credit arrangements, an amount equal to the total credit commitments thereunder, if any, and otherwise A-18 the maximum aggregate principal amount of Indebtedness that may be outstanding at any one time thereunder in each case assuming all conditions to any extension of credit, if any, are satisfied; and (b) Borrower repays or prepays outstanding Loans in accordance with Section 2.07(b), not later than simultaneously with any such issuance of securities or incurrence of Indebtedness or obtaining other credit arrangements, to the extent the Exposure would exceed the amount of the Commitment after giving effect to the reduction required by clause (a) above. "PERSON" means any natural person, corporation, business trust, joint venture, association, company, limited liability company, partnership or government, or any agency or political subdivision thereof. "PLAN" means any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Tax Code or Section 307 of ERISA, and in respect of which any Company or its ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA or with respect to which any Company could incur liability. "PLEDGED EQUITY INTERESTS" has the meaning set forth in the Security Agreements. "PLEDGED FOREIGN STOCK" shall mean the shares of capital stock of each direct or indirect Foreign Subsidiary of Borrower owned by Borrower or any Subsidiary of Borrower, including any and all certificates and other instruments now or hereafter evidencing any such capital stock. "PLEDGED INTERCOMPANY DEBT" has the meaning set forth in the Security Agreements. "PRO RATA PERCENTAGE" shall mean for (i) each of the fiscal years ending in 2004, 2005 and 2006, 1.0, (ii) for the fiscal year ending in 2003, 0.25 and (iii) for the fiscal year ending in 2007, 0.75. "PROPERTY" means any right, title or interest in or to property or assets of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible and including Equity Interests or other ownership interests of any person and whether now in existence or owned or hereafter entered into or acquired. "PURCHASE MONEY OBLIGATION" means, for any person, the obligations of such person in respect of Indebtedness incurred for the purpose of financing all or any part of the purchase price of any property (including Equity Interests of any person) or the cost of installation, construction or improvement of any property or assets and any refinancing thereof; provided, however, that such Indebtedness is incurred within 90 days after such acquisition of such property by such person. "REAL PROPERTY" means, collectively, all right, title and interest (including any leasehold estate) in and to any and all parcels of or interests in real property owned, leased or operated by A-19 any person, whether by lease, license or other means, together with, in each case, all easements, hereditaments and appurtenances relating thereto, all improvements and appurtenant fixtures and equipment, all general intangibles and contract rights and other property and rights incidental to the ownership, lease or operation thereof. "REGISTRATION RIGHTS AGREEMENT" means the registration rights agreement, dated June 27, 2003, entered into between Lender and Borrower in connection with the issuance of the Warrant. "REGULATION T" means Regulation T of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "REGULATION U" means Regulation U of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "REGULATION X" means Regulation X of the Board as from time to time in effect and all official rulings and interpretations thereunder or thereof. "RELEASED GUARANTOR" has the meaning assigned to such term in Section 7.09. "REQUIREMENTS OF LAW" means, collectively, any and all requirements of any Governmental Authority including any and all laws, ordinances, rules, regulations or similar statutes or case law and all final orders, judgments, decrees, injunctions, rulings or awards of any court of competent jurisdiction. "RESPONSIBLE OFFICER" of any corporation means any executive officer or Financial Officer of such corporation and any other officer or similar official thereof responsible for the administration of the obligations of such corporation in respect of this Agreement. "REVENUE" means, for any person in respect of any period, the revenue of such person for such period determined in accordance with GAAP as applied by Borrower. "SECTION 5.10(b) LISTED SUBSIDIARIES" has the meaning assigned to such term in Section 5.10(b). "SECURED PARTIES" has the meaning assigned to such term in the Security Documents. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SECURITY AGREEMENTS" means, collectively, the U.S. Security Agreement and each Foreign Security Agreement. "SECURITY AGREEMENT COLLATERAL" has the meaning set forth in any Security Agreement delivered on the Closing Date or thereafter pursuant to the terms of this Agreement. A-20 "SECURITY DOCUMENTS" means the Security Agreements, the Mortgages, the Control Agreements, the Perfection Certificate, the Collateral Assignments of Lease and each other security document or pledge agreement required by applicable local law to grant a valid, perfected security interest in any property acquired or developed, and all UCC or other financing statements or instruments of perfection required by this Agreement, any Security Agreement, Mortgage or Collateral Assignment of Lease to be filed with respect to the security interests in property and fixtures created pursuant to any Security Agreement, Mortgage or Collateral Assignment of Lease and any other document or instrument utilized to pledge as collateral for the Obligations any property of whatever kind or nature. "SUBSIDIARY" means, with respect to any person (the "PARENT") at any date, any corporation, limited liability company, partnership, association or other entity the accounts of which would be consolidated with those of the parent in the parent's consolidated financial statements if such financial statements were prepared in accordance with GAAP as of such date, as well as any other corporation, limited liability company, partnership, association or other entity (a) of which securities or other ownership interests representing more than 50% of the ordinary voting power or, in the case of a partnership, more than 50% of the general partnership interests are, as of such date, owned, controlled or held, or (b) that is, as of such date, otherwise Controlled, by the parent or one or more Subsidiaries of the parent or by the parent and one or more subsidiaries of the parent. "SUBSIDIARY GUARANTOR" means each Subsidiary listed on Schedule 1.01(b), each other Subsidiary that is or becomes a party to this Agreement pursuant to Section 5.10 (but excluding any Released Guarantor that remains released from its Guarantee in accordance with Section 7.09 hereof and including each Foreign Subsidiary that enters into any other Guarantee required by applicable Requirements of Law). "SYNTHETIC LEASE OBLIGATION" means the monetary obligation of a person under (a) a so-called synthetic, off-balance sheet or tax retention lease, or (b) an agreement for the use or possession of property creating obligations that do not appear on the balance sheet of such person but which, upon the insolvency or bankruptcy of such person, would be characterized as the indebtedness of such person (without regard to accounting treatment). "TAX CODE" means the Internal Revenue Code of 1986, as amended. "TAXES" mean any and all present or future taxes, duties, levies, fees, assessments, imposts, deductions, charges or withholdings, whether computed on a separate, consolidated, unitary, combined or other basis and any and all liabilities (including interest, fines, penalties or additions to tax) with respect to the foregoing. "TAX REFUND" has the meaning assigned to such term in Section 2.09(f). "TAX RETURN" means all returns, statements, filings, attachments and other documents or certifications required to be filed in respect of Taxes or any amendments thereof or thereto. A-21 "TAX SHARING AGREEMENT" means the tax sharing agreement dated as of June 27, 2003, among the Borrower and its Subsidiaries, as in effect on the Closing Date and without giving effect to any subsequent amendment, waiver or supplement thereof. "TITLE COMPANY" means any title insurance company as shall be retained by Borrower and reasonably acceptable to Lender. "TITLE POLICY" has the meaning assigned to such term in Section 5.10(d). "TRANSACTION DOCUMENTS" means any and all documents entered into or delivered in connection with the Transactions, including the Distribution Agreement, the Tax Sharing Agreement and the Loan Documents. "TRANSACTIONS" means, collectively, the transactions to occur pursuant to the Transaction Documents, including (a) the consummation of the Distribution; (b) the execution and delivery of the Loan Documents; (c) any borrowings pursuant to this Agreement; (d) the guarantees and grant of security interests provided in the Loan Documents; (e) the issue of the Warrant; and (f) the payment of all fees and expenses to be paid on or prior to the Closing Date and owing in connection with the foregoing. "UCC" has the meaning set forth in the U.S. Security Agreement. "U.S. SECURITY AGREEMENT" means a Security Agreement substantially in the form of Exhibit F among the Loan Parties for the benefit of the Secured Parties, as the same may be amended in accordance with the terms thereof and hereof, or such other agreements reasonably acceptable to Lender as shall be necessary to comply with applicable Requirements of Law and effective to grant to Lender a perfected, first-priority security interest in the Security Agreement Collateral covered thereby. "VOTING STOCK" means any class or classes of capital stock of Borrower pursuant to which the holders thereof have the general voting power under ordinary circumstances to elect at least a majority of the Board of Directors of Borrower. "WARRANT" means the warrant to acquire up to 8,333,334 shares of Borrower's Common Stock to be issued to Lender. "WHOLLY OWNED FOREIGN SUBSIDIARY" means any Wholly Owned Subsidiary that is a Foreign Subsidiary. "WHOLLY OWNED SUBSIDIARY" means, as to any person, (a) any corporation 100% of whose capital stock (other than directors' qualifying shares) is at the time owned by such person and/or one or more Wholly Owned Subsidiaries of such person and (b) any partnership, association, joint venture, limited liability company or other entity in which such person and/or one or more Wholly Owned Subsidiaries of such person have a 100% equity interest at such time. A-22 "WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. 1.02. TERMS GENERALLY. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words "include," "includes" and "including" shall be deemed to be modified by the phrase "without limitation." The word "will" shall be construed to have the same meaning and effect as the word "shall." Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument of other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified in accordance with the provisions hereof and thereof; (b) any reference herein to any person shall be construed to include such person's successors and permitted assigns; (c) the words "herein," "hereof" and "hereunder," and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision of this Agreement; (d) all references herein to Articles, Sections, Exhibits and Schedules shall be construed to refer to articles and sections of, and exhibits and schedules to, this Agreement; and (e) the words "asset" and "property" shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights. All references to the knowledge of any Company or to facts known by any Company shall mean actual knowledge of any Responsible Officer of any Loan Party or any of its Subsidiaries. 1.03. ACCOUNTING TERMS; GAAP. Except as otherwise expressly provided herein, all accounting terms not otherwise defined herein shall have the meanings assigned to them in conformity with GAAP, as in effect from time to time. Financial statements and other information required to be delivered by Borrower to Lenders pursuant to Sections 5.01(a), (b) and (c) shall be prepared in accordance with GAAP as in effect at the time of such preparation. 1.04. HEADINGS. Article and section headings and the table of contents used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, this Agreement. A-23 -----END PRIVACY-ENHANCED MESSAGE-----

EX-2.1

                                                                     Exhibit 2.1

================================================================================

                             DISTRIBUTION AGREEMENT

                                 by and between

                             CONEXANT SYSTEMS, INC.

                                       and

                          MINDSPEED TECHNOLOGIES, INC.

================================================================================

                                  June 27, 2003



                                TABLE OF CONTENTS



                                                                                                             Page
                                                                                                             ----
                                                                                                          
ARTICLE I  DEFINITIONS.....................................................................................    1
     Section 1.01        General...........................................................................    1

ARTICLE II  THE CONTRIBUTION...............................................................................   18
     Section 2.01        Intercorporate Reorganization.....................................................   18
     Section 2.02        Financial Instruments.............................................................   21
     Section 2.03        Intercompany Accounts and Arrangements............................................   22
     Section 2.04        Cash Management...................................................................   23
     Section 2.05        The Mindspeed Board...............................................................   24
     Section 2.06        Resignations; Transfer of Stock Held as Nominee...................................   24
     Section 2.07        Mindspeed Certificate of Incorporation and Bylaws; Rights Plan....................   25
     Section 2.08        Consents..........................................................................   25

ARTICLE III  THE DISTRIBUTION..............................................................................   26
     Section 3.01        The Distribution..................................................................   26
     Section 3.02        Fractional Shares.................................................................   26
     Section 3.03        Cooperation Prior to the Distribution.............................................   27
     Section 3.04        Conexant Board Action; Conditions to the Distribution.............................   27
     Section 3.05        Waiver of Conditions..............................................................   28

ARTICLE IV  MUTUAL RELEASE; INDEMNIFICATION; EXPENSES......................................................   29
     Section 4.01        Mutual Release....................................................................   29
     Section 4.02        Indemnification by Conexant.......................................................   30
     Section 4.03        Indemnification by Mindspeed......................................................   30
     Section 4.04        Limitations on Indemnification Obligations........................................   31
     Section 4.05        Procedures Relating to Indemnification............................................   32
     Section 4.06        Remedies Cumulative...............................................................   34
     Section 4.07        Indemnification under Tax Allocation Agreement....................................   34
     Section 4.08        Expenses..........................................................................   34

ARTICLE V  CERTAIN OTHER MATTERS...........................................................................   35
     Section 5.01        Insurance.........................................................................   35
     Section 5.02        Use of Names, Trademarks, etc.....................................................   38
     Section 5.03        License of Intellectual Property..................................................   41
     Section 5.04        Jazz Warrant......................................................................   51
     Section 5.05        Charitable Funds..................................................................   51

ARTICLE VI  ACCESS TO INFORMATION..........................................................................   51
     Section 6.01        Provision of Corporate Records....................................................   51
     Section 6.02        Access to Information.............................................................   52


                                       i



                                                                                                           
     Section 6.03        Production of Witnesses...........................................................   53
     Section 6.04        Retention of Records..............................................................   53
     Section 6.05        Confidentiality...................................................................   54

ARTICLE VII  MISCELLANEOUS.................................................................................   54
     Section 7.01        Entire Agreement; Construction....................................................   54
     Section 7.02        Survival of Agreements............................................................   55
     Section 7.03        Governing Law.....................................................................   55
     Section 7.04        Notices...........................................................................   55
     Section 7.05        Dispute Resolution................................................................   56
     Section 7.06        Consent to Jurisdiction...........................................................   57
     Section 7.07        Amendments........................................................................   57
     Section 7.08        Assignment........................................................................   57
     Section 7.09        Captions; Currency................................................................   58
     Section 7.10        Severability......................................................................   58
     Section 7.11        Parties in Interest...............................................................   58
     Section 7.12        Schedules.........................................................................   58
     Section 7.13        Termination.......................................................................   58
     Section 7.14        Waivers; Remedies.................................................................   58
     Section 7.15        Further Assurances................................................................   59
     Section 7.16        Counterparts......................................................................   59
     Section 7.17        Performance.......................................................................   59
     Section 7.18        Currency Calculations.............................................................   59
     Section 7.19        Interpretation....................................................................   59



                                       ii



                                    SCHEDULES
                            
Schedule 1.01(a)           -      Conexant Former Businesses
Schedule 1.01(b)           -      Amended Bylaws
Schedule 1.01(c)           -      Restated Certificate of Incorporation
Schedule 1.01(d)           -      Mindspeed Patents and Trademarks
Schedule 1.01(e)           -      Mindspeed Former Businesses
Schedule 1.01(f)           -      Mindspeed Company Codes
Schedule 1.01(g)           -      Mindspeed Financial Instruments
Schedule 1.01(h)           -      Mindspeed Specified Liabilities
Schedule 1.01(i)           -      Mindspeed Real Property
Schedule 1.01(j)           -      Mindspeed Subsidiaries
Schedule 1.01(k)           -      Certain IT Assets
Schedule 2.01(c)           -      Reorganization Transactions
Schedule 2.03(a)           -      Intercompany Accounts
Schedule 2.03(b)(ii)       -      Intercompany Agreements
Schedule 2.05              -      Mindspeed Directors
Schedule 2.06              -      Continuing Directors and Officers
Schedule 4.02(b)           -      Certain Form 10 Sections



                                      iii



                             DISTRIBUTION AGREEMENT

                  This DISTRIBUTION AGREEMENT (this "Agreement") is dated as of
June 27, 2003 by and between CONEXANT SYSTEMS, INC., a Delaware corporation
("Conexant"), and MINDSPEED TECHNOLOGIES, INC., a Delaware corporation and a
wholly-owned subsidiary of Conexant ("Mindspeed"). Capitalized terms used in
this Agreement shall have the meanings set forth in Section 1.01.

                  WHEREAS, the Conexant Board has determined that it is
appropriate and desirable to distribute all outstanding shares of Mindspeed
Common Stock on a pro rata basis to the holders of Conexant Common Stock; and

                  WHEREAS, subject to the terms and conditions contained herein,
immediately prior to the Distribution, Conexant and the Conexant Subsidiaries
will transfer the Mindspeed Assets and the Mindspeed Subsidiaries to Mindspeed
or one of the Mindspeed Subsidiaries and Mindspeed and the Mindspeed
Subsidiaries will assume the Mindspeed Liabilities, all as more fully described
in this Agreement (the "Contribution"); and

                  WHEREAS, Conexant and Mindspeed have determined that it is
appropriate and desirable to set forth the principal corporate transactions
required to effect the Contribution and the Distribution and certain other
agreements that will govern certain matters relating to the Contribution and the
Distribution and the relationship of Conexant, Mindspeed and the respective
members of the Conexant Group and the Mindspeed Group following the Contribution
and the Distribution.

                  NOW, THEREFORE, in consideration of the premises and of the
respective agreements and covenants contained in this Agreement, the parties
hereby agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

                  Section 1.01 General. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):

                  "Accounts Receivable" means accounts, loans and notes
receivable (whether current or not current), including receivables due from
employees, and all proceeds thereof and rights to payment with respect thereto.

                  "Action" means, with respect to any Person, any actual or
threatened or future action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Entity or any claims or other legal
matters that have been or may be asserted by or against, or otherwise affect,
such Person.



                  "Affiliate" means, with respect to any specified Person, any
other Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person; provided, however, that for purposes of the Separation Agreements,
following the Time of Distribution, neither Conexant nor any Conexant Subsidiary
shall be deemed to be an Affiliate of any member of the Mindspeed Group and
neither Mindspeed nor any Mindspeed Subsidiary shall be deemed to be an
Affiliate of any member of the Conexant Group. For purposes of the immediately
preceding sentence, the term "control" (including, with correlative meanings,
the terms "controlled by" and "under common control with"), as used with respect
to any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through ownership of voting securities, by contract or otherwise.

                  "Agreement" shall have the meaning set forth in the preamble.

                  "American Stock Exchange" means the American Stock Exchange
LLC.

                  "Asset/Liability Allocation Matter" shall have the meaning set
forth in Section 2.01(b).

                  "Assets" means any and all assets, properties and rights,
whether tangible or intangible, real, personal or mixed, fixed, contingent or
otherwise, and wherever located (other than ownership interests in
Subsidiaries), including the following:

         (a)      Real Property;

         (b)      Machinery and Equipment;

         (c)      Inventories;

         (d)      bank accounts;

         (e)      cash (including cash in bank accounts), cash on hand, cash
         equivalents, funds, certificates of deposit, similar instruments,
         travelers checks and cash deposits held by third parties securing or
         otherwise collateralizing obligations;

         (f)      Accounts Receivable;

         (g)      advances, performance and surety bonds, and interests as
         beneficiary under letters of credit and other similar instruments and
         all proceeds thereof;

         (h)      Securities;

         (i)      Hedging Arrangements;

         (j)      Data and Records;

                                       2



         (k)      Patents and Trademarks;

         (l)      Trade Secrets;

         (m)      Contracts;

         (n)      credits, prepayments and prepaid expenses;

         (o)      claims, causes of action, rights under express or implied
         warranties, guarantees and indemnities and similar rights, rights of
         recovery, rights of set-off, rights of subrogation and all other rights
         of any kind (including the right to receive mail and other
         communications);

         (p)      Permits;

         (q)      goodwill and going concern value; and

         (r)      other intangible assets not otherwise included in clauses (a)
         through (q) of this definition.

                  "Assigning Party" shall have the meaning set forth in Section
2.08.

                  "Broadband Business" means (a) the businesses and operations
engaged in prior to the Time of Distribution by the members of the
Pre-Distribution Group (but with respect to each such member who has ceased to
be an Affiliate of Conexant or its predecessors, only businesses engaged in
prior to the time that such member of the Pre-Distribution Group ceased to be an
Affiliate of Conexant or its predecessors) of researching, developing,
designing, engineering, manufacturing, having manufactured, assembling, having
assembled, selling, distributing, installing, modifying, repairing, servicing
and supporting semiconductor products and systems for communications electronics
markets such as personal computers, personal imaging devices, network access
products, digital information and entertainment products, and activities related
thereto, (b) Former Businesses set forth on Schedule 1.01(a), (c) other Former
Business related primarily to any of the foregoing, and (d) activities related
primarily to the foregoing, other than, in the case of each of the foregoing
clauses (a), (b), (c) and (d), any businesses, operations or activities included
in the Mindspeed Business.

                  "Business Day" means any day other than a Saturday, Sunday or
other day when banks are authorized or required by law to be closed in
California or New York.

                  "Bylaws" means Mindspeed's amended Bylaws in the form attached
hereto as Schedule 1.01(b).

                  "Certificate of Incorporation" means Mindspeed's restated
certificate of incorporation in the form attached hereto as Schedule 1.01(c).

                                       3



                  "Claims Administration" means the processing of claims made
under Policies, including the reporting of claims to the insurance carrier,
management and defense of claims, and providing for appropriate releases upon
settlement of claims.

                  "Claims Made Policies" shall have the meaning set forth in
Section 5.01(b)(ii).

                  "Code" means the Internal Revenue Code of 1986, as amended, or
any successor legislation.

                  "Commission" means the Securities and Exchange Commission.

                  "Conexant" shall have the meaning set forth in the preamble.

                  "Conexant Assets" means the following:

         (a)      all rights of any member of the Conexant Group under any
         Separation Agreement to which it is or becomes a party;

         (b)      all Assets which are expressly allocated to any member of the
         Conexant Group pursuant to the Employee Matters Agreement or the Tax
         Allocation Agreement;

         (c)      the following specifically enumerated Assets which immediately
         prior to the Time of Distribution are owned by Conexant or any of its
         Subsidiaries (including members of the Mindspeed Group), in each case
         whether or not such Assets are used in or relate to the Broadband
         Business or the Mindspeed Business:

                           (i)      all Conexant Bank Accounts;

                           (ii)     all Conexant Cash;

                           (iii)    all Accounts Receivable other than Mindspeed
                  Accounts Receivable;

                           (iv)     all Inventories other than Mindspeed
                  Inventories;

                           (v)      all Securities;

                           (vi)     all Hedging Arrangements;

                           (vii)    all Machinery and Equipment other than
                  Mindspeed Machinery and Equipment;

                           (viii)   all Real Property other than Mindspeed Real
                  Property;

                           (ix)     all Patents and Trademarks other than those
                  set forth on Schedule 1.01(d);

                                       4



                           (x)      all rights in, and to the use of, the
                  Conexant Marks, other than as provided for in Section 5.02;

                           (xi)     all Policies and all rights, benefits and
                  privileges thereunder and related thereto (including the right
                  to receive any and all return premiums with respect thereto),
                  other than rights with respect to Policies to the extent
                  provided in Sections 5.01(b) and 5.01(c); and

                           (xii)    all information technology Assets identified
                  in Schedule 1.01(k) as Conexant's;

         (d)      all other Assets which immediately prior to the Time of
         Distribution are owned by Conexant or any of its Subsidiaries
         (including members of the Mindspeed Group) that are not Mindspeed
         Assets; and

         (e)      all rights, causes of action and claims of Conexant or any of
         its Subsidiaries (including members of the Mindspeed Group) to the
         extent relating to any asset described in clauses (a) through (d)
         above.

                  Anything contained herein to the contrary notwithstanding,
assets described in paragraphs (b) and (c) of the definition of "Mindspeed
Assets" will not be included in Conexant Assets.

                  "Conexant Bank Accounts" means all bank accounts of Conexant
or any of its Subsidiaries (including members of the Mindspeed Group)
immediately prior to the Time of Distribution, other than Mindspeed Bank
Accounts.

                  "Conexant Board" means the Board of Directors of Conexant or a
duly authorized committee thereof.

                  "Conexant Cash" means all (i) cash (including cash in bank
accounts), cash on hand, cash equivalents, funds, certificates of deposit,
similar instruments and travelers checks held by Conexant or any of its
Subsidiaries and Affiliates (including members of the Mindspeed Group)
immediately prior to the Time of Distribution and (ii) cash deposits held by
third parties securing or otherwise collateralizing obligations of Conexant or
any of its Subsidiaries or Affiliates (including members of Mindspeed Group)
immediately prior to the Time of Distribution, other than, in the case of each
of the foregoing clauses (i) and (ii), Mindspeed Cash.

                  "Conexant Common Stock" means the common stock, par value $.01
per share, of Conexant.

                  "Conexant Expenses" means all out-of-pocket fees, costs and
expenses of Conexant or any of its Subsidiaries (including members of the
Mindspeed Group) incurred prior to the Time of Distribution in connection with
effecting the Contribution, the Distribution, the preparation, execution and
delivery of the Separation Agreements and the consummation of the Contribution
and the Distribution, other than Mindspeed Expenses.

                                       5



                  "Conexant Group" means Conexant and the Conexant Subsidiaries.

                  "Conexant Indemnitees" mean each member of the Conexant Group
and each of their respective Representatives and Affiliates and each of the
heirs, executors, successors and permitted assigns of any of the foregoing.

                  "Conexant Liabilities" means the following:

         (a)      all Liabilities of any member of the Conexant Group under any
         Separation Agreement to which it is or becomes a party;

         (b)      all Liabilities for which any member of the Conexant Group is
         expressly made responsible pursuant to the Employee Matters Agreement
         or the Tax Allocation Agreement;

         (c)      the following specifically enumerated Liabilities of Conexant
         or any of its Subsidiaries (including members of the Mindspeed Group),
         in each case whether or not such Liabilities relate to the Broadband
         Business, the Conexant Assets, the Mindspeed Business or the Mindspeed
         Assets:

                           (i)      all Liabilities in respect of the
                  Convertible Notes; and

         (d)      all other Liabilities of Conexant or any of its Subsidiaries
         (including members of the Mindspeed Group) in respect of operations
         engaged in prior to the Time of Distribution that are not Mindspeed
         Liabilities.

                  Anything contained herein to the contrary notwithstanding,
Liabilities described in paragraphs (b) and (c) of the definition of "Mindspeed
Liabilities" will not be included in Conexant Liabilities.

                  "Conexant Marks" means the names, trademarks, trade names,
domain names and service marks "Conexant", "Conexant Systems" and "Conexant
Systems, Inc." and all corporate symbols and logos related thereto and all
names, trademarks, trade names, domain names and service marks which include the
words "Conexant", "Conexant Systems" or "Conexant Systems, Inc." or any
derivative thereof and any other name, mark or symbol connoting "Conexant" or
which constitutes a formative thereof.

                  "Conexant Subsidiary" means each Subsidiary of Conexant other
than Mindspeed and the Mindspeed Subsidiaries.

                  "Consents" means consents, approvals, waivers, clearances,
exemptions, allowances, novations, authorizations, filings, registrations and
notifications.

                  "Contracts" means all agreements, personal property leases,
contracts (including employee contracts), licenses, memoranda of understanding,
letters of intent, sales orders, purchase orders, open bids and other
commitments, including in each case, all

                                       6



amendments, modifications and supplements thereto and waivers and consents
thereunder, but excluding real property leases.

                  "Contribution" shall have the meaning set forth in the
recitals.

                  "Convertible Notes" means Conexant's (a) 4-1/4% convertible
subordinated notes due May 1, 2006 issued under the Indenture dated as of May
12, 1999 between Conexant and The First National Bank of Chicago, as trustee and
(b) 4% convertible subordinated notes due February 1, 2007 issued under the
Indenture dated as of February 1, 2000 between Conexant and Bank One Trust
Company, National Association, as trustee.

                  "Conveyance and Assumption Instruments" means, collectively,
the various agreements, bills of sale, stock powers, certificates of title,
instruments of conveyance and assignment, instruments of assumption and other
instruments and documents to be entered into to effect the transfer of Assets
and Subsidiaries and the assumption of Liabilities contemplated by the
transactions described in Sections 2.01(b) and (c).

                  "Credit Agreement" means the senior secured revolving credit
agreement dated as of the date hereof entered into prior to the Time of
Distribution by and between Conexant and Mindspeed under which Mindspeed may
borrow up to $50 million, subject to the terms set forth therein, together with
any related security documents and ancillary agreements.

                  "Data and Records" means financial, accounting, corporate,
operating, design, manufacturing, test and other data and records (in each case,
in whatever form or medium, including electronic media), including books,
records, notes, sales and sales promotional material and data, advertising
materials, credit information, cost and pricing information, customer, supplier
and agent lists, other records pertaining to customers, business plans,
reference catalogs, payroll and personnel records and procedures, blue-prints,
research and development files, data and laboratory books, sales order files,
litigation files, minute books, stock ledgers, stock transfer records and other
similar data and records.

                  "Dispute" shall have the meaning set forth in Section 7.05.

                  "Distribution" means the distribution, on the basis provided
for in Section 3.01, to the holders of Conexant Common Stock of the shares of
Mindspeed Common Stock owned by Conexant on the Distribution Date.

                  "Distribution Agent" means the distribution agent selected by
Conexant to distribute Mindspeed Common Stock in connection with the
Distribution.

                  "Distribution Date" means the date determined by the Conexant
Board in accordance with Section 3.01 as the date as of which the Distribution
will be effected.

                  "Employee Matters Agreement" means the Employee Matters
Agreement dated as of the date hereof entered into prior to the Time of
Distribution by and between Conexant and Mindspeed.

                                       7



                  "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

                  "Financing Agreements" means the Credit Agreement, the Initial
Warrants, the Financing Warrants, the Registration Rights Agreements, and each
other agreement, instrument or document expressly contemplated thereby to be
entered into by any party thereto.

                  "Financing Warrants" means warrants to purchase shares of
Mindspeed Common Stock to be issued by Mindspeed to Conexant in connection with
borrowings under the Credit Agreement.

                  "Form 10" means the registration statement on Form 10 filed by
Mindspeed with the Commission to effect the registration of the Mindspeed Common
Stock pursuant to the Exchange Act, including all amendments thereto filed by
Mindspeed with the Commission prior to the Time of Distribution.

                  "Former Business" means any corporation, partnership, entity,
division, business unit, business, assets, plants, product line, operations or
contract (including any assets and liabilities comprising the same) that has
been sold, conveyed, assigned, transferred or otherwise disposed of or divested
(in whole or in part) by any member of the Pre-Distribution Group or the
operations, activities or production of which has been discontinued, abandoned,
completed or otherwise terminated (in whole or in part) by any member of the
Pre-Distribution Group.

                  "Governmental Entity" means any government or any court,
arbitral tribunal, administrative agency or commission or other governmental or
regulatory authority or agency, federal, state, local, domestic, foreign or
international.

                  "Group" means the Conexant Group or the Mindspeed Group, as
applicable.

                  "Hedging Arrangements" means swaps, collars, caps, forward
contracts and other hedging arrangements of any kind.

                  "Indemnifiable Losses" means any and all losses, Liabilities,
claims, damages, deficiencies, obligations, fines, payments, Taxes, Liens, costs
and expenses, matured or unmatured, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, known or unknown, whenever arising and
whether or not resulting from Third Party Claims (including the costs and
expenses of any and all Actions; all amounts paid in connection with any
demands, assessments, judgments, settlements and compromises relating thereto;
interest and penalties with respect thereto; out-of-pocket expenses and
reasonable attorneys', accountants' and other experts' fees and expenses
reasonably incurred in investigating, preparing for or defending against any
such Actions or in asserting, preserving or enforcing an Indemnitee's rights
hereunder; and any losses that may result from the granting of injunctive relief
as a result of any such Actions).

                  "Indemnifying Party" shall have the meaning set forth in
Section 4.04(a).

                                       8



                  "Indemnitee" means any of the Conexant Indemnitees or the
Mindspeed Indemnitees who or which is entitled to seek indemnification under
this Agreement.

                  "Indemnity Reduction Amounts" shall have the meaning set forth
in Section 4.04(a).

                  "Information" means all records, books, contracts,
instruments, computer data and other data and information (in each case, in
whatever form or medium, including electronic media).

                  "Information Statement" means the information statement with
respect to Mindspeed, which is part of the Form 10, sent to holders of Conexant
Common Stock in connection with the Distribution.

                  "Initial Warrants" mean warrants to purchase shares of
Mindspeed Common Stock dated as of the date hereof issued by Mindspeed to
Conexant prior to the Time of Distribution.

                  "Insurance Proceeds" means monies (a) received by an insured
from an insurance carrier, (b) paid by an insurance carrier on behalf of an
insured or (c) received from any third party in the nature of insurance,
contribution or indemnification in respect of any Liability.

                  "Intellectual Property" means all Patents and Trademarks,
Trade Secrets, and other intellectual property rights existing as of the Time of
Distribution.

                  "Inventories" means inventories, including raw materials,
work-in-process, materials, components, finished goods, parts, accessories and
supplies.

                  "Jazz" means Jazz Semiconductor, Inc. (formerly named
Specialtysemi, Inc.), a Delaware corporation.

                  "Jazz Contribution Agreement" means the Contribution Agreement
dated February 23, 2002 among Jazz, Conexant and Carlyle Capital Investors,
L.L.C., as amended by the First Amendment to Contribution Agreement dated March
12, 2002.

                  "Jazz Warrant" means the warrant to purchase 2.9 million
shares of Conexant Common Stock issued by Conexant to Jazz dated March 12, 2002,
as it may be adjusted from time to time.

                  "Liabilities" means any and all claims, debts, liabilities,
commitments and obligations of whatever nature, whether fixed, contingent or
absolute, matured or unmatured, liquidated or unliquidated, accrued or not
accrued, known or unknown, due or to become due, whenever or however arising and
whether or not the same would be required by generally accepted accounting
principles to be reflected as a liability in financial statements or disclosed
in the notes thereto, including all costs and expenses relating thereto and
those claims, debts, liabilities, commitments and obligations:

                                       9



         (a)      based upon, arising out of or relating to any law, statute,
         rule, regulation, judgment, order, decision or consent decree of any
         Governmental Entity or any noncompliance therewith or breach or
         violation of any thereof;

         (b)      in respect of accounts payable;

         (c)      in respect of outstanding checks;

         (d)      based upon, arising out of or relating to workers'
         compensation, automobile liability, general liability, product
         liability, intellectual property liability and other claims and matters
         (whether direct or for indemnification of any Person or otherwise, and
         whether insured or uninsured);

         (e)      based upon, arising out of or relating to Actions or any award
         of any arbitrator of any kind;

         (f)      in respect of salary, bonuses, incentive payments, severance
         payments and other compensation payments and all Taxes and withholdings
         related thereto;

         (g)      in respect of employee welfare and fringe benefits (including
         claims for medical and disability benefits);

         (h)      based upon, arising out of or relating to environmental
         matters (including the presence, release or threatened release of
         hazardous materials or any other environmental conditions or the
         violation of any environmental laws), including all removal,
         remediation and cleanup costs, investigatory costs, settlement costs,
         governmental response costs, natural resources damages, property
         damages, personal injury damages and all other costs and damages;

         (i)      based upon, arising out of or relating to Contracts;

         (j)      based upon, arising out of or relating to torts (whether based
         on negligence, strict liability or otherwise) or infringements; and

         (k)      in respect of products and services, including warranty
         liabilities, deferred revenues, product liability claims and
         liabilities in respect of the return, repair or replacement of
         products.

                  "License and Assignment Agreement" means the License and
Assignment Agreement dated as of June 26, 2003 by and between Conexant and
Mindspeed.

                  "Lien" means any lien, security interest, pledge, mortgage,
charge, restriction, retention of title agreement or other encumbrance of
whatever nature.

                  "Machinery and Equipment" means machinery, equipment, tooling,
vehicles, furniture and fixtures (other than real property fixtures), leasehold
improvements, repair parts, tools, plant, laboratory and office equipment and
supplies, computer hardware and software,

                                       10



computer networking equipment, engineering and design equipment, test equipment
and other tangible personal property (other than tangible personal property
included in other categories of assets in the definition of "Assets"), together
with any rights or claims arising out of maintenance or service contracts
relating thereto or the breach of any express or implied warranty by the
manufacturers or sellers of any of such assets or any component part thereof.

                  "Mindspeed" shall have the meaning set forth in the preamble.

                  "Mindspeed Accounting Ledgers" means the general ledgers and
other subsidiary ledgers of Conexant for each of the Mindspeed Company Codes.

                  "Mindspeed Accounts Receivable" mean the Accounts Receivable
set forth on the Mindspeed Accounting Ledgers immediately prior to the Time of
Distribution.

                  "Mindspeed Assets" means the following:

         (a)      all rights of any member of the Mindspeed Group under any
Separation Agreement to which it is or becomes a party;

         (b)      all Assets which are expressly allocated to any member of the
Mindspeed Group pursuant to the Employee Matters Agreement or the Tax Allocation
Agreement;

         (c)      the following specifically enumerated Assets which immediately
prior to the Time of Distribution are owned by Conexant or any of its
Subsidiaries (including members of the Mindspeed Group):

                           (i)      the Mindspeed Bank Accounts;

                           (ii)     the Mindspeed Cash (subject to Section
                  2.04(b));

                           (iii)    the Mindspeed Accounts Receivable;

                           (iv)     the Mindspeed Inventories;

                           (v)      the Mindspeed Machinery and Equipment;

                           (vi)     the Mindspeed Real Property;

                           (vii)    the Patents and Trademarks set forth on
                  Schedule 1.01(d);

                           (viii)   rights to the extent relating to the
                  Mindspeed Business to receive indemnification from Rockwell
                  pursuant to the Rockwell Distribution Agreement;

                           (ix)     rights to the extent relating to the
                  Mindspeed Business to receive indemnification from Skyworks
                  pursuant to the Skyworks Distribution Agreement;

                                       11



                           (x)      rights to the extent relating to the
                  Mindspeed Business to receive indemnification from Jazz
                  pursuant to the Jazz Contribution Agreement;

                           (xi)     one-third of the amount pre-paid by Conexant
                  to ARM Limited, or $580,909, pursuant to the Agreement dated
                  June 14, 2002 between Conexant and ARM Limited; and

                           (xii)    all information technology Assets identified
                  in Schedule 1.01(k) as Mindspeed's;

         (d)      the following Assets (other than those described in paragraphs
         (b) and (c) of the definition of "Conexant Assets") which immediately
         prior to the Time of Distribution are owned by Conexant or any of its
         Subsidiaries (including members of the Mindspeed Group) and which are
         used exclusively in or relate exclusively to the Mindspeed Business, as
         the same shall exist as of such time:

                           (i)      Contracts;

                           (ii)     advances, performance and surety bonds, and
                  interests as beneficiary under letters of credit and other
                  similar instruments and all proceeds thereof;

                           (iii)    Permits;

                           (iv)     credits, prepayments and prepaid expenses;

                           (v)      claims, causes of action, rights under
                  express or implied warranties, guarantees and indemnities and
                  similar rights, rights of recovery, rights of set-off, rights
                  of subrogation and all other rights of any kind (including the
                  right to receive mail and other communications); and

                           (vi)     goodwill, going concern value and other
                  intangible assets not otherwise included in clauses (a)
                  through (q) of the definition of "Assets";

         (e)      the following Assets (other than those described in paragraphs
         (b) and (c) of the definition of "Conexant Assets") which immediately
         prior to the Time of Distribution are owned by Conexant or any of its
         Subsidiaries (including members of the Mindspeed Group) and which are
         used 75% or more in or relate 75% or more to the Mindspeed Business, as
         the same shall exist as of such time:

                           (i)      Data and Records; and

                           (ii)     Trade Secrets; and

                                       12



         (f)      all rights, causes of action and claims of Conexant or any of
         its Subsidiaries (including members of the Mindspeed Group) to the
         extent relating to any asset described in clauses (a) through (e)
         above.

                  Anything contained herein to the contrary notwithstanding,
assets described in paragraphs (b) and (c) of the definition of "Conexant
Assets" will not be included in Mindspeed Assets.

                  "Mindspeed Bank Accounts" means all bank accounts which are
solely in the name of one or more members of the Mindspeed Group immediately
prior to the Time of Distribution.

                  "Mindspeed Board" means the Board of Directors of Mindspeed.

                  "Mindspeed Business" means (a) the business and operations
engaged in prior to the Time of Distribution by the members of the
Pre-Distribution Group (but with respect to each such member who has ceased to
be an Affiliate of Conexant or its predecessors, only businesses engaged in
prior to the time that such member of the Pre-Distribution Group ceased to be an
Affiliate of Conexant or its predecessors) of researching, developing,
designing, engineering, manufacturing, having manufactured, assembling, having
assembled, selling, distributing, installing, modifying, repairing, servicing
and supporting semiconductor networking products for communications applications
in enterprise, access, metropolitan and wide-area networks and activities
related thereto, (b) Former Businesses set forth on Schedule 1.01(e), (c) other
Former Businesses related primarily to any of the foregoing and (d) activities
related primarily to the foregoing.

                  "Mindspeed Cash" means (i) the following to the extent set
forth on the Mindspeed Accounting Ledgers immediately prior to the Time of
Distribution or located at locations of the Mindspeed Business at the Time of
Distribution: cash in Mindspeed Bank Accounts, cash on hand, cash equivalents,
funds, certificates of deposits, similar instruments and travelers checks and
(ii) cash deposits held by third parties securing or otherwise collateralizing
obligations relating to the Mindspeed Business immediately prior to the Time of
Distribution.

                  "Mindspeed Common Stock" means the common stock, par value
$.01 per share, of Mindspeed.

                  "Mindspeed Company Codes" means the Mindspeed company codes
set forth on Schedule 1.01(f).

                  "Mindspeed Expenses" means the following out-of-pocket fees,
costs and expenses of Conexant or any of its Subsidiaries (including members of
the Mindspeed Group), in each case, whether incurred and/or paid before, at or
after the Time of Distribution:

         (a)      all out-of-pocket fees, costs, and expenses (including legal
         fees and expenses) of and related to the Credit Agreement, the credit
         facility established thereby and the Financing Warrants; and

                                       13



         (b)      all out-of-pocket fees, costs and expenses of the transfer
         agent and registrar for the Mindspeed Common Stock.

                  "Mindspeed Financial Instruments" means those credit
facilities, guaranties, foreign currency forward exchange contracts, comfort
letters, letters of credit and similar instruments related to the Mindspeed
Business under which any member of the Conexant Group has any primary,
secondary, contingent, joint, several or other Liability, including those set
forth on Schedule 1.01(g).

                  "Mindspeed Group" means Mindspeed and the Mindspeed
Subsidiaries.

                  "Mindspeed Indemnitees" means each member of the Mindspeed
Group and each of their respective Representatives and Affiliates and each of
the heirs, executors, successors and permitted assigns of any of the foregoing.

                  "Mindspeed Inventories" means the Inventories set forth on the
Mindspeed Accounting Ledgers immediately prior to Time of Distribution.

                  "Mindspeed Liabilities" means the following:

         (a)      all Liabilities of any member of the Mindspeed Group under any
         Separation Agreement to which it is or becomes a party;

         (b)      all Liabilities for which any member of the Mindspeed Group is
         expressly made responsible pursuant to the Employee Matters Agreement
         or the Tax Allocation Agreement;

         (c)      the following specifically enumerated Liabilities of Conexant
         or any of its Subsidiaries (including members of the Mindspeed Group),
         in each case whether or not such Liabilities relate to the Broadband
         Business, the Conexant Assets, the Mindspeed Business or the Mindspeed
         Assets:

                           (i)      all Liabilities set forth on the Mindspeed
                  Accounting Ledgers immediately prior to the Time of
                  Distribution; and

                           (ii)     all Liabilities set forth on Schedule
                  1.01(h); and

         (d)      all Liabilities (other than those described in paragraphs (b)
         and (c) of the definition of "Conexant Liabilities") of Conexant or any
         of its Subsidiaries (including members of the Mindspeed Group) to the
         extent based upon, arising out of or relating to the Mindspeed Assets
         or the Mindspeed Business, including:

                           (i)      all Liabilities (including Liabilities
                  arising out of any breaches or violations) to the extent
                  relating to the Mindspeed Business based upon, arising out of
                  or relating to Contracts (whether or not such Contracts
                  constitute Mindspeed Assets) (including any primary,
                  secondary, contingent or other obligations, such as under
                  guaranties or indemnities, in respect of such

                                       14



                  Contracts), including (A) all Liabilities to the extent
                  relating to the Mindspeed Assets or the Mindspeed Business for
                  which Conexant has agreed to indemnify Rockwell and certain
                  other Persons pursuant to the Rockwell Distribution Agreement,
                  (B) all Liabilities to the extent relating to the Mindspeed
                  Assets or the Mindspeed Business for which Conexant has agreed
                  to indemnify Skyworks and certain other Persons pursuant to
                  the Skyworks Distribution Agreement and (C) all Liabilities to
                  the extent relating to the Mindspeed Assets or the Mindspeed
                  Business for which Conexant has agreed to indemnify Jazz and
                  certain other Persons pursuant to the Jazz Contribution
                  Agreement; and

                           (ii)     the Actions set forth in paragraph E of
                  Schedule 1.01(h).

                  Anything contained herein to the contrary notwithstanding,
Liabilities described in paragraphs (b) and (c) of the definition of "Conexant
Liabilities" will not be included in Mindspeed Liabilities.

                  "Mindspeed Machinery and Equipment" means the Machinery and
Equipment set forth on the Mindspeed Accounting Ledgers immediately prior to the
Time of Distribution.

                  "Mindspeed Real Property" means the Real Property set forth on
Schedule 1.01(i).

                  "Mindspeed Subsidiary" means each Person listed on Schedule
1.01(j).

                  "New Jazz-Mindspeed Warrant" shall have the meaning set forth
in Section 5.04.

                  "Occurrence Basis Policies" shall have the meaning set forth
in Section 5.01(b)(i).

                  "Patents and Trademarks" means (a) all patents (including
utility and design patents, industrial designs and utility models), patent
applications and patent and invention disclosures, together with all
reissuances, continuations, continuations-in-part, divisions, revisions,
supplementary protection certificates, extensions and re-examinations thereof,
and any other U.S. or foreign patent rights entitled to the same priority claim
(in whole or in part) as any of the foregoing, (b) trademarks, service marks,
trade names, trade dress, logos, Internet domain names, business and product
names and slogans and all registrations and applications for registration of any
of the foregoing, (c) copyrights and all applications, registrations and
renewals in connection therewith and (d) mask work and semiconductor chip right
applications, registrations and renewals in connection therewith.

                  "Patent License Agreement" means the Patent License Agreement
dated as of the date hereof by and between Conexant and Mindspeed.

                                       15



                  "Permits" means licenses, permits, authorizations, Consents,
certificates, registrations, variances, franchises and other approvals from any
Governmental Entity, including those relating to environmental matters.

                  "Person" means any individual, partnership, joint venture,
corporation, limited liability entity, trust, unincorporated organization or
other entity (including a Governmental Entity).

                  "Policies" means all insurance policies, insurance contracts
and claim administration contracts of any kind of Conexant and its Subsidiaries
(including members of the Mindspeed Group) and their predecessors which were or
are in effect at any time at or prior to the Time of Distribution (other than
insurance policies, insurance contracts and claim administration contracts
established in contemplation of the Distribution to cover only Mindspeed and its
Subsidiaries after the Time of Distribution), including the Property Policy,
primary, excess and umbrella, commercial general liability, fiduciary liability,
product liability, automobile, aircraft, property and casualty, business
interruption, directors and officers liability, employment practices liability,
workers' compensation, crime, errors and omissions, special accident, cargo and
employee dishonesty insurance policies and captive insurance company
arrangements, together with all rights, benefits and privileges thereunder.

                  "Pre-Distribution Group" means (a) each of Conexant, the
Subsidiaries of Conexant existing immediately prior to the Time of Distribution
(including members of the Mindspeed Group) and Persons that have ceased to be
Subsidiaries of Conexant prior to the Time of Distribution, (b) each of the
predecessors of each of the foregoing (including Rockwell) and (c) each of the
Persons that have ceased to be Subsidiaries and other Affiliates of each of the
foregoing and their predecessors prior to the Time of Distribution.
Notwithstanding the foregoing, (i) Boeing North American, Inc. and Persons who
are Affiliates of Boeing North American, Inc. after December 6, 1996 will not
constitute members of the Pre-Distribution Group for periods after December 6,
1996, (ii) Rockwell and Persons who are Affiliates of Rockwell after December
31, 1998 will not constitute members of the Pre-Distribution Group for periods
after December 31, 1998 and (iii) Washington and Persons who are Affiliates of
Washington or its successor after June 25, 2002 will not constitute members of
the Pre-Distribution Group for periods after June 25, 2002.

                  "Privileged Information" means, with respect to a Group,
Information regarding a member of such Group, or any of its operations,
employees, Assets or Liabilities (whether in documents or stored in any other
form or known to its employees or agents) that is or may be protected from
disclosure pursuant to the attorney-client privilege, the work product doctrine
or other applicable privileges, that a member of the other Group has or may come
into possession of or has obtained or may obtain access to pursuant to this
Agreement or otherwise.

                  "Property Policy" means the Conexant property insurance
policies for the policy year July 1, 2002 through June 30, 2003.

                                       16



                  "Real Property" means real property (including land, plants,
buildings, real property fixtures and improvements) and real property interests
(including real property leases, easements and rights of way, occupancy or use).

                  "Recipient Party" shall have the meaning set forth in Section
2.08.

                  "Record Date" means the close of business on June 20, 2003.

                  "Registration Rights Agreements" means the two Registration
Rights Agreements dated as of the date hereof entered into prior to the Time of
Distribution by and between Conexant and Mindspeed, one each relating to (i) the
Initial Warrants and (ii) the Financing Warrants.

                  "Representative" means, with respect to any Person, any of
such Person's directors, officers, employees, agents, consultants, advisors,
accountants, attorneys and representatives.

                  "Rights" means the Rights to be issued pursuant to the Rights
Plan.

                  "Rights Plan" means the rights agreement dated as of June 26,
2003 by and between Mindspeed and Mellon Investor Services LLC, as rights agent.

                  "Rockwell" means Rockwell Automation, Inc. (formerly named
Rockwell International Corporation), a Delaware corporation.

                  "Rockwell Distribution Agreement" means the Distribution
Agreement dated as of December 31, 1998 between Conexant and Rockwell.

                  "Securities" means all short-term and long-term investments,
banker's acceptances, shares of stock, notes, bonds, debentures, evidences of
indebtedness, certificates of interest or participation in profit-sharing
agreements, collateral-trust certificates, preorganization certificates or
subscriptions, transferable shares, puts, calls, straddles, options, investment
contracts, voting trusts and certificates and other securities of any kind
(other than ownership interests in Subsidiaries).

                  "Separation Agreements" means, collectively, this Agreement,
the Employee Matters Agreement, the Tax Allocation Agreement, the Transition
Agreement, the Conveyance and Assumption Instruments, the Sublease and any other
agreement entered into between Conexant and Mindspeed in connection with the
Contribution and the Distribution (other than the Financing Agreements).

                  "Skyworks" means Skyworks Solutions, Inc., a Delaware
corporation (formerly named Alpha Industries, Inc.) and successor by merger to
Washington.

                  "Skyworks Distribution Agreement" means the Contribution and
Distribution Agreement dated as of December 16, 2001, as amended as of June 25,
2002, by and between Conexant and Washington.

                                       17



                  "Sublease" means the Sublease dated as of the date hereof
entered into prior to the Time of Distribution by and between Conexant and
Mindspeed relating to premises at 4000 MacArthur Boulevard, Newport Beach,
California 92660-3095.

                  "Subsidiary" means, with respect to any Person, any
corporation or other organization, whether incorporated or unincorporated, of
which such Person or any Subsidiaries of such Person controls or owns, directly
or indirectly, more than 50% of the stock or other equity interest, or more than
50% of the voting power entitled to vote on the election of members to the board
of directors or similar governing body.

                  "Tax" and "Taxes" shall have the meaning set forth in the Tax
Allocation Agreement.

                  "Tax Allocation Agreement" means the Tax Allocation Agreement
dated as of the date hereof entered into prior to the Time of Distribution by
and between Conexant and Mindspeed.

                  "Third Party Claim" shall have the meaning set forth in
Section 4.05(a).

                  "Time of Distribution" means the close of business on the
Distribution Date.

                  "Trade Secrets" means (a) trade secrets and confidential
business and technical information (including ideas, research and development,
know-how, formulas, technology, compositions, manufacturing and production
processes and techniques, technical data, engineering, production and other
designs, drawings, engineering notebooks, industrial models, mask works,
semiconductor chip topographies, software and specifications and any other
information meeting the definition of a trade secret under the Uniform Trade
Secrets Act); (b) computer and electronic data processing programs and software,
both source code and object code (including data and related documentation, flow
charts, diagrams, descriptive texts and programs, computer print-outs,
underlying tapes, computer databases and similar items), computer applications
and operating programs; and (c) all copies and tangible embodiments of any or
all of the foregoing (in whatever form or medium, including electronic media).

                  "Transition Agreement" means the Transition Services Agreement
dated as of the date hereof entered into prior to the Time of Distribution by
and between Conexant and Mindspeed.

                  "Washington" means Washington Sub, Inc., a Delaware
corporation.

                                   ARTICLE II

                                THE CONTRIBUTION

                  Section 2.01 Intercorporate Reorganization. (a) Prior to the
Time of Distribution, Conexant and Mindspeed will take all actions necessary to
increase the

                                       18



outstanding shares of Mindspeed Common Stock so that, immediately prior to the
Distribution, Conexant will hold a number of shares of Mindspeed Common Stock
(rounded down to the nearest whole share) equal to the aggregate number of
shares of Conexant Common Stock (excluding treasury shares held by Conexant)
issued and outstanding as of the Record Date divided by three.

         (b)      Subject to Section 2.08, prior to the Time of Distribution:

         (i)      Conexant and each Conexant Subsidiary shall convey, assign
     and transfer, or cause to be conveyed, assigned and transferred, to
     Mindspeed or a Mindspeed Subsidiary, as appropriate, any and all right,
     title and interest of Conexant and each of the Conexant Subsidiaries in the
     Mindspeed Subsidiaries;

         (ii)     Mindspeed and each Mindspeed Subsidiary shall convey, assign
     and transfer, or cause to be conveyed, assigned and transferred, to
     Conexant or a Conexant Subsidiary, as appropriate, any and all right, title
     and interest of Mindspeed and each of the Mindspeed Subsidiaries in the
     Conexant Subsidiaries;

         (iii)    Conexant and each Conexant Subsidiary shall convey, assign
     and transfer, or cause to be conveyed, assigned and transferred, to
     Mindspeed or a Mindspeed Subsidiary, as appropriate, any and all right,
     title and interest of Conexant and each of the Conexant Subsidiaries in the
     Mindspeed Assets;

         (iv)     Mindspeed and each Mindspeed Subsidiary shall convey, assign
     and transfer, or cause to be conveyed, assigned and transferred, to
     Conexant or a Conexant Subsidiary, as appropriate, any and all right, title
     and interest of Mindspeed and each of the Mindspeed Subsidiaries in the
     Conexant Assets;

         (v)      Conexant or a Conexant Subsidiary, as appropriate, shall
     unconditionally assume and undertake to pay, perform and discharge, in a
     timely manner and in accordance with the terms thereof, all Liabilities of
     Mindspeed and the Mindspeed Subsidiaries that are Conexant Liabilities; and

         (vi)     Mindspeed or a Mindspeed Subsidiary, as appropriate, shall
     unconditionally assume and undertake to pay, perform and discharge, in a
     timely manner and in accordance with the terms thereof, all Liabilities of
     Conexant and the Conexant Subsidiaries that are Mindspeed Liabilities.

                  In the event that at any time or from time to time (whether at
or after the Time of Distribution) any member of the Conexant Group shall
receive or otherwise possess any Mindspeed Asset or interest in a Mindspeed
Subsidiary, such member will promptly convey, assign and transfer, or cause to
be conveyed, assigned and transferred, such Mindspeed Asset or interest in a
Mindspeed Subsidiary to Mindspeed. In the event that at any time or from time to
time (whether at or after the Time of Distribution) any member of the Mindspeed
Group shall receive or otherwise possess any Conexant Asset or interest in a
Conexant Subsidiary, such member will promptly convey, assign and transfer, or
cause to be conveyed,

                                       19



assigned and transferred, such Conexant Asset or interest in a Conexant
Subsidiary to Conexant. Prior to any such transfer, the Person receiving or
possessing such Asset or interest in a Subsidiary will hold such Asset or
interest in a Subsidiary in trust for the benefit of the Person entitled thereto
(at the expense of the Person entitled thereto).

                  In the event that at any time or from time to time (whether at
or after the Time of Distribution) either Conexant or Mindspeed determines that
the other party (or any member of such other party's respective Group) shall not
have unconditionally assumed any Liabilities that are allocated to such other
party (or a member of such other party's respective Group) pursuant to this
Agreement, the Employee Matters Agreement or the Tax Allocation Agreement, such
other party will promptly execute and deliver, or cause to be executed and
delivered, all such documents and instruments and will take, or cause to be
taken, all such actions as the requesting party may reasonably request to
unconditionally assume, or cause to be unconditionally assumed, such
Liabilities.

                  Solely for purposes of implementing the terms of this
Agreement, during the period beginning on the date of this Agreement and ending
six months after the Distribution Date, Conexant and Mindspeed agree to discuss
the allocation of any Asset or Liability of Conexant and its Subsidiaries
(including members of the Mindspeed Group) that either of them reasonably
believes should be or should have been allocated differently than pursuant to
the terms of this Agreement (an "Asset/Liability Allocation Matter"). The
Conexant Chief Executive Officer will designate an employee of Conexant and the
Mindspeed Chief Executive Officer will designate an employee of Mindspeed who
will discuss an appropriate resolution of any Asset/Liability Allocation Matter.
If within thirty days of the receipt of the notification of an Asset/Liability
Allocation Matter by either Conexant or Mindspeed pursuant to this paragraph, or
such other time as Conexant and Mindspeed may agree, the designees have not
reached a mutually acceptable resolution of the Asset/Liability Allocation
Matter, the matter will be referred for discussion to the Conexant Chief
Executive Officer and the Mindspeed Chief Executive Officer. Should a mutually
acceptable resolution of the Asset/Liability Allocation Matter not be reached
within thirty days following the referral to them, the terms and conditions of
this Agreement shall remain in full force and effect, unamended, unmodified and
unsupplemented. In no event shall the terms and conditions of this Agreement be
amended, modified or supplemented other than in accordance with the provisions
of Section 7.07. Nothing in this paragraph shall affect the right of any party
to resort to the dispute resolution provisions of Section 7.05 in respect of any
dispute, claim or controversy arising out of an alleged breach of any provision
of this Agreement.

                  (c)      Subject to Section 2.08, Conexant and Mindspeed will
take, or cause to be taken, the actions described on Schedule 2.01(c) in
connection with United States and international operations of the Broadband
Business and the Mindspeed Business.

                  (d)      In connection with the transfers of Subsidiaries and
Assets and the assumptions of Liabilities contemplated by subsections (b) and
(c) of this Section 2.01, Conexant and Mindspeed will execute or cause to be
executed by the appropriate entities the Conveyance and Assumption Instruments.
The transfer of capital stock contemplated by such subsections will be effected
by means of delivery of stock certificates duly endorsed or

                                       20



accompanied by duly executed stock powers and notation on the stock record books
of the corporation or other legal entities involved and, to the extent required
by applicable law, by notation on appropriate registries.

         (e)      Each of Conexant (on behalf of itself and each other member of
the Conexant Group) and Mindspeed (on behalf of itself and each other member of
the Mindspeed Group) understands and agrees that, except as expressly set forth
in any Separation Agreement, any Financing Agreement or any other agreement or
document contemplated by any Separation Agreement or Financing Agreement, no
party to any Separation Agreement, Financing Agreement or any other agreement or
document contemplated by any Separation Agreement or Financing Agreement either
has or is, in such agreement or otherwise, representing or warranting in any way
as to the Assets, Subsidiaries, businesses or Liabilities retained, conveyed,
assigned, transferred or assumed as contemplated hereby or thereby, as to any
consents or approvals required in connection with the transactions contemplated
by the Separation Agreements or the Financing Agreements, as to the value or
freedom from any Lien of, or any other matter concerning, any Assets,
Liabilities or Subsidiaries of such party, or as to the absence of any defenses
or rights of setoff or freedom from counterclaim with respect to any claim or
other Assets or Subsidiaries of any party, or as to the legal sufficiency of any
assignment, document or instrument delivered hereunder or thereunder to convey
title to any Asset or Subsidiary or thing of value upon the execution, delivery
or filing thereof. Except as may expressly be set forth in any Separation
Agreement, all Assets and Subsidiaries being transferred or retained as
contemplated by any Separation Agreement are being transferred, or are being
retained, on an "as is", "where is" basis (and, in the case of the transfer of
any Real Property, by means of a quitclaim or similar form deed or conveyance
for title and an assignment for leasehold or other rights not subject to the
Sublease) and the respective transferees shall bear the economic and legal risks
that any conveyance shall prove to be insufficient or that the title to any
Asset or Subsidiary shall be other than good and marketable and free and clear
of any Lien.

         (f)      It is the intention of the parties that payments made by the
parties to each other after the Time of Distribution pursuant to this Agreement,
the Employee Matters Agreement or the Tax Allocation Agreement are to be treated
as relating back to the transactions occurring prior to the Time of Distribution
pursuant to this Section 2.01 as an adjustment to the transfers of Assets,
Subsidiaries and Liabilities contemplated by this Section 2.01, and Conexant and
Mindspeed will, and will cause the Conexant Subsidiaries and the Mindspeed
Subsidiaries, respectively, to, take positions consistent with such intention
with any Tax authority, unless with respect to any payment any party receives an
opinion of counsel reasonably acceptable to the other party to the effect that
there is no substantial authority for such a position.

                  Section 2.02 Financial Instruments. (a) Mindspeed will (from
and after the Time of Distribution, at its expense) take or cause to be taken
all actions, and enter into (or cause the Mindspeed Subsidiaries to enter into)
such agreements and arrangements, as shall be necessary to effect the release of
and substitution for each member of the Conexant Group, effective as of the Time
of Distribution, from all primary, secondary, contingent, joint, several

                                       21



and other Liabilities in respect of Mindspeed Financial Instruments (it being
understood that all Liabilities in respect of Mindspeed Financial Instruments
are Mindspeed Liabilities).

                  (b)      Mindspeed's obligations under Section 2.02(a) will
continue to be applicable to all Mindspeed Financial Instruments identified at
any time by Conexant, whether before, at or after the Time of Distribution.

                  Section 2.03 Intercompany Accounts and Arrangements.

                  (a)      Elimination of Intercompany Accounts.

                  (i)      Except as set forth in Section 2.03(a)(ii) or on
         Schedule 2.03(a), Conexant, on behalf of itself and each other member
         of the Conexant Group, on the one hand, and Mindspeed, on behalf of
         itself and each other member of the Mindspeed Group, on the other hand,
         hereby settle and eliminate, by cancellation or transfer to a member of
         the other Group (whether to cancel or transfer and the manner thereof
         will be determined by Conexant), effective as of the Time of
         Distribution, all intercompany receivables, payables and other balances
         (including intercompany cash management balances) existing immediately
         prior to the Time of Distribution between Conexant and/or any Conexant
         Subsidiary, on the one hand, and Mindspeed and/or any Mindspeed
         Subsidiary, on the other hand.

                  (ii)     The provisions of Section 2.03(a)(i) will not apply
         to any intercompany receivables, payables and other balances arising
         under any Separation Agreement, including those arising under Section
         2.04 or incurred in connection with the payment by any party of any
         expenses which are required to be paid or reimbursed by the other party
         pursuant to Section 4.08.

                  (b)      Intercompany Agreements.

                  (i)      Except as set forth in Section 2.03(b)(ii), in
         furtherance of the releases and other provisions of Section 4.01,
         Mindspeed, on behalf of itself and each other member of the Mindspeed
         Group, and Conexant, on behalf of itself and each other member of the
         Conexant Group, hereby terminate any and all agreements, arrangements,
         commitments or understandings in existence as of the Time of
         Distribution, whether or not in writing, between or among Mindspeed
         and/or any Mindspeed Subsidiary, on the one hand, and Conexant and/or
         any Conexant Subsidiary, on the other hand. No such terminated
         agreement, arrangement, commitment or understanding (including any
         provision thereof which purports to survive termination) shall be of
         any further force or effect after the Time of Distribution.

                  (ii)     The provisions of Section 2.03(b)(i) will not apply
         to any of the following agreements, arrangements, commitments or
         understandings (or to any of the provisions thereof): (A) the
         Separation Agreements, the Financing Agreements, the License and
         Assignment Agreement and the Patent License Agreement (and each

                                       22



         other agreement, instrument or document expressly contemplated by any
         Separation Agreement or Financing Agreement to be entered into by any
         party hereto or any of the members of their respective Groups); (B) any
         agreements, arrangements, commitments or understandings listed or
         described on Schedule 2.03(b)(ii); (C) any agreements, arrangements,
         commitments or understandings to which any Person other than the
         parties hereto and their respective Affiliates is a party; and (D) any
         other agreements, arrangements, commitments or understandings that any
         Separation Agreement or Financing Agreement expressly contemplates will
         survive the Time of Distribution.

                  Section 2.04 Cash Management.

                  (a)      Pre-Distribution Cash Contribution. At least one
Business Day prior to the Time of Distribution, Conexant shall contribute to
Mindspeed (by wire transfer to Mindspeed's Bank Account at Comerica Bank,
Account No. 1850968197, A.B.A. Routing Number 072000096) an amount in cash equal
to $97 million.

                  (b)      Cash Balances at the Time of Distribution. In the
event the amount of Mindspeed Cash (after giving effect to the contribution
described in Section 2.04(a)) (x) exceeds $100 million, Mindspeed will pay to
Conexant (by wire transfer to Conexant's bank account at Comerica Bank, Account
No. 1850967629, A.B.A. Routing Number 072000096), within five Business Days
after the Distribution, an amount equal to such excess or (y) is less than $100
million, Conexant will pay to Mindspeed, within five Business Days after the
Distribution Date, an amount equal to such deficit.

                  (c)      Funding of Outstanding Checks.

                  (i)      Mindspeed or a Mindspeed Subsidiary will fund all
         amounts in respect of checks that are outstanding immediately prior to
         the Time of Distribution and presented for payment at or after the Time
         of Distribution in Mindspeed Bank Accounts.

                  (ii)     Conexant or a Conexant Subsidiary will fund all
         amounts in respect of checks that are outstanding immediately prior to
         the Time of Distribution and presented for payment at or after the Time
         of Distribution in Conexant Bank Accounts.

                  (iii)    The provisions of this Section 2.04(c) with respect
         to funding of outstanding checks will not affect in any way, and will
         be subject to, all other provisions of this Agreement providing for the
         reimbursement of any amounts or the allocation of any Liabilities,
         including Section 4.08.

                  (d)      Customer Payments.

                  (i)      Mindspeed will, and will cause the Mindspeed
         Subsidiaries to, forward to Conexant (for the account of Conexant or
         the applicable Conexant Subsidiary) any customer payments in respect of
         accounts receivable constituting Conexant Assets

                                       23



         received by Mindspeed or any of the Mindspeed Subsidiaries after the
         Time of Distribution, whether received in lock boxes, via wire transfer
         or otherwise, by the first Business Day of the week after the week
         during which such payment is received. Such amounts will be forwarded
         by wire transfer (to Conexant's bank account at Comerica Bank, Account
         No. 1850967629, A.B.A. Routing Number 072000096) in the case of
         customer payments received within thirty days after the Time of
         Distribution and by check in the case of customer payments received
         thereafter.

                  (ii)     Conexant will, and will cause the Conexant
         Subsidiaries to, forward to Mindspeed (for the account of Mindspeed or
         the applicable Mindspeed Subsidiary) any customer payments in respect
         of accounts receivable constituting Mindspeed Assets received by
         Conexant or any of the Conexant Subsidiaries after the Time of
         Distribution, whether received in lock boxes, via wire transfer or
         otherwise, by the first business day of the week after the week during
         which such payment is received. Such amounts will be forwarded by wire
         transfer (to Mindspeed's bank account at Comerica Bank, Account No.
         1850968197, A.B.A. Routing Number 072000096) in the case of customer
         payments received within thirty days after the Time of Distribution and
         by check in the case of customer payments received thereafter.

                  Section 2.05 The Mindspeed Board. Prior to the Time of
Distribution, Mindspeed and Conexant will take all actions which may be required
to elect or otherwise appoint as directors of Mindspeed the persons named on
Schedule 2.05 to constitute the board of directors of Mindspeed at the Time of
Distribution.

                  Section 2.06 Resignations; Transfer of Stock Held as Nominee.
(a) Conexant will cause all of its employees and directors and all of the
employees and directors of each other member of the Conexant Group to resign,
effective not later than the Time of Distribution, from all boards of directors
or similar governing bodies of Mindspeed or any other member of the Mindspeed
Group on which they serve, and from all positions as officers of Mindspeed or
any other member of the Mindspeed Group in which they serve, except as otherwise
specified on Schedule 2.06. Mindspeed will cause all of its employees and
directors and all of the employees and directors of each other member of the
Mindspeed Group to resign, effective not later than the Time of Distribution,
from all boards of directors or similar governing bodies of Conexant or any
other member of the Conexant Group on which they serve, and from all positions
as officers of Conexant or any other member of the Conexant Group in which they
serve, except as otherwise specified on Schedule 2.06.

                  (b)      Conexant will cause each of its employees, and each
of the employees of the other members of the Conexant Group, who holds stock or
similar evidence of ownership of any Mindspeed Group entity as nominee for such
entity pursuant to the laws of the country in which such entity is located to
transfer such stock or similar evidence of ownership to the Person so designated
by Mindspeed to be such nominee as of and after the Time of Distribution.
Mindspeed will cause each of its employees, and each of the employees of the
other members of the Mindspeed Group, who holds stock or similar evidence of
ownership of any Conexant Group entity as nominee for such entity pursuant to
the laws of the country in which such entity is located to transfer such stock
or similar evidence of

                                       24



ownership to the Person so designated by Conexant to be such nominee as of and
after the Time of Distribution.

                  (c)      Conexant will cause each of its employees and each of
the employees of the other members of the Conexant Group to revoke or withdraw
their express written authority, if any, to act on behalf of any Mindspeed Group
entity as an agent or representative therefor after the Time of Distribution.
Mindspeed will cause each of its employees and each of the employees of the
other members of the Mindspeed Group to revoke or withdraw their express written
authority, if any, to act on behalf of any Conexant Group entity as an agent or
representative therefor after the Time of Distribution.

                  Section 2.07 Mindspeed Certificate of Incorporation and
Bylaws; Rights Plan. Prior to the Time of Distribution, (a) the Mindspeed Board
will (i) approve the Certificate of Incorporation and will cause the same to be
filed with the Secretary of State of the State of Delaware and (ii) adopt the
Bylaws, and (b) Conexant, as sole shareholder of Mindspeed, will approve the
Certificate of Incorporation. Prior to the Time of Distribution, the Mindspeed
Board will adopt the Rights Plan and declare a dividend of the Rights so that
each share of Mindspeed Common Stock issued and outstanding as of the Time of
Distribution will initially have one Right attached thereto.

                  Section 2.08 Consents. Prior to and after the Distribution
Date, Conexant and Mindspeed will, and will cause the Conexant Subsidiaries and
the Mindspeed Subsidiaries, respectively, to, use their commercially reasonable
efforts (as requested by the other party) to obtain, or to cause to be obtained,
all Consents necessary for the transfer of all Assets, Subsidiaries and
Liabilities contemplated to be transferred pursuant to this Article II;
provided, however, that none of Conexant (or any of the Conexant Subsidiaries)
or Mindspeed (or any of the Mindspeed Subsidiaries) shall be obligated to pay
any consideration or offer or grant any financial accommodation in connection
therewith. Anything contained herein to the contrary notwithstanding, this
Agreement shall not constitute an agreement to assign any Contract or Permit if
an assignment or attempted assignment of the same without the Consent of any
other party or parties thereto or other required Consent would constitute a
breach thereof or of any applicable law or in any way impair the rights of any
member of the Conexant Group or the Mindspeed Group thereunder. If any such
Consent is not obtained or if an attempted assignment would be ineffective or
would impair any rights of any member of either Group under any such Contract or
Permit so that the contemplated assignee hereunder (the "Recipient Party") would
not receive all such rights, then after the Time of Distribution (x) the party
contemplated hereunder to assign such Contract or Permit (the "Assigning Party")
will use commercially reasonable efforts (it being understood that such efforts
shall not include any requirement of the Assigning Party to pay any
consideration or offer or grant any financial accommodation) to provide or cause
to be provided to the Recipient Party the benefits of any such Contract or
Permit and the Assigning Party will promptly pay or cause to be paid to the
Recipient Party when received all moneys and properties received by the
Assigning Party with respect to any such Contract or Permit and (y) the
Recipient Party will pay, perform and discharge on behalf of the Assigning Party
all of the Assigning Party's Liabilities thereunder in a timely manner and in
accordance with the terms thereof. If and when such Consents are obtained, the
transfer of the applicable Contract or Permit shall be

                                       25



effected as promptly following the Time of Distribution as shall be practicable
in accordance with the terms of this Agreement. To the extent that any transfers
and assumptions contemplated by this Article II shall not have been consummated
on or prior to the Time of Distribution, the parties shall cooperate to effect
such transfers as promptly following the Time of Distribution as shall be
practicable, it nonetheless being agreed and understood by the parties that no
party shall be liable in any manner to any other party for any failure of any of
the transfers contemplated by this Article II to be consummated prior to the
Time of Distribution.

                                  ARTICLE III

                                THE DISTRIBUTION

                  Section 3.01 The Distribution. (a) Subject to Section 3.04,
prior to the Time of Distribution, Conexant will deliver to the Distribution
Agent, for the benefit of holders of record of Conexant Common Stock as of the
Record Date, a number of shares of Mindspeed Common Stock (rounded down to the
nearest whole share) equal to the number of shares of Conexant Common Stock
issued and outstanding as of the Record Date (excluding treasury shares held by
Conexant) divided by three, and Conexant will instruct the Distribution Agent to
make book-entry credits on the Distribution Date or as soon thereafter as
practicable for each holder of record of Conexant Common Stock as of the Record
Date, or the designated transferee or transferees of such holder, for a number
of shares of Mindspeed Common Stock (rounded down to the nearest whole share)
equal to the number of shares of Conexant Common Stock so held by such holder of
record as of the Record Date (excluding treasury shares held by Conexant)
divided by three. The Distribution will be effective as of the Time of
Distribution.

                  (b)      Conexant and Mindspeed each will provide to the
Distribution Agent all information (including information necessary to make
appropriate book-entry credits) and share certificates, in each case, as may be
required in order to complete the Distribution on the basis of one share of
Mindspeed Common Stock for every three shares of Conexant Common Stock
(excluding treasury shares held by Conexant).

                  Section 3.02 Fractional Shares. Anything contained herein to
the contrary notwithstanding, no fractional shares of Mindspeed Common Stock
will be distributed to holders of Conexant Common Stock in the Distribution.
Holders that are otherwise entitled to receive less than one whole share of
Mindspeed Common Stock in the Distribution will receive cash in lieu of such
fractional share as contemplated hereby. As soon as practicable after the
Distribution Date, Conexant will direct the Distribution Agent to determine in
accordance with its customary practice the number of fractional shares of
Mindspeed Common Stock otherwise allocable to holders of record or beneficial
owners of Conexant Common Stock as of the Record Date, to aggregate all such
fractional shares and sell as soon as practicable the whole shares obtained by
aggregating such fractional shares either in open market transactions or
otherwise, in each case at then prevailing trading prices, and to cause to be
distributed to each such holder or for the benefit of each such beneficial
owner, in lieu of

                                       26



any fractional share, such holder's or owner's ratable share of the proceeds of
such sale, after making appropriate deductions of the amount required to be
withheld for federal income tax purposes and after deducting an amount equal to
all brokerage charges, commissions and transfer taxes attributed to such sale.
Conexant will direct the Distribution Agent to seek to aggregate the shares of
Conexant Common Stock that may be held by any such beneficial owner thereof
through more than one account in determining the fractional share allocable to
such beneficial owner.

                  Section 3.03 Cooperation Prior to the Distribution. Prior to
the Distribution:

                  (a)      Conexant and Mindspeed will prepare the Information
Statement which will include appropriate disclosure concerning Mindspeed, its
business, operations and management, the Contribution, the Distribution and such
other matters as Conexant and Mindspeed may determine and as may be required by
law. Conexant and Mindspeed will prepare, and Mindspeed will file with the
Commission, the Form 10, which will include or incorporate by reference the
Information Statement. Mindspeed will use its commercially reasonable efforts to
cause the Form 10 to become effective under the Exchange Act as soon as
practicable following the filing thereof. Promptly after effectiveness of the
Form 10 and completion of the Information Statement included therein, and prior
to the Distribution, Conexant will mail to the holders of Conexant Common Stock
the Information Statement.

                  (b)      Conexant and Mindspeed will cooperate in preparing,
filing with the Commission and causing to become effective any registration
statements or amendments thereof which are required to reflect the establishment
of, or amendments to, any employee benefit and other plans contemplated by the
Employee Matters Agreement.

                  (c)      Conexant and Mindspeed will take all such action as
may be necessary or appropriate under the securities or "blue sky" laws of the
states or other political subdivisions of the United States and the securities
laws of any applicable foreign countries or other political subdivisions thereof
in connection with the transactions contemplated by this Agreement.

                  (d)      Conexant and Mindspeed will cause to be prepared, and
Mindspeed will file and use its commercially reasonable efforts to have
approved, an application for the listing on the American Stock Exchange of the
Mindspeed Common Stock to be distributed in the Distribution.

                  Section 3.04 Conexant Board Action; Conditions to the
Distribution. The Conexant Board will in its discretion establish the Record
Date and the Distribution Date and all appropriate procedures in connection with
the Distribution, but in no event will the Distribution occur prior to such time
as each of the following conditions shall have been satisfied or shall have been
waived by the Conexant Board in accordance with Section 3.05:

                  (a)      the Conexant Board shall be reasonably satisfied that
(i) Conexant will have sufficient surplus under Section 170 of the Delaware
General Corporation Law to permit the Distribution and (ii) after giving effect
to the Contribution and the Distribution, each of

                                       27



Conexant and Mindspeed will not be insolvent and will not have unreasonably
small capital with which to engage in its respective businesses;

                  (b)      the Conexant Board shall have given final approval of
the Distribution;

                  (c)      the Conexant Board shall have received a favorable
opinion issued by Chadbourne & Parke LLP confirming that the Distribution should
qualify as a tax-free reorganization within the meaning of Section 368(a)(i)(d)
of the Code;

                  (d)      all material Consents which are required to effect
the Contribution and the Distribution shall have been obtained and shall be in
full force and effect;

                  (e)      the Form 10 shall have become effective under the
Exchange Act;

                  (f)      the Certificate of Incorporation, the Bylaws and the
Rights Plan each shall have been adopted and be in effect;

                  (g)      the Mindspeed Common Stock shall have been approved
for listing upon notice of issuance on the American Stock Exchange;

                  (h)      the transactions contemplated by Section 2.01,
Section 2.02 and Section 2.04(a) shall have been consummated in all material
respects;

                  (i)      Conexant and Mindspeed shall have entered into each
of the Separation Agreements and the Financing Agreements to which they are
parties and each such agreement shall be in full force and effect;

                  (j)      no order, injunction or decree issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing
consummation of the Contribution or the Distribution shall be in effect;

                  (k)      no suit, action or proceeding by or before any court
of competent jurisdiction or other Governmental Entity shall have been commenced
and be pending to restrain or challenge the Contribution or Distribution, and no
inquiry shall have been received that in the reasonable judgment of the Conexant
Board may lead to such a suit, action or proceeding; and

                  (l)      Mindspeed shall have issued to Conexant the Initial
Warrants;

provided, that the satisfaction of such conditions will not create any
obligation on the part of Conexant to effect or seek to effect the Contribution
or the Distribution or in any way limit Conexant's right to terminate this
Agreement set forth in Section 7.13 or alter the consequences of any such
termination from those specified in Section 7.13.

                  Section 3.05 Waiver of Conditions. Any or all of the
conditions set forth in Section 3.04 may be waived, in whole or in part, in the
sole discretion of the Conexant Board. The conditions set forth in Section 3.04
are for the sole benefit of Conexant and shall not give

                                       28



rise to or create any duty on the part of Conexant or the Conexant Board to
waive or not waive any such conditions.

                                   ARTICLE IV

                    MUTUAL RELEASE; INDEMNIFICATION; EXPENSES

                  Section 4.01 Mutual Release. Effective as of the Time of
Distribution and except as otherwise specifically set forth in the Separation
Agreements and Financing Agreements, each of Conexant, on behalf of itself and
each other member of the Conexant Group, on the one hand, and Mindspeed, on
behalf of itself and each other member of the Mindspeed Group, on the other
hand, hereby releases and forever discharges the other party and its
Subsidiaries, and its and their respective officers, directors, agents, record
and beneficial security holders (including trustees and beneficiaries of trusts
holding such securities), advisors and Representatives (in each case, in their
respective capacities as such) and their respective heirs, executors,
administrators, successors and assigns, of and from all debts, demands, actions,
causes of action, suits, accounts, covenants, contracts, agreements, damages,
claims and Liabilities whatsoever of every name and nature, both in law and in
equity, which the releasing party has or ever had or ever will have, which arise
out of or relate to events, circumstances or actions taken by such other party
occurring or failing to occur or any conditions existing at or prior to the Time
of Distribution; provided, however, that the foregoing general release shall not
apply to (i) any Liabilities or other obligations (including Liabilities with
respect to payment, reimbursement, indemnification or contribution) under the
Separation Agreements or Financing Agreements or assumed, transferred, assigned,
allocated or arising under any of the Separation Agreements or Financing
Agreements (including any Liability that the parties may have with respect to
payment, performance, reimbursement, indemnification or contribution pursuant to
any Separation Agreement or Financing Agreement for claims brought against the
parties by third Persons or any Indemnitee), and the foregoing release will not
affect any party's right to enforce the Separation Agreements or Financing
Agreements in accordance with their terms or (ii) any Liability arising from or
relating to any agreement, arrangement, commitment or undertaking described in
Section 2.03(b)(ii), or (iii) any Liability the release of which would result in
the release of any Person other than a Person released pursuant to this Section
4.01 (provided, that the parties agree not to bring suit or permit any of their
Subsidiaries to bring suit against any member of the other Group with respect to
any Liability to the extent such member of the other Group would be released
with respect to such Liability by this Section 4.01 but for this clause (iii)).

                  Each of Conexant and Mindspeed acknowledges that it has been
advised by its legal counsel and is familiar with the provisions of California
Civil Code Section 1542, which provides as follows:

                  "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
                  CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE
                  TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE

                                       29



                  MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."

Being aware of said Code section, each of Conexant, on behalf of itself and each
of the Conexant Subsidiaries, and Mindspeed, on behalf of itself and each of the
Mindspeed Subsidiaries, hereby expressly waives any rights it may have under
California Civil Code Section 1542, as well as any other statutes or common law
principles of similar effect.

                  Section 4.02 Indemnification by Conexant. Subject to the
provisions of this Article IV, Conexant shall indemnify, defend and hold
harmless the Mindspeed Indemnitees from and against, and pay or reimburse, as
the case may be, the Mindspeed Indemnitees for, all Indemnifiable Losses, as
incurred, suffered by any Mindspeed Indemnitee to the extent based upon, arising
out of or relating to the following:

                  (a)      the Conexant Liabilities (including the failure by
Conexant or any other member of the Conexant Group to pay, perform or otherwise
discharge the Conexant Liabilities in accordance with their terms), whether such
Indemnifiable Losses are based upon, arise out of or relate to events,
occurrences, actions, omissions, facts, circumstances or conditions occurring,
existing or asserted before, at or after the Time of Distribution;

                  (b)      any untrue statement or alleged untrue statement of a
material fact contained in the sections of the Form 10 listed on Schedule
4.02(b), or any omission or alleged omission to state in such sections a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading; but only in each case with respect to information relating to the
Conexant Group provided by Conexant expressly for use in the sections of the
Form 10 listed on Schedule 4.02(b);

                  (c)      the breach by any member of the Conexant Group of any
agreement or covenant contained in a Separation Agreement which does not by its
express terms expire at the Time of Distribution;

                  (d)      the use by members of the Conexant Group or their
respective sublicensees of any intellectual property licensed by Mindspeed and
the Mindspeed Subsidiaries pursuant to Section 5.03; and

                  (e)      the enforcement by the Mindspeed Indemnitees of their
rights to be indemnified, defended and held harmless under this Section 4.02.

                  Section 4.03 Indemnification by Mindspeed. Subject to the
provisions of this Article IV, Mindspeed shall indemnify, defend and hold
harmless the Conexant Indemnitees from and against, and pay or reimburse, as the
case may be, the Conexant Indemnitees for, all Indemnifiable Losses, as
incurred, suffered by any Conexant Indemnitee to the extent based upon, arising
out of or relating to the following:

                  (a)      the Mindspeed Liabilities (including the failure by
Mindspeed or any other member of the Mindspeed Group to pay, perform or
otherwise discharge the Mindspeed

                                       30



Liabilities in accordance with their terms), whether such Indemnifiable Losses
are based upon, arise out of or relate to events, occurrences, actions,
omissions, facts, circumstances or conditions occurring, existing or asserted
before, at or after the Time of Distribution;

                  (b)      any untrue statement or alleged untrue statement of a
material fact contained in the Form 10, or any omission or alleged omission to
state in the Form 10 a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except in each case with respect to information
relating to the Conexant Group provided by Conexant expressly for use in the
sections of the Form 10 listed on Schedule 4.02(b);

                  (c)      the breach by any member of the Mindspeed Group of
any agreement or covenant contained in a Separation Agreement which does not by
its express terms expire at the Time of Distribution;

                  (d)      the use by members of the Mindspeed Group (or, in the
case of intellectual property licensed by Conexant and the Conexant Subsidiaries
pursuant to Section 5.03, members of the Mindspeed Group or their respective
sublicensees) of any names, trademarks, trade names, domain names, service marks
or corporate symbols or logos pursuant to Section 5.02 or intellectual property
licensed by Conexant and the Conexant Subsidiaries pursuant to Section 5.03; and

                  (e)      the enforcement by the Conexant Indemnitees of their
rights to be indemnified, defended and held harmless under this Section 4.03.

                  Section 4.04 Limitations on Indemnification Obligations. (a)
The amount which any party (an "Indemnifying Party") is or may be required to
pay to an Indemnitee in respect of Indemnifiable Losses or other Liability for
which indemnification is provided under this Agreement shall be reduced by any
amounts actually received (including Insurance Proceeds actually received) by or
on behalf of such Indemnitee (net of increased insurance premiums and charges
related directly and solely to the related Indemnifiable Losses and costs and
expenses (including reasonable legal fees and expenses) incurred by such
Indemnitee in connection with seeking to collect and collecting such amounts) in
respect of such Indemnifiable Losses or other Liability (such net amounts are
referred to herein as "Indemnity Reduction Amounts"). If any Indemnitee receives
any Indemnity Reduction Amounts in respect of an Indemnifiable Loss for which
indemnification is provided under this Agreement after the full amount of such
Indemnifiable Loss has been paid by an Indemnifying Party or after an
Indemnifying Party has made a partial payment of such Indemnifiable Loss and
such Indemnity Reduction Amounts exceed the remaining unpaid balance of such
Indemnifiable Loss, then the Indemnitee shall promptly remit to the Indemnifying
Party an amount equal to the excess (if any) of (A) the amount theretofore paid
by the Indemnifying Party in respect of such Indemnifiable Loss, less (B) the
amount of the indemnity payment that would have been due if such Indemnity
Reduction Amounts in respect thereof had been received before the indemnity
payment was made. An insurer or other third party who would otherwise be
obligated to pay any claim shall not be relieved of the responsibility with
respect thereto or, solely by virtue of the indemnification provisions

                                       31



hereof, have any subrogation rights with respect thereto, it being expressly
understood and agreed that no insurer or any other third party shall be entitled
to any benefit they would not be entitled to receive in the absence of the
indemnification provisions by virtue of the indemnification provisions hereof.

                  (b)      In determining the amount of any Indemnifiable
Losses, such amount shall be (i) reduced to take into account any net Tax
benefit realized by the Indemnitee arising from the incurrence or payment by the
Indemnitee of such Indemnifiable Losses and (ii) increased to take into account
any net Tax cost incurred by the Indemnitee as a result of the receipt or
accrual of payments hereunder (grossed-up for such increase), in each case
determined by treating the Indemnitee as recognizing all other items of income,
gain, loss, deduction or credit before recognizing any item arising from such
Indemnifiable Losses. It is the intention of the parties that indemnity payments
made pursuant to this Agreement are to be treated as relating back to the
Distribution as an adjustment to capital (i.e., capital contribution or
distribution), and the parties shall not take any position inconsistent with
such intention before any Tax Authority (as defined in the Tax Allocation
Agreement), except to the extent that a final determination (as defined in
Section 1313 of the Code) with respect to the recipient party causes any such
payment not to be so treated.

                  Section 4.05 Procedures Relating to Indemnification. (a) If a
claim or demand is made against an Indemnitee, or an Indemnitee shall otherwise
learn of an assertion, by any Person who is not a party to this Agreement (or an
Affiliate thereof) as to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement (a "Third Party Claim"), such
Indemnitee will notify the Indemnifying Party in writing, and in reasonable
detail, of the Third Party Claim reasonably promptly after becoming aware of
such Third Party Claim; provided, however, that failure to give such
notification will not affect the indemnification provided hereunder except to
the extent the Indemnifying Party shall have been actually prejudiced as a
result of such failure. Thereafter, the Indemnitee will deliver to the
Indemnifying Party, promptly after the Indemnitee's receipt thereof, copies of
all material notices and documents (including court papers) received or
transmitted by the Indemnitee relating to the Third Party Claim.

                  (b)      If a Third Party Claim is made against an Indemnitee,
the Indemnifying Party will be entitled to participate in or to assume the
defense thereof (in either case, at the expense of the Indemnifying Party) with
counsel selected by the Indemnifying Party and reasonably satisfactory to the
Indemnitee. Should the Indemnifying Party so elect to assume the defense of a
Third Party Claim, the Indemnifying Party will not be liable to the Indemnitee
for any legal or other expenses subsequently incurred by the Indemnitee in
connection with the defense thereof; provided, that if in the Indemnitee's
reasonable judgment a conflict of interest exists in respect of such claim or if
the Indemnifying Party shall have assumed responsibility for such claim with any
reservations or exceptions, such Indemnitee will have the right to employ
separate counsel reasonably satisfactory to the Indemnifying Party to represent
such Indemnitee and in that event the reasonable fees and expenses of such
separate counsel (but not more than one separate counsel for all Indemnitees
similarly situated) shall be paid by such Indemnifying Party. If the
Indemnifying Party assumes the defense of any Third Party Claim, the Indemnitee
will have the right to participate in the

                                       32



defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Party, it being understood that the
Indemnifying Party will control such defense. The Indemnifying Party will be
liable for the fees and expenses of counsel employed by the Indemnitee for any
period during which the Indemnifying Party has failed to assume the defense
thereof. If the Indemnifying Party assumes the defense of any Third Party Claim,
the Indemnifying Party will promptly supply to the Indemnitee copies of all
material correspondence and documents relating to or in connection with such
Third Party Claim and keep the Indemnitee fully informed of all material
developments relating to or in connection with such Third Party Claim (including
providing to the Indemnitee on reasonable request updates and summaries as to
the status thereof). If the Indemnifying Party chooses to defend a Third Party
Claim, the parties hereto will cooperate in the defense thereof (such
cooperation to be at the expense, including reasonable legal fees and expenses,
of the Indemnifying Party), which cooperation shall include the retention in
accordance with this Agreement and (upon the Indemnifying Party's request) the
provision to the Indemnifying Party of records and information which are
reasonably relevant to such Third Party Claim, and making employees available on
a mutually convenient basis to provide additional information and explanation of
any material provided hereunder.

                  (c)      No Indemnifying Party will consent to any settlement,
compromise or discharge (including the consent to entry of any judgment) of any
Third Party Claim without the Indemnitee's prior written consent (which consent
will not be unreasonably withheld); provided, that if the Indemnifying Party
assumes the defense of any Third Party Claim, the Indemnitee will agree to any
settlement, compromise or discharge of such Third Party Claim which the
Indemnifying Party may recommend and which by its terms obligates the
Indemnifying Party to pay the full amount of Indemnifiable Losses in connection
with such Third Party Claim and unconditionally and irrevocably releases the
Indemnitee and its Affiliates completely from all Liability in connection with
such Third Party Claim; provided, however, that the Indemnitee may refuse to
agree to any such settlement, compromise or discharge (x) that provides for
injunctive or other nonmonetary relief affecting the Indemnitee or any of its
Affiliates or (y) that, in the reasonable opinion of the Indemnitee, would
otherwise materially adversely affect the Indemnitee or any of its Affiliates.
Whether or not the Indemnifying Party shall have assumed the defense of a Third
Party Claim, the Indemnitee will not (unless required by law) admit any
liability with respect to, or settle, compromise or discharge, such Third Party
Claim without the Indemnifying Party's prior written consent (which consent will
not be unreasonably withheld).

                  (d)      Any claim on account of Indemnifiable Losses which
does not involve a Third Party Claim will be asserted by reasonably prompt
written notice given by the Indemnitee to the Indemnifying Party from whom such
indemnification is sought. The failure by any Indemnitee so to notify the
Indemnifying Party will not relieve the Indemnifying Party from any liability
which it may have to such Indemnitee under this Agreement, except to the extent
that the Indemnifying Party shall have been actually prejudiced by such failure.

                  (e)      In the event of payment in full by an Indemnifying
Party to any Indemnitee in connection with any Third Party Claim, such
Indemnifying Party will be subrogated to and shall stand in the place of such
Indemnitee as to any events or

                                       33



circumstances in respect of which such Indemnitee may have any right or claim
relating to such Third Party Claim against any claimant or plaintiff asserting
such Third Party Claim or against any other Person. Such Indemnitee will
cooperate with such Indemnifying Party in a reasonable manner, and at the cost
and expense of such Indemnifying Party, in prosecuting any subrogated right or
claim.

                  Section 4.06 Remedies Cumulative. Subject to the provisions of
Section 7.05, the remedies provided in this Article IV shall be cumulative and
shall not preclude assertion by any Indemnitee of any other rights or the
seeking of any and all other remedies against any Indemnifying Party.

                  Section 4.07 Indemnification under Tax Allocation Agreement.
Notwithstanding anything in this Agreement to the contrary, indemnification in
respect of Tax matters will be governed exclusively by the Tax Allocation
Agreement.

                  Section 4.08 Expenses. (a) Except as otherwise set forth in
any Separation Agreement or Financing Agreement, (i) all Conexant Expenses will
be charged to and paid by Conexant and (ii) all Mindspeed Expenses will be
charged to and paid by Mindspeed.

                  (b)      Within ten days after the Distribution Date,
Mindspeed will reimburse Conexant (by wire transfer to Conexant's bank account
at Comerica Bank, Account No. 1850967629, A.B.A. Routing Number 072000096) for
all amounts in respect of Mindspeed Expenses paid by Conexant or any of its
Subsidiaries (including members of the Mindspeed Group) before or at the Time of
Distribution and notified in writing by Conexant to Mindspeed within five days
after the Distribution Date. From time to time thereafter, promptly after
Conexant's request therefor, and in any event within ten days after any such
request, Mindspeed will reimburse Conexant (by wire transfer to the same bank
account referred to in the preceding sentence) for all Mindspeed Expenses paid
by Conexant or any of its Subsidiaries before, at or after the Time of
Distribution (other than as previously reimbursed by Mindspeed pursuant to the
preceding sentence). Conexant will, at the request of Mindspeed, provide
Mindspeed with appropriate documentation to support Mindspeed Expenses required
to be reimbursed to Conexant pursuant to this Section 4.08(b).

                  (c)      Except as otherwise set forth in any Separation
Agreement or Financing Agreement, and subject in all events to the provisions of
Section 4.08(a), all out-of-pocket costs and expenses incurred following the
Time of Distribution in connection with implementation of the transactions
contemplated by the Separation Agreements will be charged to and paid by the
party for whose benefit the expenses are incurred, with any out-of-pocket
expenses which cannot be allocated on such basis to be split equally between
Conexant and Mindspeed.

                                       34



                                   ARTICLE V

                              CERTAIN OTHER MATTERS

                  Section 5.01 Insurance.

                  (a)      Coverage. Subject to the provisions of this Section
5.01, coverage of Mindspeed and the Mindspeed Subsidiaries under all Policies
shall cease as of the Time of Distribution. From and after the Time of
Distribution, Mindspeed and the Mindspeed Subsidiaries will be responsible for
obtaining and maintaining all insurance coverages in their own right.

                  (b)      Rights Under Shared Policies. From and after the Time
of Distribution, Mindspeed and the Mindspeed Subsidiaries will have no rights
with respect to any Policies, except that:

                  (i)      Mindspeed will have the right to assert claims (and
         Conexant will use commercially reasonable efforts to assist Mindspeed
         in asserting claims) for any loss, liability or damage with respect to
         Mindspeed Assets or Mindspeed Liabilities under Policies with
         third-party insurers which are "occurrence basis" insurance policies
         ("Occurrence Basis Policies") arising out of insured incidents
         occurring from the date coverage thereunder first commenced until the
         Time of Distribution to the extent that the terms and conditions of any
         such Occurrence Basis Policies and agreements relating thereto so
         allow, and

                  (ii)     Mindspeed will have the right to continue to
         prosecute claims with respect to Mindspeed Assets or Mindspeed
         Liabilities properly asserted with an insurer prior to the Time of
         Distribution (and Conexant will use commercially reasonable efforts to
         assist Mindspeed in connection therewith) under Policies with
         third-party insurers which are insurance policies written on a "claims
         made" basis ("Claims Made Policies") arising out of insured incidents
         occurring from the date coverage thereunder first commenced until the
         Time of Distribution to the extent that the terms and conditions of any
         such Claims Made Policies and agreements relating thereto so allow,

provided, that in the case of both clauses (i) and (ii) above, (A) all of
Conexant's and each Conexant Subsidiary's reasonable out-of-pocket costs and
expenses incurred in connection with the foregoing are promptly paid by
Mindspeed, (B) Conexant and the Conexant Subsidiaries may, at any time, without
liability or obligation to Mindspeed or any Mindspeed Subsidiary (other than as
set forth in Section 5.01(d)), amend, commute, terminate, buy-out, extinguish
liability under or otherwise modify any Occurrence Basis Policies or Claims Made
Policies (and such claims shall be subject to any such amendments, commutations,
terminations, buy-outs, extinguishments and modifications), (C) such claims will
be subject to (and recovery thereon will be reduced by the amount of) any
applicable deductibles, retentions or self-insurance provisions, (D) such claims
will be subject to (and recovery thereon will be reduced by the amount of) any
payment or reimbursement obligations of

                                       35



Conexant, any Conexant Subsidiary or any Affiliate of Conexant or any Conexant
Subsidiary in respect thereof and (E) such claims will be subject to exhaustion
of existing aggregate limits. In the event that claims submitted by Conexant and
Mindspeed exhaust existing aggregate limits in any one policy year, the amount
payable under the Policies shall be allocated pro rata based on the amounts paid
in satisfaction of such claims or the amounts that would have been paid to
satisfy such claims absent exhaustion of Policy limits. To the extent the amount
paid to Mindspeed or Conexant, as the case may be, in satisfaction of claims
exceeds its pro rata portion, Mindspeed or Conexant, as the case may be, shall
pay to the other party an amount equal to such excess. Conexant's obligation to
use commercially reasonable efforts to assist Mindspeed in asserting claims
under applicable Policies will include using commercially reasonable efforts in
assisting Mindspeed to establish its right to coverage under such Policies (so
long as all of Conexant's reasonable out-of-pocket costs and expenses in
connection therewith are promptly paid by Mindspeed). None of Conexant or the
Conexant Subsidiaries will bear any Liability for the failure of an insurer to
pay any claim under any Policy. It is understood that any Claims Made Policies
will not provide any coverage to Mindspeed and the Mindspeed Subsidiaries for
incidents occurring prior to the Time of Distribution but which are asserted
with the insurance carrier after the Time of Distribution. If a claim or claims
submitted by Mindspeed are paid under any Policy during any policy year in which
no claim or claims are paid to Conexant, and Conexant's annual premium increases
in the next policy year in respect of the Policy, then the full amount of such
premium increase in the first policy year after such Mindspeed claim or claims
are paid shall be deemed to be attributable to the Mindspeed claim or claims and
charged to Mindspeed. Promptly (and in no event later than ten (10) Business
Days) after receipt of a written request by Conexant, Mindspeed shall reimburse
Conexant for the full amount of such annual premium increase. If claims
submitted by both Conexant and Mindspeed are paid under the same Policy during
any policy year, and Conexant's annual premium increases in the next policy year
in respect of the Policy, then the amount of the premium increase will be
allocated between Conexant and Mindspeed based on the amount of the claims paid
to each party during the prior policy year. Promptly (and in no event later than
ten (10) Business Days) after receipt of a written request by Conexant,
Mindspeed shall reimburse Conexant for its pro rata portion.

                  (c)      Rights Under Property Policy. Conexant will request
that the insurer under the Property Policy permit members of the Mindspeed Group
to be named as additional named insureds under the Property Policy with respect
to incidents occurring from the Time of Distribution to July 1, 2003, provided,
that no member of the Conexant Group will be required to pay any consideration
or grant any financial or other accommodation in connection therewith. In
connection therewith, from and after the Time of Distribution, Mindspeed will
have the right to assert claims (and Conexant will use commercially reasonable
efforts to assist Mindspeed in asserting claims) for any loss, liability or
damage with respect to Mindspeed Assets or Mindspeed Liabilities under the
Property Policy arising out of insured incidents occurring from the Time of
Distribution to July 1, 2003 to the extent that the terms and conditions of the
Property Policy and agreements relating thereto and the insurer thereunder so
allow; provided, that (i) all of Conexant's and each Conexant Subsidiary's
reasonable costs and expenses incurred in connection with the foregoing are
promptly paid by Mindspeed, (ii) Conexant and the Conexant Subsidiaries may, at
any time, without liability or obligation to Mindspeed or any Mindspeed
Subsidiary (other than as set

                                       36



forth in Section 5.01(d)), amend, commute, terminate, buy-out, extinguish
liability under or otherwise modify the Property Policy (and such claims shall
be subject to any such amendments, commutations, terminations, buy-outs,
extinguishments and modifications), (iii) such claims will be subject to (and
recovery thereon will be reduced by the amount of) any applicable deductibles,
retentions, self-insurance provisions or any payment or reimbursement
obligations of Conexant, any Conexant Subsidiary or any Affiliate of Conexant or
any Conexant Subsidiary in respect thereof, and (iv) such claims will be subject
to exhaustion of existing aggregate limits. Conexant's obligation to use
commercially reasonable efforts to assist Mindspeed in asserting claims under
the Property Policy will include using commercially reasonable efforts in
assisting Mindspeed to establish its right to coverage under the Property Policy
(so long as all of Conexant's costs and expenses in connection therewith are
promptly paid by Mindspeed). None of Conexant or the Conexant Subsidiaries will
bear any Liability for the failure of the insurer to pay any Mindspeed claim
under the Property Policy. Within five (5) Business Days after the Time of
Distribution, Mindspeed will reimburse Conexant for its pro rata portion of the
premium paid by Conexant under the Property Policy reasonably determined by
Conexant to be attributable to Mindspeed for the period from the Time of
Distribution to June 30, 2003.

                  (d)      Conexant Actions. In the event that after the Time of
Distribution Conexant or any Conexant Subsidiary proposes to amend, commute,
terminate, buy-out, extinguish liability under or otherwise modify any Policies
under which Mindspeed has rights to assert claims pursuant to Section 5.01(b)
and Section 5.01(c) in a manner that would adversely affect any such rights of
Mindspeed, (i) Conexant will give Mindspeed prior notice thereof and consult
with Mindspeed with respect to such action (it being understood that the
decision to take any such action will be in the sole discretion of Conexant) and
(ii) Conexant will pay to Mindspeed its equitable share (which shall be
determined by Conexant in good faith based on the amount of premiums paid by or
allocated to the Mindspeed Business in respect of the applicable Policy) of any
net proceeds actually received by Conexant from the insurer under the applicable
Policy as a result of such action by Conexant (after deducting Conexant's
reasonable costs and expenses incurred in connection with such action).

                  (e)      Administration. From and after the Time of
Distribution:

                  (i)      Conexant or a Conexant Subsidiary, as appropriate,
         will be responsible for the Claims Administration with respect to
         claims of Conexant and the Conexant Subsidiaries under Policies; and

                  (ii)     Mindspeed or a Mindspeed Subsidiary, as appropriate,
         will be responsible for the Claims Administration with respect to
         claims of Mindspeed and the Mindspeed Subsidiaries under Policies.

                  (f)      Insurance Premiums. From and after the Time of
Distribution, Conexant will pay all premiums (retrospectively-rated or
otherwise) as required under the terms and conditions of the respective Policies
in respect of periods prior to the Time of Distribution, whereupon Mindspeed
will, upon the request of Conexant, forthwith reimburse

                                       37



Conexant for that portion of such premiums paid by Conexant as are reasonably
determined by Conexant to be attributable to the Mindspeed Business.

                  (g)      Agreement for Waiver of Conflict and Shared Defense.
In the event that a Policy provides coverage for both Conexant and/or a Conexant
Subsidiary, on the one hand, and Mindspeed and/or a Mindspeed Subsidiary, on the
other hand, relating to the same occurrence, Conexant and Mindspeed agree to
defend jointly and to waive any conflict of interest necessary to the conduct of
that joint defense. Nothing in this Section 5.01(g) will be construed to limit
or otherwise alter in any way the indemnity obligations of the parties to this
Agreement, including those created by this Agreement, by operation of law or
otherwise.

                  (h)      Directors' and Officers' Insurance. Conexant will use
commercially reasonable efforts to cause the persons currently serving as
directors and/or officers of Conexant or any Subsidiary of Conexant who will be,
effective as of the Time of Distribution, directors and/or officers of Mindspeed
or any Mindspeed Subsidiary to be covered for a period of six years from the
Time of Distribution with respect to claims arising from facts or events which
occurred prior to the Time of Distribution by the directors' and officers'
liability insurance policies maintained by Conexant during such six-year period
following the Time of Distribution for all persons who served as directors
and/or officers of Conexant or any Conexant Subsidiary prior to the Time of
Distribution with respect to claims arising from facts or events which occurred
prior to the Time of Distribution. The parties understand and acknowledge that
coverage under such directors' and officers' liability insurance policies will
continue so long as the continuity date under such policies remains December 31,
1998. Conexant shall be under no obligation to purchase run-off coverage in the
event that the continuity date under such policies changes. In addition,
Conexant shall not be restricted from reducing the amount of directors' and
officers' liability insurance coverage purchased after the Time of Distribution
so long as the coverage for the Mindspeed directors and officers is no less than
the coverage purchased for Conexant's ongoing directors and officers.

                  Section 5.02 Use of Names, Trademarks, etc. (a) From and after
the Time of Distribution, subject to Section 5.02(b), Conexant will own all
rights of Conexant or any of its Subsidiaries (including members of the
Mindspeed Group) in, and to the use of, the Conexant Marks. Prior to or promptly
after the Time of Distribution (but in no event later than 90 days after the
Time of Distribution in the case of United States Persons and 180 days after the
Time of Distribution in the case of non-United States Persons), Mindspeed will
change the name of any Mindspeed Subsidiary or other Person under its control to
eliminate therefrom the names "Conexant", "Conexant Systems" and "Conexant
Systems, Inc." and all derivatives thereof.

                  (b)      From and after the Time of Distribution, except as
permitted in this Section 5.02(b), the Mindspeed Group will not use or have any
rights to the Conexant Marks or any name, mark or symbol confusingly similar
thereto, or any special script, type font, form, style, logo, design, device,
trade dress or symbol which contains, represents or evokes the Conexant Marks or
any name or mark confusingly similar thereto. From and after the Time of
Distribution, the Mindspeed Group will not hold itself out as having any
affiliation with the Conexant Group. However, Conexant hereby grants to
Mindspeed a non-exclusive, non-transferable (other than by way of sublicenses to
members of the Mindspeed Group)

                                       38



license to utilize without obligation to pay royalties to Conexant the names,
trademarks, trade names and service marks "Conexant", "Conexant Systems" and
"Conexant Systems, Inc." and any corporate symbol or logo related thereto in
connection with stationery, supplies, labels, catalogs, vehicles, signs,
packaging and products of the Mindspeed Business, but only as described in
paragraphs (i) through (v) of this Section 5.02(b), subject to the terms and
conditions of this Section 5.02(b) and Section 5.02(c), in each case in the same
manner and to the same extent as such names, trademarks, trade names, service
marks, corporate symbols or logos were used by the Mindspeed Business at any
time within the two year period preceding the Distribution:

                  (i)      All documents constituting Mindspeed Assets as of the
         Time of Distribution within the following categories may be used for
         the duration of the periods following the Distribution indicated below
         or until the supply is exhausted, whichever is the first to occur:



                                                                          Maximum Period
                                                                          of Permitted Use
                                                                          Following the
Category of Documents                                                     Distribution
- ---------------------                                                     ------------
                                                                       
A.    Stationery                                                          6 months
B.    Invoices, purchase orders, debit and credit memos and other
      similar documents of a transactional nature                         6 months
C.    Business cards                                                      6 months
D.    Other outside forms such as packing lists, labels, packing
      materials and cartons, etc.                                         6 months
E.    Forms for internal use only                                         6 months
F.    Product literature                                                  6 months;


         provided, however, that Mindspeed will cause each document within any
         of the above categories A, B or F used for any purpose within the
         stated period to clearly and prominently display a statement, the form
         of which is approved by Conexant, to the effect that the Mindspeed
         Group was formerly affiliated with Conexant.

                  (ii)     All vehicles constituting Mindspeed Assets as of the
         Time of Distribution may continue to be used without re-marking (except
         as to legally required permit numbers, license numbers, etc.) for a
         period not to exceed six months following the Distribution Date or the
         date of disposition of the vehicle, whichever is the first to occur.
         Mindspeed will cause all markings on such vehicles to be removed or
         permanently obscured prior to the disposition of such vehicles.

                                       39



                  (iii)    Within six months following the Distribution Date,
         Mindspeed will remove or cause to be removed from display all signs and
         displays which contain the Conexant Marks.

                  (iv)     Products of the Mindspeed Business may have applied
         thereto the names, trademarks, trade names or service marks "Conexant",
         "Conexant Systems" or "Conexant Systems, Inc." or any Conexant
         corporate symbol or logo related thereto for a period of six months
         after the Distribution.

                  (v)      Products of the Mindspeed Business in finished goods
         inventory and work in process (to the extent the same bear the name,
         trademark, trade name or service mark "Conexant", "Conexant Systems" or
         "Conexant Systems, Inc." or any Conexant corporate symbol or logo
         related thereto as of the Time of Distribution or have any such name,
         trademark, trade name, service mark, corporate symbol or logo applied
         to them in accordance with paragraph (iv) above) may be disposed of
         without re-marking.

                  (c)      (i)      Apart from the rights granted under Section
5.02(b), no member of the Mindspeed Group shall have any right, title or
interest in, or to the use of, the Conexant Marks, either alone or in
combination with any other word, name, symbol, device, trademarks, or any
combination thereof. Anything contained herein to the contrary notwithstanding,
except as expressly permitted by Section 5.02(b), in no event will any member of
the Mindspeed Group utilize the Conexant Marks as a component of a company or
trade name. Mindspeed will not, and will cause each other member of the
Mindspeed Group not to, challenge or contest the validity of the Conexant Marks,
the registration thereof or the ownership thereof by the Conexant Group.
Mindspeed will not, and will cause each other member of the Mindspeed Group not
to, apply anywhere at any time for any registration as owner or exclusive
licensee of the Conexant Marks. If, notwithstanding the foregoing, any member of
the Mindspeed Group develops, adopts or acquires, directly or indirectly, any
right, title or interest in, or to the use of, any Conexant Marks in any
jurisdiction, or any goodwill incident thereto, Mindspeed will, and will cause
the Mindspeed Subsidiaries, upon the request of Conexant, and for a nominal
consideration of one dollar, assign or cause to be assigned to Conexant or any
designee of Conexant, all right, title and interest in, and to the use of, such
Conexant Marks in any and all jurisdictions, together with any goodwill incident
thereto.

                  (ii)     If the laws of any country require that any mark
subject to Section 5.02(b) or the right of any member of the Mindspeed Group to
use any mark as permitted by Section 5.02(b) be registered in order to fully
protect the Conexant Group, Conexant and Mindspeed will cooperate in
constituting such member of the Mindspeed Group as a registered user (or its
equivalent) in each of the countries in which such registration is necessary. If
any such laws of any country require that any such mark or the use by any member
of the Mindspeed Group of any such mark be registered prior to use in order to
protect fully the Conexant Group, the license granted pursuant to Section
5.02(b) will not extend to such country until such registration has been
effected to the reasonable satisfaction of Conexant. Any expenses for
registering such mark or constituting such

                                       40



member of the Mindspeed Group as a registered user in any country shall be borne
by Mindspeed. Any registration of such member of the Mindspeed Group as a
registered user of any mark hereunder shall be expunged on termination of the
period of permitted use under this Agreement or upon a breach or threatened
breach by any member of the Mindspeed Group of the terms of this Section 5.02
and Mindspeed will, upon request of Conexant, take all necessary steps to cause
such registration to be so expunged upon such termination or breach or
threatened breach.

                  (iii)    Conexant will have the right to terminate the license
granted in Section 5.02(b) upon 30 days written notice to Mindspeed for any
material failure by any member of the Mindspeed Group to observe the terms of
Section 5.02(b) or this Section 5.02(c), provided that such failure is not
remedied prior to the effectiveness of the termination.

                  (iv)     Mindspeed hereby constitutes and appoints Conexant
the true and lawful attorney of Mindspeed and its Subsidiaries to act as their
attorney-in-fact to execute any documents and to take all necessary steps to
cause Mindspeed and its Subsidiaries to perform any of their obligations set
forth in this Section 5.02(c), provided however, that Conexant will provide
Mindspeed sixty days written notice prior to executing such documents or
commencing such steps.

                  Section 5.03 License of Intellectual Property.

         (a)      Licenses from Conexant to Mindspeed.

                  (i)      Conexant-Owned Intellectual Property. Subject to
         Section 5.03(a)(v) and Section 5.03(c) and subject to any licenses or
         rights previously granted to a third party, effective as of the Time of
         Distribution, Conexant, on behalf of itself and the Conexant
         Subsidiaries, hereby grants to the Mindspeed Group a nonexclusive,
         worldwide, irrevocable (except as provided in Section 5.03(a)(vi)),
         royalty-free license, without the right to assign or grant sublicenses
         except as provided in Sections 5.03(a)(iii) and (iv), under all
         Intellectual Property that constitutes Conexant Assets (excluding
         trademarks, trade names, domain names, service marks, trade dress and
         any other form of trade identity) and that the Conexant Group has a
         right to license without the payment of royalties or other fees to a
         third party, (A) with respect to any copyrighted work included in such
         Intellectual Property, to reproduce, display, distribute and prepare
         derivative works of such copyrighted work; and (B) to make, have made
         (including by third-party contract manufacturers), use, import, sell,
         offer for sale, and otherwise dispose of Mindspeed Products and to
         practice any process involved in the use or manufacture thereof. For
         purposes of this Section 5.03, a product will be considered a
         "Mindspeed Product" if the specifications and designs of such product
         (taken as a whole) are developed or owned by, or exclusively licensed
         to, Mindspeed or a Mindspeed Subsidiary (even if the specifications and
         designs of individual components of such Product are not owned or
         developed by or exclusively licensed to Mindspeed or a Mindspeed
         Subsidiary).

                                       41



                  (ii)     Third-Party Intellectual Property. Solely to the
         extent allowed (without Conexant or any Conexant Subsidiary being
         required to pay any royalty or other fee to a third party) by, and
         subject to all applicable terms, conditions, limitations and
         requirements of, any Contract pursuant to which Intellectual Property
         owned by a third party is licensed to Conexant or any Conexant
         Subsidiary, Conexant, on behalf of itself and the Conexant
         Subsidiaries, hereby grants to the Mindspeed Group a nonexclusive,
         worldwide, irrevocable (except as provided in Section 5.03(a)(vi)),
         royalty-free sublicense, without the right to assign or grant further
         sublicenses except as provided in Sections 5.03(a)(iii) and (iv), under
         such third-party Intellectual Property, (A) with respect to any
         copyrighted work included in such third-party Intellectual Property, to
         reproduce, display, distribute and prepare derivative works of such
         copyrighted work; and (B) to make, have made (including by third-party
         contract manufacturers), use, import, sell, offer for sale, and
         otherwise dispose of Mindspeed Products and to practice any process
         involved in the use or manufacture thereof. If, at any time after the
         Time of Distribution, Mindspeed becomes aware of any Intellectual
         Property owned by a third party that was licensed to Conexant or a
         Conexant Subsidiary as of the Time of Distribution and that Conexant or
         the Conexant Subsidiary had (at the Time of Distribution) and continues
         to have the right to sublicense to the Mindspeed Group (or any portion
         thereof) without being required to pay any royalty or other fee to the
         third party, but that was not effectively sublicensed to the Mindspeed
         Group pursuant to the previous sentence, then at Mindspeed's written
         request, Conexant will grant, or (provided that the relevant Conexant
         Subsidiary is at the time a wholly-owned subsidiary of Conexant) cause
         the Conexant Subsidiary to grant, to the Mindspeed Group (or if
         sublicensing to the entire Mindspeed Group is not allowed, to a portion
         thereof, to the maximum extent allowed), a nonexclusive, royalty-free
         sublicense to such third-party Intellectual Property, to the maximum
         extent (and solely to this extent) allowed under, and subject to all
         applicable terms, conditions, limitations and requirements of, the
         Contract pursuant to which such third-party Intellectual Property is
         licensed to Conexant or the Conexant Subsidiary.

                  (iii)    Assignment of License Rights. Mindspeed or a
         Mindspeed Subsidiary may assign any or all of its rights under the
         license granted in Section 5.03(a)(i) (other than the right to
         sublicense provided in Section 5.03(a)(iv)) to any entity that is, at
         the time of such assignment, a direct or indirect wholly-owned
         subsidiary of Mindspeed. Except as expressly provided in the preceding
         sentence and in Section 5.03(a)(iv), and notwithstanding anything to
         the contrary in this Agreement, neither Mindspeed nor any Mindspeed
         Subsidiary may assign or otherwise transfer any of its rights under
         such license (whether in insolvency proceedings, in corporate mergers,
         by acquisition or other change of control or otherwise), and any
         purported assignment or transfer in violation hereof will be null and
         void. Mindspeed or a Mindspeed Subsidiary may assign any or all of its
         rights under any sublicense of third-party Intellectual Property
         granted in Section 5.03(a)(ii) to the maximum extent (and solely to
         this extent) allowed under, and subject to all applicable terms,
         conditions, limitations and requirements of, the Contract pursuant to
         which such third-party Intellectual Property is licensed to Conexant or
         a Conexant Subsidiary.

                                       42



                  (iv)     Sublicensing. Subject to Section 5.03(a)(v)(B),
         Mindspeed or a Mindspeed Subsidiary may sublicense any or all of its
         rights under the license granted in Section 5.03(a)(i) (other than the
         right to sublicense provided herein) (A) to any entity that is, at the
         time when such sublicense grant is made, a direct or indirect
         wholly-owned subsidiary of Mindspeed; (B) to any third party in
         connection with a divestiture, sale, or spin-off of any business unit,
         product line, or business operation of Mindspeed or a Mindspeed
         Subsidiary; and/or (C) to any third party that works under a joint
         development agreement with Mindspeed to jointly develop a new Mindspeed
         Product or to jointly redevelop an existing Mindspeed Product wherein
         the Mindspeed contribution comprises a substantial hardware
         contribution to the resulting Mindspeed Product developed under the
         joint development agreement. Except as expressly provided in the
         preceding sentence, and notwithstanding anything to the contrary in
         this Agreement, neither Mindspeed nor any Mindspeed Subsidiary may
         sublicense any of its rights under such license, and any purported
         sublicense in violation hereof will be null and void. Mindspeed or a
         Mindspeed Subsidiary may sublicense any or all of its rights under any
         sublicense of third-party Intellectual Property granted in Section
         5.03(a)(ii) to the maximum extent (and solely to this extent) allowed
         under, and subject to all applicable terms, conditions, limitations and
         requirements of, the Contract pursuant to which such third-party
         Intellectual Property is licensed to Conexant or the Conexant
         Subsidiary.

                  (v)      Limitations on Mindspeed's Rights.

                           (A)      Change in Control. If Mindspeed or any
         Mindspeed Subsidiary undergoes a Change in Control, the rights licensed
         to Mindspeed or such Mindspeed Subsidiary, as the case may be, in
         Section 5.03(a)(i) will be limited at all times after such Change in
         Control to (i) Mindspeed Products being developed, manufactured, or
         sold by or for Mindspeed or the Mindspeed Subsidiary, as the case may
         be, immediately prior to the time of such Change in Control, (ii)
         future versions of such Mindspeed Products, and (iii) Successor
         Products of such Mindspeed Products developed by or for Mindspeed or
         the Mindspeed Subsidiary after the Change in Control occurs, and in no
         event will such licenses or rights be deemed to extend to products
         already developed or being developed, manufactured, or sold by or for
         any third party involved in the Change in Control immediately prior to
         the time of the Change in Control.

                           (B)      Sublicense. If Mindspeed or any Mindspeed
         Subsidiary grants a sublicense permitted under Section 5.03(a)(iv) to
         any of the rights licensed to Mindspeed or such Mindspeed Subsidiary,
         as the case may be, in Section 5.03(a)(i), to any person or entity that
         is not a direct or indirect wholly-owned subsidiary of Mindspeed, the
         rights sublicensed to the third party will cover and be limited to, at
         all times after such sublicense grant, (i) Mindspeed Products being
         developed, manufactured, or sold by or for Mindspeed or the Mindspeed
         Subsidiary immediately prior to the time of such sublicense grant, (ii)
         future versions of such Mindspeed Products, and (iii) Successor
         Products of such Mindspeed Products developed by or for the sublicensee
         after the sublicense grant occurs, and in no event will such

                                       43



         sublicensed rights be deemed to extend to products already developed or
         being developed, manufactured, or sold by or for the sublicensee
         immediately prior to the time of the sublicense grant.

                  (vi)     Termination. If Mindspeed or a Mindspeed Subsidiary
         purports to assign or sublicense rights licensed to it in this Section
         5.03(a) in willful and knowing breach of this Section 5.03(a), Conexant
         may, in addition to all other rights and remedies it may have,
         terminate the license or sublicense granted to Mindspeed or the
         Mindspeed Subsidiary, as the case may be, under which Mindspeed or the
         Mindspeed Subsidiary was attempting to assign or sublicense rights.
         Such termination will be effective immediately when the notice of
         termination is given to Mindspeed or the Mindspeed Subsidiary by
         Conexant.

                  (b)      License of Mindspeed Intellectual Property to
         Conexant.

                  (i)      Mindspeed-Owned Intellectual Property. Subject to
         Section 5.03(b)(v) and Section 5.03(c) and subject to any licenses or
         rights previously granted to a third party, effective as of the Time of
         Distribution, Mindspeed, on behalf of itself and the Mindspeed
         Subsidiaries, hereby grants to the Conexant Group a nonexclusive,
         worldwide, irrevocable (except as provided in Section 5.03(b)(vi)),
         royalty-free license, without the right to assign or grant sublicenses
         except as provided in Sections 5.03(b)(iii) and (iv), under all
         Intellectual Property that constitutes Mindspeed Assets (excluding
         trademarks, trade names, domain names, service marks, trade dress and
         any other form of trade identity) and that the Mindspeed Group has a
         right to license without the payment of royalties or other fees to a
         third party, (A) with respect to any copyrighted work included in such
         Intellectual Property, to reproduce, display, distribute and prepare
         derivative works of such copyrighted work; and (B) to make, have made
         (including by third-party contract manufacturers), use, import, sell,
         offer for sale, and otherwise dispose of Conexant Products and to
         practice any process involved in the use or manufacture thereof. For
         purposes of this Section 5.03, a product will be considered a "Conexant
         Product" if the specifications and designs of such product (taken as a
         whole) are developed or owned by, or exclusively licensed to, Conexant
         or a Conexant Subsidiary (even if the specifications and designs of
         individual components of such Product are not owned or developed by or
         exclusively licensed to Conexant or a Conexant Subsidiary).

                  (ii)     Third-Party Intellectual Property. Solely to the
         extent allowed (without Mindspeed or any Mindspeed Subsidiary being
         required to pay any royalty or other fee to a third party) by, and
         subject to all applicable terms, conditions, limitations and
         requirements of, any Contract pursuant to which Intellectual Property
         owned by a third party is licensed to Mindspeed or any Mindspeed
         Subsidiary, Mindspeed, on behalf of itself and the Mindspeed
         Subsidiaries, hereby grants to the Conexant Group a nonexclusive,
         worldwide, irrevocable (except as provided in Section 5.03(b)(vi)),
         royalty-free sublicense, without the right to assign or grant further
         sublicenses except as provided in Sections 5.03(b)(iii) and (iv), under
         such third-party Intellectual Property, (A) with respect to any
         copyrighted work included in such third-party

                                       44



         Intellectual Property, to reproduce, display, distribute and prepare
         derivative works of such copyrighted work; and (B) to make, have made
         (including by third-party contract manufacturers), use, import, sell,
         offer for sale, and otherwise dispose of Conexant Products and to
         practice any process involved in the use or manufacture thereof. If, at
         any time after the Time of Distribution, Conexant becomes aware of any
         Intellectual Property owned by a third party that was licensed to
         Mindspeed or a Mindspeed Subsidiary as of the Time of Distribution and
         that Mindspeed or the Mindspeed Subsidiary had (at the Time of
         Distribution) and continues to have the right to sublicense to the
         Conexant Group (or any portion thereof) without being required to pay
         any royalty or other fee to the third party, but that was not
         effectively sublicensed to the Conexant Group pursuant to the previous
         sentence, then at Conexant's written request, Mindspeed will grant, or
         (provided that the relevant Mindspeed Subsidiary is at the time a
         wholly-owned subsidiary of Mindspeed) cause the Mindspeed Subsidiary to
         grant, to the Conexant Group (or if sublicensing to the entire Conexant
         Group is not allowed, to a portion thereof, to the maximum extent
         allowed), a nonexclusive, royalty-free sublicense to such third-party
         Intellectual Property, to the maximum extent (and solely to this
         extent) allowed under, and subject to all applicable terms, conditions,
         limitations and requirements of, the Contract pursuant to which such
         third-party Intellectual Property is licensed to Mindspeed or the
         Mindspeed Subsidiary.

                  (iii)    Assignment of License Rights. Conexant or a Conexant
         Subsidiary may assign any or all of its rights under the license
         granted in Section 5.03(b)(i) (other than the right to sublicense
         provided in Section 5.03(b)(iv)) to any entity that is, at the time of
         such assignment, a direct or indirect wholly-owned subsidiary of
         Conexant. Except as expressly provided in the preceding sentence and in
         Section 5.03(b)(iv), and notwithstanding anything to the contrary in
         this Agreement, neither Conexant nor any Conexant Subsidiary may assign
         or otherwise transfer any of its rights under such license (whether in
         insolvency proceedings, in corporate mergers by acquisition or other
         change of control or otherwise), and any purported assignment or
         transfer in violation hereof will be null and void. Conexant or a
         Conexant Subsidiary may assign any or all of its rights under any
         sublicense of third-party Intellectual Property granted in Section
         5.03(b)(ii) to the maximum extent (and solely to this extent) allowed
         under, and subject to all applicable terms, conditions, limitations and
         requirements of, the Contract pursuant to which such third-party
         Intellectual Property is licensed to Mindspeed or a Mindspeed
         Subsidiary.

                  (iv)     Sublicensing. Subject to Section 5.03(b)(v)(B),
         Conexant or a Conexant Subsidiary may sublicense any or all of its
         rights under the license granted in Section 5.03(b)(i) (other than the
         right to sublicense provided herein) (A) to any entity that is, at the
         time when such sublicense grant is made, a direct or indirect
         wholly-owned subsidiary of Conexant; (B) to any third party in
         connection with a divestiture, sale, or spin-off of any business unit,
         product line, or business operation of Conexant or a Conexant
         Subsidiary; and/or (C) to any third party that works under a joint
         development agreement with Conexant to jointly develop a new Conexant
         Product or to jointly redevelop an existing Conexant Product wherein
         the Conexant contribution comprises a substantial hardware contribution
         to the resulting Conexant

                                       45



         Product developed under the joint development agreement. Except as
         expressly provided in the preceding sentence, and notwithstanding
         anything to the contrary in this Agreement, neither Conexant nor any
         Conexant Subsidiary may sublicense any of its rights under such
         license, and any purported sublicense in violation hereof will be null
         and void. Conexant or a Conexant Subsidiary may sublicense any or all
         of its rights under any sublicense of third-party Intellectual Property
         granted in Section 5.03(b)(ii) to the maximum extent (and solely to
         this extent) allowed under, and subject to all applicable terms,
         conditions, limitations and requirements of, the Contract pursuant to
         which such third-party Intellectual Property is licensed to Mindspeed
         or a Mindspeed Subsidiary.

                  (v)      Limitations on Conexant's Rights.

                           (A)      Change in Control. If Conexant or any
         Conexant Subsidiary undergoes a Change in Control, the rights licensed
         to Conexant or such Conexant Subsidiary, as the case may be, in Section
         5.03(b)(i) will be limited at all times after such Change in Control to
         (i) Conexant Products being developed, manufactured, or sold by or for
         Conexant or the Conexant Subsidiary, as the case may be, immediately
         prior to the time of such Change in Control, (ii) future versions of
         such Conexant Products, and (iii) Successor Products of such Conexant
         Products developed by or for Conexant or the Conexant Subsidiary after
         the Change in Control occurs, and in no event will such licenses or
         rights be deemed to extend to products already developed or being
         developed, manufactured, or sold by or for any third party involved in
         the Change in Control immediately prior to the time of the Change in
         Control.

                           (B)      Sublicense. If Conexant or any Conexant
         Subsidiary grants a sublicense permitted under Section 5.03(b)(iv) to
         any of the rights licensed to Conexant or such Conexant Subsidiary, as
         the case may be, in Section 5.03(b)(i), to any person or entity that is
         not a direct or indirect wholly-owned subsidiary of Conexant, the
         rights sublicensed to the third party will cover and be limited to, at
         all times after such sublicense grant, (i) Conexant Products being
         developed, manufactured, or sold by or for Conexant or the Conexant
         Subsidiary immediately prior to the time of such sublicense grant, (ii)
         future versions of such Conexant Products, and (iii) Successor Products
         of such Conexant Products developed by or for the sublicensee after the
         sublicense grant occurs, and in no event will such sublicensed rights
         be deemed to extend to products already developed or being developed,
         manufactured, or sold by or for the sublicensee immediately prior to
         the time of the sublicense grant.

                  (vi)     Termination. If Conexant or a Conexant Subsidiary
         purports to assign or sublicense rights licensed to it in this Section
         5.03(b) in willful and knowing breach of this Section 5.03(b),
         Mindspeed may, in addition to all other rights and remedies it may
         have, terminate the license or sublicense granted to Conexant or the
         Conexant Subsidiary, as the case may be, under which Conexant or the
         Conexant Subsidiary was attempting to assign or sublicense rights. Such
         termination will be effective

                                       46



         immediately when the notice of termination is given to Conexant or the
         Conexant Subsidiary by Mindspeed.

                  (c)      Order of Precedence. In the event of any
inconsistency or conflict between this Section 5.03 and either (i) the License
and Assignment Agreement or (ii) the Patent License Agreement, the License and
Assignment Agreement or the Patent License Agreement, as the case may be, will
control. Nothing in this Section 5.03 will be construed as granting or conveying
any right or license to any Intellectual Property (including Intellectual
Property owned by a third party) that is licensed or sublicensed pursuant to the
License and Assignment Agreement or the Patent License Agreement.

                  (d)      Definitions. Solely for purposes of this Section
5.03:

                  (i)      "Change in Control" of an entity means the occurrence
         of any of the following: (i) a sale of assets representing more than
         fifty percent (50%) of the net book value or fair market value of such
         entity's consolidated assets (in a single transaction or in a series of
         related transactions) other than to one or more direct or indirect
         wholly-owned subsidiaries of such entity; (ii) a merger or
         consolidation of such entity with a third party, whether or not such
         entity is the surviving entity, in which such entity's stockholders
         immediately before such merger or consolidation do not own, directly or
         indirectly, more than fifty percent (50%) of the outstanding stock of
         the surviving entity; or (iii) an acquisition, other than in a merger
         or consolidation of the type referred to in clause (ii) of this
         sentence, of beneficial ownership of outstanding voting securities of
         such entity representing at least fifty percent (50%) of the combined
         voting power of such entity, in a single transaction or series of
         related transactions.

                  (ii)     "Successor Product" shall mean, with respect to a
         product, a new product based on the same core technology that has
         substantially similar features and functionality (with or without
         enhancements or improvements thereto) and that is marketed and
         distributed under a different name instead of as a new version of the
         original product.

                  (iii)    "Under Development". For purposes of this Section
         5.03, the phrase "being developed" by an entity means, with respect to
         a product, that such entity is actively engaged in the development of
         the product (as reflected in such entity's laboratory notebooks,
         product development plans and reports, and other documents and
         records), either alone or in conjunction with a third party, pursuant
         to existing functional specifications (which need not be detailed
         technical specifications) and a development schedule or timeline.

                  (e)      Defensive Use of Other Party's Patents.

                  (i)      From and after the Time of Distribution, each party
         has and retains the unrestricted right to enforce against any third
         party such Intellectual Property rights as that party then owns.
         Notwithstanding the grant of any license or sublicense to the

                                       47



         other party (or the members of such other party's Group) under Section
         5.03(a) or 5.03(b), the owner of such Intellectual Property (the
         "Owner") may enforce the same without any obligation to the other
         party.

                  (ii)     Upon the occurrence of any dispute involving
         Intellectual Property, including a pre-litigation dispute, (an "IP
         Dispute") either party may request (the requesting party referred to
         hereinafter as "Requestor") from the other party who is the Owner of
         the applicable Intellectual Property, the right to use certain
         Intellectual Property owned by the Owner for defensive purposes, but
         only during the five-year period following the Distribution Date,
         unless such date is extended in writing by both parties, and subject to
         strict compliance with the provisions of Section 5.03(e)(i) - (xvi),
         each of which is material.

                  (iii)    A Requestor who desires to use the Owner's
         Intellectual Property for defensive purposes in connection with an IP
         Dispute in accordance with this section 5.03(e) shall first confer with
         the Owner and submit in writing the proposed terms and conditions of
         any proposed license to a third party who is a party to the IP Dispute
         (the "Third Party") or the plan of enforcement (the "Enforcement
         Plan"), including the identity of the Third Party and a list of
         Intellectual Property proposed to be licensed or enforced.

                  (iv)     The Owner may reject or condition the proposed terms
         and conditions of the license or the Enforcement Plan for any of the
         following reasons:

                           (A)      The proposed license or Enforcement Plan
         would violate or conflict with any contractual obligation of the Owner;

                           (B)      The requested Intellectual Property is
         encumbered and the proposed license or Enforcement Plan is prohibited
         by such encumbrance;

                           (C)      The proposed terms and conditions of the
         license would impose obligations on the Owner other than or in addition
         to a naked patent grant including, without limitation, the obligations
         to enforce the patent(s) or to transfer technology; or

                           (D)      The Owner can demonstrate a significant,
         near-term competitive harm to its business other than one specified in
         subparts (A)-(C) above, and including but not limited to evidence of
         imminent threat of suit by the same Third Party, were the proposed
         license to be granted or the Enforcement Plan be carried out.

                  (v)      In response to a request by a Requestor to use the
         Owner's patents for defensive purposes in connection with an IP Dispute
         in accordance with this Section 5.03(e), the Owner may either:

                           (A)      Initiate suit against the alleged infringer
         as a co-party with the Requestor; or

                                       48



                           (B)      Assign to the Requestor the Intellectual
         Property rights necessary for the Requestor to initiate suit or
         counter-claim in its own name along with the rights necessary to obtain
         remedies for past infringement; provided, however, that subject to the
         Owner's discretion, if the Requestor negotiates a license for itself
         from the Third Party, Requestor agrees to use commercially reasonable
         efforts to secure a comparable license for the benefit of the Owner.

                  (vi)     The Owner will cooperate as reasonably required for
         the Requestor to resolve the controversy with the Third Party and, if
         necessary, to enforce the Intellectual Property rights, whether as a
         co-party with the Requestor, or as assignor to the Requestor, provided
         that all costs to the Owner occasioned thereby shall be promptly and
         fully paid by the Requestor.

                  (vii)    If the Owner elects to commence suit along with the
         Requestor as co-plaintiff as provided in Section 5.03(e)(v)(A) above,
         the Requestor shall be responsible for all costs for prosecution of the
         suit and shall control prosecution of the suit through settlement or
         judgment as the Requestor considers appropriate; provided, however,
         that the Owner may, at its own expense, be represented by its own
         counsel and participate in the proceedings and any settlement, subject
         to the Requestor's right of control.

                  (viii)   If the Owner elects to assign the Intellectual
         Property rights to the Requestor as provided in Section 5.03(e)(v)(B)
         above, any such assignment shall be subject to the reservation to the
         Owner of an irrevocable, freely assignable, royalty-free, world-wide
         license to practice the assigned Intellectual Property rights in the
         Owner's business on terms and conditions agreed to by the parties and
         subject to the following conditions:

                           (A)      The Requestor may enforce up to a maximum of
         10 of the Owner's patents for each IP Dispute;

                           (B)      Subject to applicable laws, any Intellectual
         Property rights assigned to the Requestor pursuant to Section
         5.03(e)(v)(B) will be reassigned back to the Owner immediately
         following the conclusion of the IP Dispute; and

                           (C)      With respect to the Owner's patents, the
         Requestor agrees to zealously assert infringement, defend validity and
         not stipulate to invalidity or non-infringement of any claim.

                  (ix)     Anything contained herein to the contrary
         notwithstanding, the Owner will not be required to initiate suit,
         assign Intellectual Property rights to the Requestor or otherwise
         cooperate in the enforcement of Intellectual Property rights if the
         putative defendant or party against which enforcement is sought is a
         duly authorized licensee or sub-licensee of the Owner under the
         Intellectual Property rights sought to be enforced by the Requestor.

                                       49



                  (x)      No license shall become effective and no rights shall
         be granted to a Third Party unless and until the Owner has approved in
         writing all of the terms and conditions of the proposed license, such
         terms and conditions will include at a minimum:

                           (A)      a non-exclusive license grant to the Third
         Party; and

                           (B)      a clause that revokes said license grant in
         the event that the Third Party, its successors and/or assigns,
         initiates a patent infringement suit against the Owner.

                  (xi)     The Requestor and the Owner shall share equally any
         royalties and/or damages recovered after reimbursement to the Requestor
         of any costs and expenses associated with the grant of any license or
         damages under this Section 5.03(e).

                  (xii)    The rights granted between the parties under this
         Section 5.03(e) shall expire five years from the Time of Distribution;
         provided, however, that any license granted to a Third Party may be
         made for the life of the patent rights underlying such grant and all
         such licenses shall survive expiration of this Section 5.03(e) and
         remain in full force and effect for the duration of the license.

                  (xiii)   Anything contained herein to the contrary
         notwithstanding, the rights granted between the parties under this
         Section 5.03(e) are personal and nontransferable by either party to any
         other Person, whether or not in connection with the sale of any party's
         business or any portion thereof. The rights granted between the parties
         under this Section 5.03(e) shall, unless otherwise agreed in writing,
         terminate upon a Change in Control of either party; provided, however,
         that licenses granted prior to such termination shall remain in full
         force and effect for the duration of the license.

                  (xiv)    In any dispute between the parties arising under the
         provisions of this Section 5.03(e) with respect to the right to grant a
         license or the scope of such license, the General Counsel of Conexant
         and the General Counsel of Mindspeed will attempt a good faith
         resolution of such dispute within thirty days after either party
         notifies the other of such dispute. If such dispute is not resolved
         within thirty days of such notification, such dispute will be referred
         for resolution to the Chief Executive Officers and, ultimately, to the
         respective Chairmen of the Board of Conexant and Mindspeed, whose joint
         decision will be final and binding on the parties. Notwithstanding
         anything contained in this Agreement to the contrary, this Section
         5.03(e)(xiv) shall be the parties' exclusive remedy with respect to
         claims arising under the provisions of this Section 5.03(e).

                  (xv)     Conexant makes no representations or warranties of
         any kind with respect to the validity, scope or enforceability of any
         Intellectual Property rights licensed by Conexant and the Conexant
         Subsidiaries pursuant to this Section 5.03(e) and Conexant has no
         obligation to file or prosecute any patent applications or maintain

                                       50



         any patents in force in connection therewith. Conexant will, at no cost
         to Mindspeed, promptly execute or cause a member of the Conexant Group
         promptly to execute such further documents as Mindspeed may reasonably
         request as necessary or desirable to carry out the terms of this
         Section 5.03(e). Notwithstanding anything contained herein to the
         contrary, this Section 5.03(e) will not be applicable to any rights in
         and use of the names, trademarks, trade names and service marks
         "Conexant" and "Conexant Systems" and all corporate symbols and logos
         related thereto and all names, trademarks, trade names and service
         marks which include the words "Conexant" or "Conexant Systems" or any
         derivative thereof.

                  (xvi)    Mindspeed makes no representations or warranties of
         any kind with respect to the validity, scope or enforceability of any
         Intellectual Property rights licensed by Mindspeed and Mindspeed
         Subsidiaries pursuant to this Section 5.03(e) and Mindspeed has no
         obligation to file or prosecute any patent applications or maintain any
         patents in force in connection therewith. Mindspeed will, at no cost to
         Conexant, promptly execute or cause a member of the Mindspeed Group
         promptly to execute such further documents as Conexant may reasonably
         request as necessary or desirable to carry out the terms of this
         Section 5.03(e).

                  Section 5.04 Jazz Warrant. Effective as of the Time of
Distribution Mindspeed will issue to the holder of the Jazz Warrant a warrant to
purchase shares of Mindspeed Common Stock (the "New Jazz-Mindspeed Warrant"),
pursuant to the equitable adjustment and other provisions of the Jazz Warrant.
The number of shares of Mindspeed Common Stock subject to the New Jazz-Mindspeed
Warrant and the per-share exercise price of the New Jazz-Mindspeed Warrant will
be determined as set forth in the Jazz Warrant. The New Jazz-Mindspeed Warrant
will otherwise have substantially the same terms and conditions as the Jazz
Warrant, except that references to Conexant will be changed to refer to
Mindspeed.

                  Section 5.05 Charitable Funds. As promptly as practicable
after the Time of Distribution, Conexant and Mindspeed shall cooperate and take
actions reasonably required to effect the transfer of $300,000 from the Conexant
Systems Charitable Fund, a donor advisor fund established by Conexant and
administered through the California Community Foundation, to a charitable fund
to be established by Mindspeed and also administered through the California
Community Foundation.

                                   ARTICLE VI

                              ACCESS TO INFORMATION

                  Section 6.01 Provision of Corporate Records. Prior to or as
promptly as practicable after the Time of Distribution, Conexant shall deliver
to Mindspeed all minute books and other records of meetings of the Board of
Directors, committees of the Board of Directors and stockholders of the
Mindspeed Group and all corporate books and records of the Mindspeed Group in
its possession, including, in each case, all active agreements and

                                       51



active litigation files. From and after the Time of Distribution, all such books
and records shall be the property of Mindspeed. Prior to or as promptly as
practicable after the Time of Distribution, Mindspeed shall deliver to Conexant
all corporate books and records of the Conexant Group in Mindspeed's possession
(other than the books and records described in the first sentence of this
Section 6.01), including, in each case, all active agreements and active
litigation files. From and after the Time of Distribution, all such books and
records shall be the property of Conexant.

                  Section 6.02 Access to Information. (a) From and after the
Time of Distribution, Conexant will, and will cause each Conexant Subsidiary to,
afford to Mindspeed and its Representatives (at Mindspeed's expense) reasonable
access and duplicating rights during normal business hours and upon reasonable
advance notice to all Information within the Conexant Group's possession or
control relating to Mindspeed, any Mindspeed Subsidiary, any Mindspeed Asset,
any Mindspeed Liability or the Mindspeed Business, insofar as such access is
reasonably required by Mindspeed or any Mindspeed Subsidiary, subject to the
provisions below regarding Privileged Information.

                  (b)      From and after the Time of Distribution, Mindspeed
will, and will cause each Mindspeed Subsidiary to, afford to Conexant and its
Representatives (at Conexant's expense) reasonable access and duplicating rights
during normal business hours and upon reasonable advance notice to all
Information within the Mindspeed Group's possession or control relating to
Conexant, any Conexant Subsidiary, any Conexant Asset, any Conexant Liability or
the Broadband Business, insofar as such access is reasonably required by
Conexant or any Conexant Subsidiary, subject to the provisions below regarding
Privileged Information.

                  (c)      Without limiting the foregoing, Information may be
requested under this Article VI for audit, accounting, claims, litigation,
insurance, environmental and safety and tax purposes, as well as for purposes of
fulfilling disclosure and reporting obligations and for performing this
Agreement and the transactions contemplated hereby.

                  In furtherance of the foregoing:

                  (i)      Each party acknowledges that (A) each of Conexant and
         Mindspeed (and the members of the Conexant Group and the Mindspeed
         Group, respectively) has or may obtain Privileged Information; (B)
         there are or may be a number of Actions affecting one or more of the
         members of the Conexant Group and the Mindspeed Group; (C) the parties
         may have a common legal interest in Actions, in the Privileged
         Information, and in the preservation of the confidential status of the
         Privileged Information; and (D) each of Conexant and Mindspeed intends
         that the transactions contemplated by the Separation Agreements and any
         transfer of Privileged Information in connection therewith shall not
         operate as a waiver of any potentially applicable privilege.

                  (ii)     Each of Conexant and Mindspeed agrees, on behalf of
         itself and each member of the Group of which it is a member, not to
         disclose or otherwise waive any

                                       52



         privilege attaching to any Privileged Information relating to the
         business of the other Group or relating to or arising in connection
         with the relationship between the Groups on or prior to the Time of
         Distribution, without providing prompt written notice to and obtaining
         the prior written consent of the other, which consent will not be
         unreasonably withheld. In the event of a disagreement between any
         member of the Conexant Group and any member of the Mindspeed Group
         concerning the reasonableness of withholding such consent, no
         disclosure will be made prior to a final, nonappealable resolution of
         such disagreement by a court of competent jurisdiction.

                  (iii)    Upon any member of the Conexant Group or any member
         of the Mindspeed Group receiving any subpoena or other compulsory
         disclosure notice from a court, other Governmental Entity or otherwise
         which requests disclosure of Privileged Information, in each case
         relating to the business of the other Group or relating to or arising
         in connection with the relationship between the Groups on or prior to
         the Time of Distribution, the recipient of the notice will promptly
         provide to the other party (following the notice provisions set forth
         herein) a copy of such notice, the intended response, and a description
         of all materials or information relating to the other Group that might
         be disclosed. In the event of a disagreement as to the intended
         response or disclosure, unless and until the disagreement is resolved
         as provided in Section 6.02(c)(ii), the parties will cooperate to
         assert all defenses to disclosure claimed by either Group, at the cost
         and expense of the Group claiming such defense to disclosure, and shall
         not disclose any disputed documents or information until all legal
         defenses and claims of privilege have been finally determined.

                  Section 6.03 Production of Witnesses. Subject to Section 6.02,
after the Time of Distribution, each of Conexant and Mindspeed will, and will
cause each member of the Conexant Group and the Mindspeed Group, respectively,
to, make available to the other party and members of such other party's Group,
upon written request and at the cost and expense of the party so requesting, its
directors, officers, employees and agents as witnesses to the extent that any
such Person may reasonably be required (giving consideration to business demands
of such directors, officers, employees and agents) in connection with any
Actions, administrative or other proceedings in which the requesting party may
from time to time be involved and relating to the business of either Group or
relating to or arising in connection with the relationship between the Groups on
or prior to the Time of Distribution, provided that the same shall not
unreasonably interfere with the conduct of business by the Group of which the
request is made.

                  Section 6.04 Retention of Records. Except as otherwise
required by law or agreed to by the parties in writing, if any Information
relating to the pre-Distribution business, Assets or Liabilities of a member of
a Group is retained by a member of the other Group, each of Conexant and
Mindspeed will, and will cause the members of the Group of which it is a member
to, retain for the period required by the applicable Conexant records retention
policy in effect immediately prior to the Time of Distribution all such
Information in such Group's possession or under its control. In addition, if,
prior to the scheduled date for destruction or disposal of such Information
under the applicable Conexant records retention policy,

                                       53



Conexant or Mindspeed, on behalf of any member of its Group, requests in writing
that any of the Information scheduled to be destroyed or disposed of be
delivered to such requesting party, the party whose Group is scheduled to
destroy or dispose of such Information will arrange for the delivery of the
requested Information to a location specified by, and at the expense of, the
requesting party, at or about the time such Information would have otherwise
been destroyed or disposed of.

                  Section 6.05 Confidentiality. Subject to the provisions of
Section 6.02, which shall govern Privileged Information, from and after the Time
of Distribution, each of Conexant and Mindspeed shall hold, and shall use
reasonable efforts to cause members of its Group and its and their Affiliates
and Representatives to hold, in strict confidence all Information concerning the
other party's Group in its possession or control prior to the Time of
Distribution or furnished to it by such other party's Group pursuant to the
Separation Agreements or the transactions contemplated thereby and will not
release or disclose such Information to any other Person, except members of its
Group and its and their Representatives, who will be bound by the provisions of
this Section 6.05; provided, however, that any member of the Conexant Group or
the Mindspeed Group may disclose such Information to the extent that (a)
disclosure is compelled by judicial or administrative process or, in the opinion
of such Person's counsel, by other requirements of law (in which case the party
required to make such disclosure will notify the other party as soon as
practicable of such obligation or requirement and cooperate with the other party
(at the expense of the other party) to limit the Information required to be
disclosed and to obtain a protective order or other appropriate remedy with
respect to the Information ultimately disclosed) or (b) such Person can show
that such Information was (i) available to such Person on a nonconfidential
basis (other than from a member of the other party's Group) prior to its
disclosure by such Person, (ii) in the public domain through no fault of such
Person or (iii) lawfully acquired by such Person from another source after the
time that it was furnished to such Person by the other party's Group, and not
acquired from such source subject to any confidentiality obligation on the part
of such source known to the acquiror, or on the part of the acquiror. Each party
acknowledges that it will be liable for any breach of this Section 6.05 by its
Affiliates, Representatives and Subsidiaries. Notwithstanding the foregoing,
each of Conexant and Mindspeed will be deemed to have satisfied its obligations
under this Section 6.05 with respect to any Information (other than Privileged
Information) if it exercises the same care with regard to such Information as it
takes to preserve confidentiality for its own similar Information.

                                  ARTICLE VII

                                  MISCELLANEOUS

                  Section 7.01 Entire Agreement; Construction. The Separation
Agreements, the Financing Agreements, the License and Assignment Agreement and
the Patent License Agreement including any annexes, schedules and exhibits
hereto or thereto, and other agreements and documents referred to herein and
therein, will together constitute the entire agreement between the parties with
respect to the subject matter hereof and thereof and will

                                       54



supersede all prior negotiations, agreements and understandings of the parties
of any nature, whether oral or written, with respect to such subject matter.
Notwithstanding any other provisions in the Separation Agreements to the
contrary, (i) in the event and to the extent that there is a conflict between
the provisions of this Agreement and the provisions of the Employee Matters
Agreement, the Tax Allocation Agreement, the License and Assignment Agreement or
the Patent License Agreement, the provisions of the Employee Matters Agreement,
the Tax Allocation Agreement, the License and Assignment Agreement or the Patent
License Agreement, as appropriate, will control and (ii) in the event and to the
extent that there is a conflict between the provisions of this Agreement and the
provisions of any Conveyance and Assumption Instruments, the provisions of this
Agreement will control.

                  Section 7.02 Survival of Agreements. Except as otherwise
contemplated by the Separation Agreements (including Section 7.13 of this
Agreement), all covenants and agreements of the parties contained in the
Separation Agreements will remain in full force and effect and survive the Time
of Distribution. The obligations of each of Conexant and Mindspeed under Article
IV will not terminate at any time and will survive the sale or other transfer by
any party of any assets or businesses or the assignment by any party of any
Liabilities with respect to any Indemnifiable Losses of the other related to
such assets, businesses or Liabilities.

                  Section 7.03 Governing Law. This Agreement will be governed by
and construed in accordance with the internal laws of the State of Delaware
applicable to contracts made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.

                  Section 7.04 Notices. All notices, requests, claims, demands
and other communications required or permitted to be given hereunder will be in
writing and will be delivered by hand or telecopied, e-mailed or sent, postage
prepaid, by registered, certified or express mail or reputable overnight courier
service and will be deemed given when so delivered by hand or telecopied, when
e-mail confirmation is received if delivered by e-mail, or three Business Days
after being so mailed (one Business Day in the case of express mail or overnight
courier service). All such notices, requests, claims, demands and other
communications will be addressed as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to receive such
notice:

                  (a)      If to Conexant:

                           Conexant Systems, Inc.
                           4311 Jamboree Road
                           Newport Beach, California 92660-3095

                           Attention: Dwight W. Decker
                                      Chairman of the Board and Chief
                                      Executive Officer
                           Telecopy:  (949) 483-4318
                           E-mail:    dwight.decker@conexant.com

                                       55



                           with a copy to:

                           Conexant Systems, Inc.
                           4311 Jamboree Road
                           Newport Beach, California 92660-3095

                           Attention: Dennis E. O'Reilly, Esq.
                                      Senior Vice President, General Counsel
                                        and Secretary
                           Telecopy:  (949) 483-9475
                           E-mail:    dennis.o'reilly@conexant.com

                  (b)      If to Mindspeed:

                           Mindspeed Technologies, Inc.
                           4000 MacArthur Boulevard
                           Newport Beach, California 92660-3095

                           Attention: Raouf Y. Halim
                                      Chief Executive Officer
                           Telecopy:  (949) 579-6106
                           E-mail:    raouf.halim@mindspeed.com

                           with a copy to:

                           Mindspeed Technologies, Inc.
                           4000 MacArthur Boulevard
                           Newport Beach, California 92660-3095

                           Attention: Ian J. Stock, Esq.
                                      Senior Vice President, General
                                      Counsel and Secretary
                           Telecopy:  (949) 579-3000
                           E-mail:    ian.stock@mindspeed.com

                  Section 7.05 Dispute Resolution. Except as otherwise provided
in Section 5.03(e)(xiv), in the event that from and after the Time of
Distribution any dispute, claim or controversy (collectively, a "Dispute")
arises out of or relates to this Agreement, the Employee Matters Agreement or
the Tax Allocation Agreement or any transaction contemplated thereby or the
breach, performance, enforcement or validity or invalidity of any thereof, the
designees of the Conexant Chief Executive Officer and the Mindspeed Chief
Executive Officer will attempt a good faith resolution of the Dispute within
thirty days after either party notifies the other party in writing of the
Dispute. If the Dispute is not resolved within thirty days of the receipt of the
notification, or within such other time as they may agree, the Dispute will be
referred for resolution to the Conexant Chief Executive Officer and the
Mindspeed Chief Executive Officer. Should they be unable to resolve the Dispute
within thirty days following the referral to them, or within such other time as
they may agree,
                                       56



Conexant and Mindspeed will then attempt in good faith to resolve such Dispute
by mediation in accordance with the then-existing CPR Mediation Procedures
promulgated by the CPR Institute for Dispute Resolution. If such mediation is
unsuccessful within sixty days after commencement thereof, any party to the
Dispute may pursue any other remedies available to it.

                  Section 7.06 Consent to Jurisdiction. Each of Conexant and
Mindspeed irrevocably submits to the exclusive jurisdiction of (i) the Superior
Court of the State of California, Orange County and (ii) the United States
District Court for the Central District of California, for the purposes of any
suit, action or other proceeding arising out of this Agreement, the Employee
Matters Agreement or the Tax Allocation Agreement or any transaction
contemplated thereby or the breach, performance, enforcement or validity or
invalidity of any thereof (and agrees not to commence any action, suit or
proceeding relating thereto except in such courts). Each of Conexant and
Mindspeed further agrees that service of any process, summons, notice or
document hand delivered or sent by U.S. registered mail to such party's
respective address set forth in Section 7.04 will be effective service of
process for any action, suit or proceeding in California with respect to any
matters to which it has submitted to jurisdiction as set forth in the
immediately preceding sentence. Each of Conexant and Mindspeed irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this Agreement, the Employee Matters Agreement or
the Tax Allocation Agreement or the transactions contemplated thereby or the
breach, performance, enforcement or validity or invalidity of any thereof in (i)
the Superior Court of the State of California, Orange County or (ii) the United
States District Court for the Central District of California, and hereby further
irrevocably and unconditionally waives and agrees 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. Notwithstanding the foregoing, each
party agrees that a final judgment in any action, suit or proceeding so brought
shall be conclusive and may be enforced by suit on the judgment in any
jurisdiction or in any other manner provided in law or in equity.

                  Section 7.07 Amendments. This Agreement cannot be amended,
modified or supplemented except by a written agreement executed by Conexant and
Mindspeed.

                  Section 7.08 Assignment. Except as otherwise provided herein,
neither party will convey, assign or otherwise transfer any of its rights or
obligations under this Agreement without the prior written consent of the other
party in its sole and absolute discretion. Notwithstanding the foregoing, but
subject to the provisions of Section 5.03, either party may (without obtaining
any consent) assign all or any portion of its rights and obligations hereunder
to (i) the surviving entity resulting from a merger or consolidation involving
such party, (ii) the acquiring entity in a sale or other disposition of all or
substantially all of the assets of such party as a whole or of any line of
business or division of such party, or (iii) any other Person that is created as
a result of a spin-off from, or similar reorganization transaction of, such
party or any line of business or division of such party. In the event of an
assignment pursuant to (ii) or (iii) above, the nonassigning party shall, at the
assigning party's request, use good faith commercially reasonable efforts to
enter into separate agreements with each of the resulting entities and take such
further actions as may be reasonably required to assure that the

                                       57



rights and obligations under this Agreement are preserved, in the aggregate, and
divided equitably between such resulting entities. Any conveyance, assignment or
transfer requiring the prior written consent of another party pursuant to this
Section 7.08 which is made without such consent will be void ab initio. No
assignment of this Agreement will relieve the assigning party of its obligations
hereunder.

                  Section 7.09 Captions; Currency. The article, section and
paragraph captions herein and the table of contents hereto are for convenience
of reference only, do not constitute part of this Agreement and will not be
deemed to limit or otherwise affect any of the provisions hereof. Unless
otherwise specified, all references herein to numbered articles or sections are
to articles and sections of this Agreement and all references herein to
schedules are to schedules to this Agreement. Unless otherwise specified, all
references contained in this Agreement, in any schedule referred to herein or in
any instrument or document delivered pursuant hereto to dollars or "$" shall
mean United States Dollars.

                  Section 7.10 Severability. If any provision of this Agreement
or the application thereof to any Person or circumstance is determined by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or
unenforceable, will remain in full force and effect and will in no way be
affected, impaired or invalidated thereby. If the economic or legal substance of
the transactions contemplated hereby is affected in any manner adverse to any
party as a result thereof, the parties will negotiate in good faith in an effort
to agree upon a suitable and equitable substitute provision to effect the
original intent of the parties.

                  Section 7.11 Parties in Interest. This Agreement is binding
upon and is for the benefit of the parties hereto and their respective
successors and permitted assigns. This Agreement is not made for the benefit of
any Person not a party hereto, and no Person other than the parties hereto or
their respective successors and permitted assigns will acquire or have any
benefit, right, remedy or claim under or by reason of this Agreement, except
that the provisions of Sections 4.02 and 4.03 shall inure to the benefit of and
shall be enforceable by the Persons referred to therein.

                  Section 7.12 Schedules. All schedules attached hereto are
hereby incorporated in and made a part of this Agreement as if set forth in full
herein. Capitalized terms used in the schedules hereto but not otherwise defined
therein will have the respective meanings assigned to such terms in this
Agreement.

                  Section 7.13 Termination. This Agreement may be terminated and
the Distribution abandoned at any time prior to the Time of Distribution by and
in the sole discretion of the Conexant Board without the approval of Mindspeed
or Conexant's shareowners. In the event of such termination, neither party will
have any liability of any kind to the other party on account of such
termination.

                  Section 7.14 Waivers; Remedies. The conditions to Conexant's
obligation to consummate the Distribution are for the sole benefit of Conexant
and may be waived in

                                       58



writing by Conexant in whole or in part in Conexant's sole discretion. No
failure or delay on the part of either Conexant or Mindspeed in exercising any
right, power or privilege hereunder will operate as a waiver thereof, nor will
any waiver on the part of either Conexant or Mindspeed of any right, power or
privilege hereunder operate as a waiver of any other right, power or privilege
hereunder, nor will any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. Subject to Section
7.05, the rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies which the parties may otherwise have at law
or in equity.

                  Section 7.15 Further Assurances. From time to time after the
Time of Distribution, as and when requested by either party hereto, the other
party shall execute and deliver, or cause to be executed and delivered, all such
documents and instruments and shall take, or cause to be taken, all such actions
as the requesting party may reasonably request to consummate the transactions
contemplated by the Separation Agreements.

                  Section 7.16 Counterparts. This Agreement may be executed in
separate counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts will together constitute the same
agreement. This Agreement may be executed and delivered by telecopier with the
same force and effect as if it were a manually executed and delivered
counterpart.

                  Section 7.17 Performance. Conexant will cause to be performed
and hereby guarantees the performance of all actions, agreements and obligations
set forth herein to be performed by any Conexant Subsidiary. Mindspeed will
cause to be performed and hereby guarantees the performance of all actions,
agreements and obligations set forth herein to be performed by any Mindspeed
Subsidiary.

                  Section 7.18 Currency Calculations. Following the Distribution
Date, for purposes of calculating the United States Dollar equivalent of any
amount payable under any Separation Agreement which is denominated in a currency
other than United States Dollars, the New York foreign exchange selling rate
applicable to such currency will be used, as published in the Wall Street
Journal, New York Edition, for the second Business Day preceding the earlier of
the date such payment is due or the date such payment is made (it being
understood that this Section 7.18 shall not apply to the conversion of foreign
currency balances made as of the Distribution Date in accordance with standard
Conexant accounting practices and procedures).

                  Section 7.19 Interpretation. Any reference herein to any
federal, state, local, or foreign law shall be deemed also to refer to all rules
and regulations promulgated thereunder, unless the context requires otherwise.
For the purposes of this Agreement, (a) words in the singular shall be held to
include the plural and vice versa and words of one gender shall be held to
include the other gender as the context requires, (b) the terms "hereof",
"herein", and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole and not to any
particular provision of this

                                       59



Agreement and (c) the word "including" and words of similar import when used in
this Agreement shall mean "including, without limitation".

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

                                       60



                  IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties as of the date first
hereinabove written.

                            CONEXANT SYSTEMS, INC.

                            By: /s/ Dennis E. O'Reilly
                                ----------------------------------------------
                                Name:  Dennis E. O'Reilly
                                Title: Senior Vice President, General
                                         Counsel and Secretary

                            MINDSPEED TECHNOLOGIES, INC.

                            By: /s/ Bradley W. Yates
                                ----------------------------------------------
                                Name:  Bradley W. Yates
                                Title: Senior Vice President and Chief
                                         Administrative Officer

                                       61

EX-2.2

                                                                     Exhibit 2.2

- --------------------------------------------------------------------------------

                           EMPLOYEE MATTERS AGREEMENT

                                 by and between

                            CONEXANT SYSTEMS, INC.

                                       and

                         MINDSPEED TECHNOLOGIES, INC.

- --------------------------------------------------------------------------------


                                 June 27, 2003


                                TABLE OF CONTENTS



                                                                              Page
                                                                              ----
                                                                           
ARTICLE I  DEFINITIONS.....................................................     1
      Section 1.01  General................................................     1

ARTICLE II  EMPLOYEES......................................................     5
      Section 2.01  Employees..............................................     5
      Section 2.02  Non-Solicitation of Employees..........................     7

ARTICLE III  SAVINGS PLANS.................................................     8
      Section 3.01  Retirement Savings Plan................................     8
      Section 3.02  Hourly Employees' Savings Plan.........................     8
      Section 3.03  Non-Qualified Retirement Savings Plan..................     9

ARTICLE IV  STOCK PLANS....................................................     9
      Section 4.01  Stock Plans............................................     9

ARTICLE V  OTHER EMPLOYEE PLANS AND MATTERS...............................     10
      Section 5.01  Welfare Plans.........................................     10
      Section 5.02  Incentive Compensation Plans..........................     13
      Section 5.03  Deferred Compensation Plans...........................     14
      Section 5.04  Severance Pay.........................................     15
      Section 5.05  Employment, Consulting and Other Employee Related
                     Agreements...........................................     15
      Section 5.06  Employee Stock Purchase Plans.........................     16
      Section 5.07  VERP..................................................     16
      Section 5.08  Other Liabilities.....................................     17

ARTICLE VI  MISCELLANEOUS.................................................     17
      Section 6.01  Indemnification.......................................     17
      Section 6.02  Sharing of Information................................     17
      Section 6.03  Entire Agreement; Construction........................     18
      Section 6.04  Survival of Agreements................................     18
      Section 6.05  Governing Law.........................................     18
      Section 6.06  Notices...............................................     18
      Section 6.07  Amendments............................................     18
      Section 6.08  Assignment............................................     18
      Section 6.09  Captions; Currency....................................     19
      Section 6.10  Severability..........................................     19
      Section 6.11  Parties in Interest...................................     19
      Section 6.12  Schedules.............................................     19
      Section 6.13  Termination...........................................     20
      Section 6.14  Change of Name........................................     20
      Section 6.15  Waivers; Remedies.....................................     20
      Section 6.16  Counterparts..........................................     20




                                        i

                                                                           
      Section 6.17  Performance...........................................     20
      Section 6.18  Dispute Resolution....................................     20
      Section 6.19  Cooperation...........................................     20
      Section 6.20  Interpretation........................................     21




SCHEDULES

Schedule 1.01(a)     -   Certain Definitions
Schedule 1.01(b)     -   Specified Conexant Options
Schedule 2.01        -   Active Mindspeed Employees
Schedule 3.03        -   Mindspeed Participants in the Conexant Non-Qualified
                         Savings Plan
Schedule 4.01(a)(i)  -   Conexant Split Option Adjustment - Conexant
                         Options
Schedule 4.01(a)(ii) -   Conexant Split Option Adjustment - Mindspeed
                         Options
Schedule 4.01(d)     -   Specified Conexant Option Adjustment
Schedule 5.07        -   Mindspeed Participants in the Conexant VERP
Schedule 5.08(c)     -   Other Liabilities


                                       ii

                           EMPLOYEE MATTERS AGREEMENT

            EMPLOYEE MATTERS AGREEMENT (this "Agreement") dated as of June 27,
2003 by and between CONEXANT SYSTEMS, INC., a Delaware corporation ("Conexant"),
and MINDSPEED TECHNOLOGIES, INC., a Delaware corporation ("Mindspeed").

            WHEREAS, the Conexant Board has determined that it is appropriate
and desirable, subject to the terms and conditions set forth in the Distribution
Agreement by and between Conexant and Mindspeed dated as of the date hereof (the
"Distribution Agreement"), to distribute on a pro rata basis to holders of
shares of Conexant Common Stock all outstanding shares of Mindspeed Common Stock
owned by Conexant (the "Distribution");

            WHEREAS, Conexant and Mindspeed are entering into the Distribution
Agreement which, among other things, sets forth the principal corporate
transactions required to effect the Contribution and the Distribution and
certain other agreements that will govern certain matters relating to the
Contribution and the Distribution; and

            WHEREAS, in connection with the Contribution and the Distribution,
Conexant and Mindspeed have determined that it is appropriate and desirable to
provide for the allocation of certain assets and liabilities and certain other
matters relating to employees, employee benefit plans and compensation
arrangements;

            NOW, THEREFORE, in consideration of the premises and the respective
agreements and covenants contained in this Agreement, the parties hereby agree
as follows:

                                   ARTICLE I

                                  DEFINITIONS

            Section 1.01 General. Capitalized terms used in this Agreement (or
in any Schedule to this Agreement) but not defined herein (other than the names
of employee benefit plans) have the meanings ascribed to such terms in the
Distribution Agreement. As used in this Agreement (or in any Schedule to this
Agreement), the terms defined in Schedule 1.01 have the meanings set forth in
Schedule 1.01 and the following terms have the following meanings (in each case,
such meanings to be equally applicable to both the singular and plural forms of
the terms defined):

            "ACTIVE CONEXANT EMPLOYEE" means any individual who, immediately
      after the Time of Distribution, will be employed by a member of the
      Conexant Group pursuant to Section 2.01(b).

            "ACTIVE MINDSPEED EMPLOYEE" means any individual who, immediately
      after the Time of Distribution, will be employed by a member of the
      Mindspeed Group pursuant to Section 2.01(a).

            "AGREEMENT" has the meaning set forth in the preamble.

            "CONEXANT" has the meaning set forth in the preamble.

            "CONEXANT 2001 ESPP" means the Conexant Systems, Inc. 2001 Employee
      Stock Purchase Plan, including all amendments thereto through the
      Distribution Date.

            "CONEXANT DEFERRED COMPENSATION PLAN" means the Conexant Systems,
      Inc. Deferred Compensation Plan, including all amendments thereto through
      the Distribution Date.

            "CONEXANT DEFERRED COMPENSATION PLAN RABBI TRUST" means the Conexant
      Systems, Inc. rabbi trust relating to the Conexant Deferred Compensation
      Plan, including all amendments thereto through the Distribution Date.

            "CONEXANT HOURLY SAVINGS PLAN" means the Conexant Systems, Inc.
      Hourly Employees' Savings Plan, including all amendments thereto through
      the Distribution Date.

            "CONEXANT NON-QUALIFIED ESPP" means the Conexant Systems, Inc.
      Non-Qualified Employee Stock Purchase Plan, including all amendments
      thereto through the Distribution Date.

            "CONEXANT NON-QUALIFIED SAVINGS PLAN" means the Conexant Systems,
      Inc. Non-Qualified Retirement Savings Plan, including all amendments
      thereto through the Distribution Date.

            "CONEXANT OPTION" means an option to purchase from Conexant shares
      of Conexant Common Stock granted pursuant to or governed by one of the
      Conexant Stock Plans which is outstanding immediately prior to the Time of
      Distribution.

            "CONEXANT PARTICIPANT" means any individual who, immediately after
      the Time of Distribution, is (i) an Active Conexant Employee, (ii) a
      Former Conexant Employee or (iii) a beneficiary of either of the
      foregoing.

            "CONEXANT SAVINGS PLAN" means the Conexant Systems, Inc. Retirement
      Savings Plan, including all amendments thereto through the Distribution
      Date.

            "CONEXANT SPLIT OPTION" means each Conexant Option (other than a
      Specified Conexant Option).

            "CONEXANT STOCK PLANS" means each of the following plans, including
      any sub-plans thereunder:

            (i)   Conexant Systems, Inc. 1998 Stock Option Plan;

            (ii)  Conexant Systems, Inc. 1999 Long-Term Incentives Plan;

            (iii) Conexant Systems, Inc. 2000 Non-Qualified Stock Plan;


                                       2


            (iv)   Conexant Systems, Inc. Directors Stock Plan;

            (v)    Istari Design, Inc. 1997 Stock Option Plan;

            (vi)   Microcosm Communications Limited Stock Option Plan;

            (vii)  Maker Communications, Inc. 1996 Stock Incentive Plan;

            (viii) Maker Communications, Inc. 1999 Stock Incentive Plan;

            (ix)   Applied Telecom, Inc. 2000 Non-Qualified Stock Option Plan;

            (x)    Philsar Semiconductor Inc. Stock Option Plan;

            (xi)   Sierra Imaging, Inc. 1996 Stock Option Plan;

            (xii)  HotRail, Inc. 1997 Equity Incentive Plan;

            (xiii) HotRail, Inc. 2000 Equity Plan;

            (xiv)  NetPlane Systems, Inc. Stock Option Plan;

            (xv)   Novanet Semiconductor Ltd. Employee Shares Option Plan; and

            (xvi)  HyperXS Communications, Inc. 2000 Stock Option Plan;

in each case, including all amendments thereto through the Distribution Date.

            "CONEXANT VERP" means the Conexant Systems, Inc. Voluntary Early
      Retirement Program, including all amendments thereto through the
      Distribution Date.

            "CONEXANT VERP TRUST" means the Conexant Systems, Inc. trust
      relating to the Conexant VERP, including all amendments thereto through
      the Distribution Date.

            "CONEXANT WELFARE PLANS" mean the Welfare Plans and other employee
      welfare benefit and fringe benefit arrangements maintained by Conexant and
      its Subsidiaries (including members of the Mindspeed Group) immediately
      prior to the Time of Distribution.

            "DISTRIBUTION" has the meaning set forth in the recitals.

            "DISTRIBUTION AGREEMENT" has the meaning set forth in the recitals.

            "DIVISION" has the meaning set forth in Section 5.01(d)(ii).

            "ERISA" means the Employee Retirement Income Security Act of 1974,
      as amended, or any successor legislation.


                                       3


            "FORMER CONEXANT EMPLOYEE" means any Pre-Distribution Group Employee
      who is not, immediately after the Time of Distribution, an Active Conexant
      Employee or an Active Mindspeed Employee, and whose most recent active
      employment with Conexant or any other member of the Pre-Distribution Group
      was with the Broadband Business.

            "FORMER MINDSPEED EMPLOYEE" means any Pre-Distribution Group
      Employee who is not, immediately after the Time of Distribution, an Active
      Mindspeed Employee or an Active Conexant Employee, and whose most recent
      active employment with Conexant or any other member of the
      Pre-Distribution Group was with the Mindspeed Business.

            "INCENTIVE COMPENSATION PLANS" means each of the following plans:

            (i) Peak Performance Plan, Conexant's Annual Incentive Plan;

            (ii) Peak Performance Plan - Marketing, Conexant's Annual Incentive
      Plan; and

            (iii) Conexant Systems, Inc. FY03 Sales Compensation Plan.

            "MINDSPEED" has the meaning set forth in the preamble.

            "MINDSPEED DEFERRED COMPENSATION PLAN" has the meaning set forth in
      Section 5.03(a)(i).

            "MINDSPEED DEFERRED COMPENSATION PLAN RABBI TRUST" has the meaning
      set forth in Section 5.03(a)(i).

            "MINDSPEED ESPP" has the meaning set forth in Section 5.06(a).

            "MINDSPEED INCENTIVE COMPENSATION PLANS" means each of the following
      plans:

            (i) Peak Performance Plan, Mindspeed's Annual Incentive Plan;

            (ii) Peak Performance Plan - Marketing MBO, Mindspeed's Annual
      Incentive Plan; and

            (iii) Mindspeed Technologies FY03 Sales Compensation Plan.

            "MINDSPEED OPTION" means an option to purchase from Mindspeed shares
      of Mindspeed Common Stock provided to a holder of a Conexant Split Option
      pursuant to Section 4.01(a).

            "MINDSPEED PARTICIPANT" means any individual who, immediately after
      the Time of Distribution, is (i) an Active Mindspeed Employee, (ii) a
      Former Mindspeed Employee or (iii) a beneficiary of either of the
      foregoing.

            "MINDSPEED RESERVE AMOUNT" has the meaning set forth in Section
      5.01(d)(ii).


                                       4

            "MINDSPEED SAVINGS PLAN" has the meaning set forth in Section
      3.01(a).

            "MINDSPEED STOCK PLANS" has the meaning set forth in Section
      4.01(b).

            "MINDSPEED TRANSFER EMPLOYEE" has the meaning set forth in Section
      2.01(c).

            "MINDSPEED WELFARE PLANS" has the meaning set forth in Section
      5.01(a).

            "PRE-DISTRIBUTION GROUP" has the meaning set forth in the
      Distribution Agreement.

            "PRE-DISTRIBUTION GROUP EMPLOYEE" means any individual who was, at
      any time prior to the Time of Distribution, employed by Conexant or any
      other member of the Pre-Distribution Group.

            "RESERVE AMOUNT" has the meaning set forth in Section 5.01(d)(ii).

            "RETURNING MINDSPEED EMPLOYEE" has the meaning set forth in Section
      2.01(c).

            "SPECIFIED CONEXANT OPTION" means the Conexant Options set forth on
      Schedule 1.01(b).

            "TRANSFER DATE" has the meaning set forth in Section 5.03(c).

            "WELFARE PLAN" means an employee welfare benefit plan as defined in
      Section 3(1) of ERISA, including medical, vision, dental and other health
      plans, retiree health plans, life insurance plans, retiree life insurance
      plans, accidental death and dismemberment plans, long-term disability
      plans and severance pay plans.

                                   ARTICLE II

                                   EMPLOYEES

      Section 2.01 Employees.

            (a) Each individual who is employed by Conexant or any of its
Subsidiaries (including members of the Mindspeed Group and the Conexant Group)
immediately prior to the Time of Distribution and who is identified on the
attached Schedule 2.01 (including those individuals identified on Schedule 2.01
who are actively employed or on lay-off, leave, short-term or long-term
disability or other permitted absence from employment) will be or will continue
to be employed by a member of the Mindspeed Group immediately after the Time of
Distribution and will be an Active Mindspeed Employee.

            (b) Each individual (other than those identified on Schedule 2.01)
who is employed by Conexant or any of its Subsidiaries (including members of the
Conexant Group and the Mindspeed Group) immediately prior to the Distribution
(including those who are actively employed or on lay-off, leave, short-term or
long-term disability or other


                                       5

permitted absence from employment) will be or will continue to be employed by a
member of the Conexant Group immediately after the Time of Distribution and will
be an Active Conexant Employee.

            (c) Notwithstanding the foregoing, in the event that on or prior to
18 months after the Time of Distribution, any Active Mindspeed Employee returns
directly from employment with Mindspeed or any of its Subsidiaries to employment
with Conexant or any of its Subsidiaries (a "Returning Mindspeed Employee") or
any Active Conexant Employee leaves employment with Conexant or any of its
Subsidiaries and is employed directly by Mindspeed or any of its Subsidiaries (a
"Mindspeed Transfer Employee"), in each case, with the prior written consent of
either (x) both the Chief Executive Officer of Conexant and the Chief Executive
Officer of Mindspeed or (y) both the Senior Vice President, Human Resources of
Conexant and the Senior Vice President, Human Resources of Mindspeed, then:

            (i) Conexant shall credit such Returning Mindspeed Employee (A)
      under welfare benefit plans of Conexant and its Subsidiaries with all
      service and other items which have been credited or accumulated for the
      benefit of such Returning Mindspeed Employee under the corresponding
      welfare benefit plans of Mindspeed and its Subsidiaries and (B) with all
      service with Mindspeed and its Subsidiaries for purposes of eligibility
      and vesting (but not for benefit accrual or contributions) under any
      savings plan, retirement plan, stock option plan, incentive compensation
      plan, deferred compensation plan, performance share plan, employee stock
      purchase plan or other similar plan of Conexant and its Subsidiaries. Such
      Returning Mindspeed Employee (x) will be considered to have been in
      continuous service with Conexant and its Subsidiaries during the combined
      period of employment with both Conexant and its Subsidiaries and Mindspeed
      and its Subsidiaries (including for purposes of vesting and treatment of
      Mindspeed Options upon termination of employment, retirement, death or
      disability under the Mindspeed Stock Plans) and (y) will not be considered
      to have terminated employment with Conexant and its Subsidiaries as a
      result of the Distribution (other than with respect to distributions made
      to such Returning Mindspeed Employee in accordance with the terms of any
      of the foregoing plans of Conexant and its Subsidiaries); and

            (ii) Mindspeed shall credit such Mindspeed Transfer Employee (A)
      under welfare benefit plans of Mindspeed and its Subsidiaries with all
      service and other items which have been credited or accumulated for the
      benefit of such Mindspeed Transfer Employee under any welfare benefit
      plans of Conexant and its Subsidiaries and (B) with all service with
      Conexant and its Subsidiaries for purposes of eligibility and vesting (but
      not for benefit accrual or contributions) under any savings plan,
      retirement plan, stock option plan, incentive compensation plan, deferred
      compensation plan, performance share plan, employee stock purchase plan or
      other similar plan of Mindspeed and its Subsidiaries, as if such Mindspeed
      Transfer Employee had become an Active Mindspeed Employee as of the Time
      of Distribution pursuant to the terms of this Agreement.


                                       6

            (d) Effective as of the Time of Distribution, (i) for immigration
      purposes Mindspeed will be the successor-in-interest to any and all
      pending or approved visa petitions (whether with the U.S. Bureau of
      Citizenship and Immigration Services or U.S. Department of Labor),
      including pending or completed Labor Condition Applications, made by
      Conexant and its Subsidiaries with respect to Active Mindspeed Employees,
      and Mindspeed will adopt and accept all representations made by Conexant
      in any of these petitions and applications, (ii) Mindspeed will adopt any
      Labor Condition Application included in the "Public Access Folders" for
      Active Mindspeed Employees who have H-1B visas, and (iii) Mindspeed will
      adopt any existing I-9 certifications of Conexant and its Subsidiaries
      with respect to Active Mindspeed Employees.

            (e) Nothing contained in this Section 2.01 is intended to confer
      upon any employee of the Mindspeed Group or the Conexant Group any right
      to continued employment after the Time of Distribution.

          Section 2.02 Non-Solicitation of Employees. Without the express
written agreement of either (x) both the Chief Executive Officer of Conexant and
the Chief Executive Officer of Mindspeed or (y) both the Senior Vice President,
Human Resources of Conexant and the Senior Vice President, Human Resources of
Mindspeed:

            (a) Conexant agrees not to (and to cause the other members of the
      Conexant Group not to) solicit, recruit or hire, directly or indirectly
      (including by contracting with or through an independent contractor,
      consultant or other third party) any employee of, or individual providing
      contracting services to, Mindspeed or any other member of the Mindspeed
      Group until 18 months after the Time of Distribution or until six months
      after such employee's employment with, or such individual's provision of
      contracting services to, Mindspeed or any other member of the Mindspeed
      Group terminates, whichever occurs first;

            (b) Mindspeed agrees not to (and to cause the other members of the
      Mindspeed Group not to) solicit, recruit or hire, directly or indirectly
      (including by contracting with or through an independent contractor,
      consultant or other third party) any employee of, or individual providing
      contracting services to, Conexant or any other member of the Conexant
      Group until 18 months after the Time of Distribution or until six months
      after such employee's employment with, or such individual's provision of
      contracting services to, Conexant or any other member of the Conexant
      Group terminates, whichever occurs first; and

            (c) Notwithstanding the foregoing (but subject to the restriction on
      hiring), such prohibitions on solicitation do not restrict general
      recruitment efforts carried out through a public or general solicitation.


                                        7

                                  ARTICLE III

                                 SAVINGS PLANS

         Section 3.01 Retirement Savings Plan.

            (a) As of the Time of Distribution, Mindspeed will have established,
      and will cover Active Mindspeed Employees who were eligible to participate
      in the Conexant Savings Plan immediately prior to the Time of Distribution
      under, a new defined contribution plan (the "Mindspeed Savings Plan"),
      which will be qualified pursuant to Sections 401(a) and 401(k) of the
      Code, and will have established a related trust which will be exempt from
      taxation under Section 501(a) of the Code. The Mindspeed Savings Plan will
      credit each participating Active Mindspeed Employee thereunder for
      purposes of eligibility and vesting with all service which had been
      credited to such Active Mindspeed Employee for such purposes under the
      Conexant Savings Plan immediately prior to the Time of Distribution.

            (b) After the Time of Distribution, each Active Mindspeed Employee
      who participated in the Conexant Savings Plan prior to the Time of
      Distribution will be permitted to rollover his or her account balances
      from the Conexant Savings Plan to the Mindspeed Savings Plan in accordance
      with the terms of the respective plans and applicable law; provided,
      however, that if any Active Mindspeed Employee has any outstanding loans
      related to his or her account balances in the Conexant Savings Plan, such
      Active Mindspeed Employee will not be permitted to rollover his or her
      account balances to the Mindspeed Savings Plan until such loan has been
      repaid in full to the Conexant Savings Plan.

            (c) As of and after the Time of Distribution, Conexant will retain
      sponsorship of the Conexant Savings Plan and will retain all assets
      thereof and all rights therein. Effective as of the Time of Distribution,
      Active Mindspeed Employees will cease to be eligible to contribute to, or
      receive contributions in respect of, their Conexant Savings Plan accounts.
      None of Mindspeed, any other member of the Mindspeed Group, Affiliates of
      the foregoing, the Mindspeed Savings Plan or the trust thereunder will
      have or acquire any interest in or right to any of the assets of the
      Conexant Savings Plan or will have any Liabilities with respect to such
      plan, and Conexant will have full power and authority with respect to the
      amendment and termination of the Conexant Savings Plan and the investment
      and disposition of assets held in the Conexant Savings Plan.

         Section 3.02 Hourly Employees' Savings Plan. As of and after the Time

of Distribution, Conexant will retain sponsorship of the Conexant Hourly Savings
Plan and will retain all assets thereof and all rights therein. No Active
Mindspeed Employees or Former Mindspeed Employees are eligible to participate in
the Conexant Hourly Savings Plan. Accordingly, none of Mindspeed, any other
member of the Mindspeed Group or Affiliates of the foregoing will have or
acquire any interest in or right to any of the assets of the Conexant Hourly
Savings Plan or will have any Liabilities with respect to such plan, and
Conexant will have full power and authority with respect to the amendment and
termination of the Conexant



                                       8

Hourly Savings Plan and the investment and disposition of assets held in the
Conexant Hourly Savings Plan.

      Section 3.03 Non-Qualified Retirement Savings Plan. As of and after the
Time of Distribution, Conexant will retain sponsorship of the Conexant
Non-Qualified Savings Plan and will retain all assets thereof and all rights
therein. Effective as of the Time of Distribution, each Mindspeed Participant
set forth on Schedule 3.03 who was eligible to participate in the Conexant
Non-Qualified Savings Plan prior to the Time of Distribution will be treated as
having terminated employment with Conexant and its Subsidiaries for purposes of
determining his or her eligibility to participate in the Conexant Non-Qualified
Savings Plan and will be paid his or her vested account balance pursuant to the
terms of the plan. Accordingly, none of Mindspeed, any other member of the
Mindspeed Group or Affiliates of the foregoing will have or acquire any interest
in or right to any of the assets of the Conexant Non-Qualified Savings Plan or,
except as set forth in the immediately following sentence, will have any
Liabilities with respect to such plan, and Conexant will have full power and
authority with respect to the amendment and termination of the Conexant
Non-Qualified Savings Plan and the investment and disposition of assets held in
the Conexant Non-Qualified Savings Plan. Notwithstanding anything to the
contrary in this Section 3.03, within five (5) Business Days after the Time of
Distribution, Mindspeed shall pay to Conexant an amount equal to the vested
account balances paid or to be paid to such Mindspeed Participants by Conexant
pursuant to the terms of the Conexant Non-Qualified Savings Plan and this
Section 3.03.

                                   ARTICLE IV

                                  STOCK PLANS

      Section 4.01 Stock Plans.

            (a) Conexant and Mindspeed will take all action necessary or
appropriate so that each Conexant Split Option that is outstanding immediately
prior to the Time of Distribution will be adjusted pursuant to the equitable
adjustment and other provisions of the applicable Conexant Stock Plan under
which such Conexant Split Option was granted in the manner described in this
Section 4.01. The number of shares of Conexant Common Stock subject to such
adjusted Conexant Split Option and the per-share exercise price of such adjusted
Conexant Split Option will be determined as set forth on Schedule 4.01(a)(i).
Each such adjusted Conexant Split Option will otherwise have the same terms and
conditions as those in effect immediately prior to the adjustment. In addition,
each person holding a Conexant Split Option that is outstanding immediately
prior to the Time of Distribution will receive a Mindspeed Option pursuant to
the equitable adjustment and other provisions of the applicable Conexant Stock
Plan under which such Conexant Split Option was granted. The number of shares of
Mindspeed Common Stock subject to such Mindspeed Option and the per-share
exercise price of such Mindspeed Option will be determined as set forth on
Schedule 4.01(a)(ii). Each such Mindspeed Option will otherwise have
substantially the same terms and conditions as the corresponding Conexant Split
Option being adjusted, except that references to Conexant will be changed to
refer to


                                       9

Mindspeed and references to any of the Conexant Stock Plans will be changed to
refer to Mindspeed's applicable stock option plan.

        (b) As of the Time of Distribution, Mindspeed will have established one
or more stock option plans (the "Mindspeed Stock Plans") the purposes of which
are to provide a means for Mindspeed to perform its obligations with respect to
Mindspeed Options arising from the Conexant Split Options and which will be
substantially similar in all material respects to the corresponding Conexant
Stock Plan governing the Conexant Split Option from which the Mindspeed Option
was derived and will provide that solely for purposes of vesting and treatment
of the Mindspeed Options upon termination of employment, retirement, death or
disability under the Mindspeed Stock Plans, continued employment of the holder
of any Mindspeed Option who is not an Active Mindspeed Employee with such
holder's current employer (or an Affiliate thereof) (including a Returning
Mindspeed Employee's continued employment with Conexant (or an Affiliate
thereof)) shall be treated as continued employment with Mindspeed. From and
after the Time of Distribution, Mindspeed will retain sponsorship of and will be
solely responsible for the Mindspeed Stock Plans.

      (c) The Conexant Stock Plans will provide that solely for purposes of
vesting and treatment of the Conexant Split Options upon termination of
employment, retirement, death or disability under the Conexant Stock Plans,
continued employment of any Active Mindspeed Employee (including a Mindspeed
Transfer Employee) who holds a Conexant Split Option with Mindspeed (or an
Affiliate thereof) shall be treated as continued employment with Conexant. From
and after the Time of Distribution, Conexant will retain sponsorship of and will
be solely responsible for the Conexant Stock Plans.

      (d) Conexant and Mindspeed will take all action necessary or appropriate
so that each Specified Conexant Option that is outstanding immediately prior to
the Time of Distribution is adjusted pursuant to the equitable adjustment and
other provisions of the applicable Conexant Stock Plan under which such
Specified Conexant Option was granted in the manner described in this Section
4.01(d). The number of shares of Conexant Common Stock subject to such adjusted
Specified Conexant Option and the per-share exercise price of such adjusted
Specified Conexant Option will be determined as set forth on Schedule 4.01(d).
Each such adjusted Specified Conexant Option will otherwise have the same terms
and conditions as those in effect immediately prior to the adjustment.

                                    ARTICLE V

                        OTHER EMPLOYEE PLANS AND MATTERS

      Section 5.01 Welfare Plans.

      (a) As of the Time of Distribution, Mindspeed and the Mindspeed
Subsidiaries will have established, and will cover Mindspeed Participants who
were eligible to participate in the Conexant Welfare Plans immediately prior to
the Time of Distribution under, Welfare Plans and other employee welfare benefit
and fringe benefit arrangements



                                       10

(collectively, "Mindspeed Welfare Plans") that are comparable in the aggregate
to the Conexant Welfare Plans.

            (b) The Mindspeed Welfare Plans will provide for the immediate
participation of those Mindspeed Participants who participated in the
corresponding Conexant Welfare Plans immediately prior to the Time of
Distribution. Each of the Mindspeed Welfare Plans will credit each Mindspeed
Participant thereunder for all Mindspeed Welfare Plan purposes with all service
and any other item which had been credited to or otherwise accumulated for the
benefit of such Mindspeed Participant under the corresponding Conexant Welfare
Plans immediately prior to the Time of Distribution, including service credited
toward any waiting periods and amounts credited toward any medical or health
insurance deductible or co-payment. Without limiting the generality of the
foregoing, each Mindspeed Welfare Plan, to the extent applicable: (i) will
recognize all amounts applied to deductibles, co-payments, out-of-pocket
maximums, lifetime maximum benefits and amounts contributed under a flexible
spending plan with respect to Mindspeed Participants under the corresponding
Conexant Welfare Plan for the plan year that includes the Time of Distribution
and for prior periods (if applicable); (ii) will recognize all service credited
to waiting periods with respect to Mindspeed Participants under the
corresponding Conexant Welfare Plan; (iii) will not impose any limitations on
coverage of pre-existing conditions of Mindspeed Participants except to the
extent such limitations applied to such Mindspeed Participants under the
corresponding Conexant Welfare Plan immediately prior to the Time of
Distribution; and (iv) will not impose any other conditions (such as proof of
good health, evidence of insurability or a requirement of a physical
examination) upon the participation by Mindspeed Participants who were
participating in the corresponding Conexant Welfare Plan immediately prior to
the Time of Distribution.

            (c) As of the Time of Distribution, Mindspeed and the Mindspeed
Subsidiaries will have established, and will cover Active Mindspeed Employees
under, policies relating to vacation days and personal and sick days that are
comparable in the aggregate to the policies relating to vacation days and
personal and sick days maintained by Conexant immediately prior to the Time of
Distribution. As of the Time of Distribution, Mindspeed and the Mindspeed
Subsidiaries will credit each Active Mindspeed Employee with the unused vacation
days and personal and sick days accrued by such employee through the Time of
Distribution in accordance with the policies relating to vacation days and
personal and sick days maintained by Conexant and its Subsidiaries (including
members of the Mindspeed Group) applicable to such employee in effect
immediately prior to the Time of Distribution.

            (d)(i) From and after the Time of Distribution, except as
specifically set forth in Section 5.01(e)(ii), Mindspeed and the Mindspeed
Subsidiaries hereby assume or retain, as applicable, and will be solely
responsible for and will fully perform, pay and discharge, all Liabilities of
Conexant or any of its Subsidiaries (including members of the Mindspeed Group)
in respect of Mindspeed Participants (and claims by or relating to Mindspeed
Participants) with respect to employee welfare and fringe benefits (including
medical, dental, life, travel, accident, short- and long-term disability,
hospitalization, workers' compensation and other insurance benefits), whether
under the Conexant Welfare Plans,


                                       11

the Mindspeed Welfare Plans or otherwise, whether incurred, or arising in
connection with incidents occurring, before, at or after the Time of
Distribution and whether any claim is made with respect thereto before, at or
after the Time of Distribution.

         (ii) Conexant and Mindspeed acknowledge and agree that, prior to the
     Time of Distribution, Conexant, as a joint or concurrent employer of
     Mindspeed Participants under California Labor Code Section 3602, shall
     have covered such Mindspeed Participants under workers' compensation
     coverage through a workers' compensation insurance policy, or as allowed
     by law, through self-insurance. From and after the Time of Distribution,
     Conexant will provide workers' compensation insurance coverage on the terms
     in effect prior to the Time of Distribution in respect of claims by or
     relating to Mindspeed Participants for periods prior to the Time of
     Distribution. Promptly (and in no event later than five (5) Business Days)
     after receipt of a written request by Conexant, Mindspeed shall reimburse
     Conexant for any amounts paid by Conexant after the Time of Distribution in
     respect of workers' compensation claims by or relating to Mindspeed
     Participants. If the portion of Conexant's total deposit (the "Reserve
     Amount") as a self-insured employer with the California Department of
     Industrial Relations, Division of Workers' Compensation (the "Division")
     attributable to claims by or relating to Mindspeed Participants (the
     "Mindspeed Reserve Amount") is equal to or greater than $170,000, promptly
     (and in no event later than five (5) Business Days) after receipt of a
     written request by Conexant, Mindspeed will deposit with Conexant cash in
     an amount equal to the excess of the Mindspeed Reserve Amount over the
     then-current amount deposited by Mindspeed with Conexant pursuant to this
     Section 5.01(d)(ii). The Mindspeed Reserve Amount shall be based on the
     Reserve Amount determined by the Division on the basis of claims reported
     on the most recent Self-Insurer's Annual Report filed by Conexant with the
     Division. The Mindspeed Reserve Amount shall be adjusted annually based on
     the portion of the Reserve Amount (as determined by the Division on the
     basis of claims reported on the Self-Insurer's Annual Report) attributable
     to claims by or relating to Mindspeed Participants. Conexant shall pay to
     Mindspeed an amount equal to the excess, if any, of the amount deposited by
     Mindspeed with Conexant pursuant to this Section 5.01(d)(ii) over the
     then-current Mindspeed Reserve Amount within five (5) Business Days after
     Conexant receives any excess Reserve Amounts from the Division following
     the Division's annual determination of the Reserve Amount.

            (e)(i) From and after the Time of Distribution, except as
specifically set forth in this Agreement, Conexant and the Conexant Subsidiaries
hereby assume or retain, as applicable, and will be solely responsible for and
will fully perform, pay and discharge, all Liabilities of Conexant or any of its
Subsidiaries (including members of the Mindspeed Group) in respect of Conexant
Participants (and claims by or relating to Conexant Participants) with respect
to employee welfare and fringe benefits (including medical, dental, life,
travel, accident, short- and long-term disability, hospitalization, workers'
compensation and other insurance benefits), whether under the Conexant Welfare
Plans or otherwise, whether incurred, or arising in connection with incidents
occurring, before, at or after the Time of Distribution and whether any claim is
made with respect thereto before, at or after the Time of Distribution.

         (ii) Except as specifically set forth in this Agreement, from and after
     the Time of Distribution, Conexant and the Conexant Subsidiaries (or where
     appropriate, the Conexant Welfare Plans) hereby assume or retain, as
     applicable, and will be solely responsible for and will fully perform, pay
     and discharge all Liabilities of Conexant or



                                       12

      any of its Subsidiaries (including members of the Mindspeed Group) in
      respect of Conexant Participants and Former Mindspeed Employees and their
      beneficiaries (and claims by or relating to Conexant Participants and
      Former Mindspeed Employees and their beneficiaries) with respect to
      retiree health and welfare benefits, whether under the Conexant Welfare
      Plans or otherwise, whether incurred, or arising in connection with
      incidents occurring, before, at or after the Time of Distribution and
      whether any claim is made with respect thereto before, at or after the
      Time of Distribution.

         Section 5.02 Incentive Compensation Plans.

            (a) Effective as of the Time of Distribution, Mindspeed and the
Mindspeed Subsidiaries hereby assume or retain, as applicable, and will be
solely responsible for and will fully perform, pay and discharge, all
Liabilities (including liability for earned but unpaid incentive payments) of
Conexant or any of its Subsidiaries (including members of the Mindspeed Group)
for, due to and/or attributable to Mindspeed Participants under the Incentive
Compensation Plans and all other long-term, annual and other incentive
compensation plans of Conexant and its Subsidiaries (including members of the
Mindspeed Group) in effect at or prior to the Time of Distribution.

            (b) Effective as of the Time of Distribution, Conexant and the
Conexant Subsidiaries hereby assume or retain, as applicable, and will be solely
responsible for and will fully perform, pay and discharge, all Liabilities
(including liability for earned but unpaid incentive payments) of Conexant or
any of its Subsidiaries (including members of the Mindspeed Group) for, due to
and/or attributable to Conexant Participants under the Incentive Compensation
Plans and all other long-term, annual and other incentive compensation plans of
Conexant and its Subsidiaries (including members of the Mindspeed Group) in
effect at or prior to the Time of Distribution (other than the Mindspeed
Incentive Compensation Plans).

            (c) Effective as of the Time of Distribution, Mindspeed and the
Mindspeed Subsidiaries hereby assume or retain, as applicable, and will be
solely responsible for and will fully perform, pay and discharge, all
Liabilities (including liability for earned but unpaid incentive payments) of
Conexant or any of its Subsidiaries (including members of the Mindspeed Group)
under or relating to the Mindspeed Incentive Compensation Plans.

            (d) Conexant and Mindspeed will cooperate in taking all actions
necessary or appropriate to adjust the performance goals and other applicable
terms and conditions of awards under the Incentive Compensation Plans, the
Mindspeed Incentive Compensation Plans and all other long-term, annual or other
incentive compensation plans and arrangements for performance periods that begin
before and end after the Time of Distribution as appropriate to reflect the
Distribution. Without limiting the generality of the foregoing, for purposes of
any Conexant restricted stock awards held by any Active Mindspeed Employee,
continued employment of such employee with Mindspeed (or an Affiliate thereof)
(including a Mindspeed Transfer Employee) following the Time of Distribution
will be treated as continued employment with Conexant.


                                       13

      Section 5.03 Deferred Compensation Plans.

               (a) Establishment and Sponsorship of Deferred Compensation Plans
and Rabbi Trusts.

            (i) As of the Time of Distribution, Mindspeed will have established,
      and will cover Mindspeed Participants who were eligible to participate in
      the Conexant Deferred Compensation Plan immediately prior to the Time of
      Distribution under, a new or existing deferred compensation plan (the
      "Mindspeed Deferred Compensation Plan") and a rabbi trust related thereto
      (the "Mindspeed Deferred Compensation Plan Rabbi Trust"). The Mindspeed
      Deferred Compensation Plan will credit each Mindspeed Participant
      thereunder for purposes of eligibility to participate, vesting, benefit
      accruals and all other plan purposes with all service which had been
      credited to such participant for such purposes under the Conexant Deferred
      Compensation Plan immediately prior to the Time of Distribution.

            (ii) As of and after the Time of Distribution, Conexant will retain
      sponsorship of the Conexant Deferred Compensation Plan and the related
      Conexant Deferred Compensation Plan Rabbi Trust. Conexant will retain, and
      will be solely responsible for and will fully perform, pay and discharge,
      and agrees to cause the Conexant Deferred Compensation Plan and the
      Conexant Deferred Compensation Plan Rabbi Trust to retain, and to fully
      perform, pay and discharge all accrued benefit and other Liabilities of
      Conexant or any of its Subsidiaries (including members of the Mindspeed
      Group) under and relating to the Conexant Deferred Compensation Plan and
      the Conexant Deferred Compensation Plan Rabbi Trust with respect to
      Conexant Participants, before, at or after the Time of Distribution.

               (b) Assumption of Deferred Compensation Plan Liabilities. As of
the Time of Distribution, Mindspeed hereby assumes, and agrees to fully perform,
pay and discharge, and agrees to cause the Mindspeed Deferred Compensation Plan
and the Mindspeed Deferred Compensation Plan Rabbi Trust to assume, and to fully
perform, pay and discharge, all accrued benefit and other Liabilities of
Conexant or any of its Subsidiaries (including members of the Mindspeed Group)
under and relating to the Conexant Deferred Compensation Plan and the Conexant
Deferred Compensation Plan Rabbi Trust with respect to Mindspeed Participants
who were covered under the Conexant Deferred Compensation Plan prior to the Time
of Distribution.

               (c) Transfers of Conexant Deferred Compensation Plan Rabbi Trust
Assets. Within twenty (20) Business Days after the Time of Distribution (the
"Transfer Date"), Conexant will transfer from the Conexant Deferred Compensation
Rabbi Trust to the Mindspeed Deferred Compensation Rabbi Trust an amount equal
to the sum of (i) compensation deferred and not paid under the Conexant Deferred
Compensation Plan to Mindspeed Participants through the Time of Distribution and
(ii) earnings deemed credited thereon through the date of such transfer for all
Mindspeed Participants.


                                       14

      Section 5.04 Severance Pay.

            (a) Conexant and Mindspeed acknowledge and agree that the
transactions contemplated by the Separation Agreements will not constitute a
severance of employment of any employee of Conexant or any of its Subsidiaries
(including members of the Mindspeed Group) prior to or as a result thereof, and
that individuals who, in connection with the Distribution, become Active
Conexant Employees or Active Mindspeed Employees pursuant to this Agreement will
not be deemed to have experienced a termination, layoff or severance of
employment from Conexant and its Subsidiaries (including members of the
Mindspeed Group), in each case for purposes of any policy, plan, program or
agreement of Conexant or any of its Subsidiaries (including any member of the
Mindspeed Group) that provides for the payment of severance, salary continuation
or similar benefits.

            (b) Mindspeed and the Mindspeed Subsidiaries hereby assume or
retain, as applicable, and will be solely responsible for and will fully
perform, pay and discharge, all Liabilities of Conexant or any of its
Subsidiaries (including members of the Mindspeed Group) in connection with
claims made by or on behalf of Mindspeed Participants in respect of severance
pay, salary continuation and similar obligations relating to the termination or
alleged termination (whether voluntary or involuntary) of any such person's
employment, whether such termination or alleged termination occurred before, at
or after the Time of Distribution and whether any claim is made with respect
thereto before, at or after the Time of Distribution (whether or not such claim
is based on any severance policy, agreement, arrangement or program which may
exist or arise under any employment, collective bargaining or other agreement or
under any federal, state, local, provincial or foreign law).

            (c) Conexant and the Conexant Subsidiaries hereby assume or retain,
as applicable, and will be solely responsible for and will fully perform, pay
and discharge, all Liabilities of Conexant or any of its Subsidiaries (including
members of the Mindspeed Group) in connection with claims made by or on behalf
of Conexant Participants in respect of severance pay, salary continuation and
similar obligations relating to the termination or alleged termination (whether
voluntary or involuntary) of any such person's employment, whether such
termination or alleged termination occurred before, at or after the Time of
Distribution and whether any claim is made with respect thereto before, at or
after the Time of Distribution (whether or not such claim is based on any
severance policy, agreement, arrangement or program which may exist or arise
under any employment, collective bargaining or other agreement or under any
federal, state, local, provincial or foreign law).

      Section 5.05 Employment, Consulting and Other Employee Related Agreements.

            (a) Effective as of the Time of Distribution, Mindspeed and the
Mindspeed Subsidiaries hereby assume or retain, as applicable, and will be
solely responsible for and will fully perform, pay and discharge, all
Liabilities of Conexant or any of its Subsidiaries (including members of the
Mindspeed Group) relating to all Mindspeed Participants under their respective
employment, consulting, separation, arbitration and other employee related



                                       15

     agreements with any member of the Pre-Distribution Group, as the same are
     in effect immediately prior to the Time of Distribution.

            (b) Effective as of the Time of Distribution, Conexant and the
      Conexant Subsidiaries hereby assume or retain, as applicable, and will be
      solely responsible for and will fully perform, pay and discharge, all
      Liabilities of Conexant or any of its Subsidiaries (including members of
      the Mindspeed Group) relating to all Conexant Participants under their
      respective employment, consulting, separation, arbitration and other
      employee related agreements with any member of the Pre-Distribution Group,
      as the same are in effect immediately prior to the Time of Distribution.

      Section 5.06 Employee Stock Purchase Plans.

            (a) As of the Time of Distribution, Mindspeed will have established,
     and will cover Active Mindspeed Employees under, a new or existing employee
     stock purchase plan qualified under Section 423 of the Code which is
     comparable to the Conexant 2001 ESPP (the "Mindspeed ESPP"). The Mindspeed
     ESPP will credit each participating Active Mindspeed Employee thereunder
     for purposes of eligibility and vesting with all service which had been
     credited to such employee for such purposes under the Conexant 2001 ESPP
     and the Conexant Non-Qualified ESPP immediately prior to the Time of
     Distribution.

            (b) As of and after the Time of Distribution, Conexant will retain
     sponsorship of the Conexant 2001 ESPP and the Conexant Non-Qualified ESPP
     and will retain all assets thereof and all rights therein. Effective as of
     the Time of Distribution, each Active Mindspeed Employee will be treated as
     having terminated employment with Conexant and the Conexant Subsidiaries
     for purposes of determining his or her eligibility to participate in the
     Conexant 2001 ESPP and the Conexant Non-Qualified ESPP. Accordingly, none
     of Mindspeed, any other member of the Mindspeed Group, Affiliates of the
     foregoing or the Mindspeed ESPP will have or retain any interest in or
     right to any of the assets of the Conexant 2001 ESPP and the Conexant
     Non-Qualified ESPP or will have any Liabilities with respect to such plans,
     and Conexant will have full power and authority with respect to the
     amendment and termination of the Conexant 2001 ESPP and the Conexant
     Non-Qualified ESPP.

      Section 5.07 VERP. As of and after the Time of Distribution, Conexant will
retain sponsorship of the Conexant VERP and will retain all assets thereof and
all rights therein. Effective as of the Time of Distribution, each Mindspeed
Participant set forth on Schedule 5.07 who was eligible to participate in the
Conexant VERP prior to the Time of Distribution will be treated as having
terminated employment with Conexant and the Conexant Subsidiaries for purposes
of determining his or her eligibility to participate in the Conexant VERP and
will be paid his or her benefit pursuant to the terms of the plan. Accordingly,
none of Mindspeed, any other member of the Mindspeed Group or Affiliates of the
foregoing will have or acquire any interest in or right to any of the assets of
the Conexant VERP Trust or will have any Liabilities with respect to such plan,
and Conexant will have full


                                       16

power and authority with respect to the amendment and termination of the
Conexant VERP and the investment and disposition of assets held in the Conexant
VERP Trust.

      Section 5.08 Other Liabilities.

            (a) From and after the Time of Distribution, except as specifically
      set forth in this Agreement, Mindspeed and the Mindspeed Subsidiaries
      hereby assume or retain, as applicable, and will be solely responsible for
      and will fully perform, pay and discharge, all Liabilities of Conexant or
      any of its Subsidiaries (including members of the Mindspeed Group) arising
      out of or relating to the employment of Mindspeed Participants by any
      member of the Pre-Distribution Group, whether pursuant to benefit plans or
      otherwise and whether such Liabilities arose before, at or after the Time
      of Distribution or any claim is made with respect thereto before, at or
      after the Time of Distribution.

            (b) From and after the Time of Distribution, except as specifically
      set forth in this Agreement, Conexant and the Conexant Subsidiaries hereby
      assume or retain, as applicable, and will be solely responsible for and
      will fully perform, pay and discharge, all Liabilities of Conexant or any
      of its Subsidiaries (including members of the Mindspeed Group) arising out
      of or relating to employment of Conexant Participants by any member of the
      Pre-Distribution Group, whether pursuant to benefit plans or otherwise and
      whether such Liabilities arose before, at or after the Time of
      Distribution or any claim is made with respect thereto before, at or after
      the Time of Distribution.

            (c) Notwithstanding any other provision of this Agreement to the
      contrary, each of Conexant and Mindspeed shall be responsible for and will
      fully perform, pay and discharge, their respective Liabilities in respect
      of the matters set forth in Schedule 5.08(c) as provided therein.

                                   ARTICLE VI

                                 MISCELLANEOUS

      Section 6.01 Indemnification. All Liabilities retained or assumed by or
allocated to Mindspeed or any Mindspeed Subsidiary pursuant to this Agreement
will be deemed to be Mindspeed Liabilities, and all Liabilities retained or
assumed by or allocated to Conexant or any Conexant Subsidiary pursuant to this
Agreement will be deemed to be Conexant Liabilities, and, in each case, will be
subject to the indemnification provisions set forth in Article IV of the
Distribution Agreement.

      Section 6.02 Sharing of Information. Each of Conexant and Mindspeed will,
and will cause each of their respective Subsidiaries to, provide to the other
all such Information in its possession as the other may reasonably request to
enable the requesting party to administer its employee benefit plans and
programs, and to determine the scope of, and fulfill, its obligations under this
Agreement. Such Information will, to the extent reasonably practicable, be
provided in the format and at the times and places requested, but in no event
will the party providing such Information be obligated to incur any direct
expense not reimbursed by the party making such request, nor to make such
Information available outside its normal business hours and premises. The right
of the parties to receive Information hereunder will, without limiting the
generality of the foregoing, extend to any and all reports, and the data
underlying such reports. Any Information shared or exchanged pursuant to this


                                       17

Agreement will be subject to the confidentiality requirements set forth in the
Distribution Agreement.

      Section 6.03 Entire Agreement; Construction. This Agreement, the
Distribution Agreement, the other Separation Agreements and the Financing
Agreements, including any annexes, schedules and exhibits hereto or thereto, and
other agreements and documents referred to herein and therein, will together
constitute the entire agreement between the parties with respect to the subject
matter hereof and thereof and will supersede all prior negotiations, agreements
and understandings of the parties of any nature, whether oral or written, with
respect to such subject matter. Notwithstanding any other provisions in the
Separation Agreements to the contrary, in the event and to the extent that there
is a conflict between the provisions of this Agreement and the provisions of the
Distribution Agreement, the provisions of this Agreement will control.

      Section 6.04 Survival of Agreements. Except as otherwise contemplated by
the Separation Agreements, all covenants and agreements of the parties
contained in this Agreement will remain in full force and effect and survive the
Time of Distribution.

      Section 6.05 Governing Law. This Agreement will be governed by and
construed in accordance with the internal laws of the State of Delaware
applicable to contracts made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.

      Section 6.06 Notices. All notices, requests, claims, demands and other
communications required or permitted to be given hereunder will be in writing
and will be delivered by hand or telecopied, e-mailed or sent, postage prepaid,
by registered, certified or express mail or reputable overnight courier service
and will be deemed given when so delivered by hand or telecopied, when e-mail
confirmation is received if delivered by e-mail, or three (3) Business Days
after being so mailed (one (1) Business Day in the case of express mail or
overnight courier service). All such notices, requests, claims, demands and
other communications will be addressed as set forth in Section 7.04 of the
Distribution Agreement, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice.

      Section 6.07 Amendments. This Agreement cannot be amended, modified or
supplemented except by a written agreement executed by Conexant and Mindspeed.

      Section 6.08 Assignment. Except as otherwise provided herein, neither
party to this Agreement will convey, assign or otherwise transfer any of its
rights or obligations under this Agreement without the prior written consent of
the other party in its sole and absolute discretion. Notwithstanding the
foregoing, either party may (without obtaining any consent) assign all or any
portion of its rights and obligations hereunder to (i) the surviving entity
resulting from a merger or consolidation involving such party, (ii) the
acquiring entity in a sale or other disposition of all or substantially all of
the assets of such party as a whole or of any line of business or division of
such party, or (iii) any other Person that is created as a result of a spin-off
from, or similar reorganization transaction of, such party or any line of


                                       18

business or division of such party. In the event of an assignment pursuant to
(ii) or (iii) above, the nonassigning party shall, at the assigning party's
request, use good faith commercially reasonable efforts to enter into separate
agreements with each of the resulting entities and take such further actions as
may be reasonably required to assure that the rights and obligations under this
Agreement are preserved, in the aggregate, and divided equitably between such
resulting entities. Any conveyance, assignment or transfer requiring the prior
written consent of another party pursuant to this Section 6.08 which is made
without such consent will be void ab initio. No assignment of this Agreement
will relieve the assigning party of its obligations hereunder.

      Section 6.09 Captions; Currency. The article, section and paragraph
captions herein and the table of contents hereto are for convenience of
reference only, do not constitute part of this Agreement and will not be deemed
to limit or otherwise affect any of the provisions hereof. Unless otherwise
specified, all references herein to numbered articles or sections are to
articles and sections of this Agreement and all references herein to schedules
are to schedules to this Agreement. Unless otherwise specified, all references
contained in this Agreement, in any schedule referred to herein or in any
instrument or document delivered pursuant hereto to dollars or $ will mean
United States Dollars.

      Section 6.10 Severability. If any provision of this Agreement or the
application thereof to any Person or circumstance is determined by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid or
unenforceable, will remain in full force and effect and will in no way be
affected, impaired or invalidated thereby. If the economic or legal substance of
the transactions contemplated hereby is affected in any manner adverse to any
party as a result thereof, the parties will negotiate in good faith in an effort
to agree upon a suitable and equitable substitute provision to effect the
original intent of the parties.

      Section 6.11 Parties in Interest. This Agreement is binding upon and is
for the benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement is not made for the benefit of any Person not
a party hereto, and no Person other than the parties hereto or their respective
successors and permitted assigns will acquire or have any benefit, right, remedy
or claim under or by reason of this Agreement. No provision of this Agreement
will be construed (a) to limit the right of Conexant, any Conexant Subsidiary,
Mindspeed or any Mindspeed Subsidiary to amend any plan or terminate their
plans, or (b) to create any right or entitlement whatsoever in any employee,
former employee or beneficiary including a right to continued employment or to
any benefit under a plan or any other benefit or compensation.

      Section 6.12 Schedules. All schedules attached hereto are hereby
incorporated in and made a part of this Agreement as if set forth in full
herein. Capitalized terms used in the schedules hereto but not otherwise defined
therein will have the respective meanings assigned to such terms in this
Agreement.


                                       19

      Section 6.13 Termination. This Agreement may be terminated at any time
prior to the Time of Distribution by and in the sole discretion of the Conexant
Board without the approval of Mindspeed or Conexant's shareowners. In the event
of any such termination, neither party will have any liability of any kind to
the other party on account of such termination.

      Section 6.14 Change of Name. On or promptly after the Distribution Date,
Mindspeed will take such actions as may be required to change the names of all
employee benefit plans sponsored or maintained by Mindspeed or any member of the
Mindspeed Group to eliminate therefrom any reference to "Conexant", "Conexant
Systems" or any derivative thereof.

      Section 6.15 Waivers; Remedies. No failure or delay on the part of either
Conexant or Mindspeed in exercising any right, power or privilege hereunder will
operate as a waiver thereof, nor will any waiver on the part of either Conexant
or Mindspeed of any right, power or privilege hereunder operate as a waiver of
any other right, power or privilege hereunder, nor will any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder. Subject to Section 6.18, the rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies which the parties may
otherwise have at law or in equity.

      Section 6.16 Counterparts. This Agreement may be executed in separate
counterparts, each such counterpart being deemed to be an original instrument,
and all such counterparts will together constitute the same agreement. This
Agreement may be executed and delivered by telecopier with the same force and
effect as if it were a manually executed and delivered counterpart.

      Section 6.17 Performance. Conexant will cause to be performed and hereby
guarantees the performance of all actions, agreements and obligations set forth
herein to be performed by any Conexant Subsidiary. Mindspeed will cause to be
performed and hereby guarantees the performance of all actions, agreements and
obligations set forth herein to be performed by any Mindspeed Subsidiary.

      Section 6.18 Dispute Resolution. Any dispute, claim or controversy arising
out of or relating to any provision of this Agreement or the breach, performance
or validity thereof will be resolved in accordance with the procedures set forth
in Section 7.05 of the Distribution Agreement.

      Section 6.19 Cooperation. Conexant and Mindspeed will cooperate in taking
all such action as may be necessary or appropriate to implement the provisions
of this Agreement, including making all appropriate filings as may be required
under ERISA or the Code, the regulations thereunder and any other applicable
laws, exchanging and sharing all appropriate records, amending plan, trust,
record keeping and other related documents and implementing all appropriate
communications with participants.


                                       20

      Section 6.20 Interpretation. Any reference herein to any federal, state,
local or foreign law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. For the purposes
of this Agreement, (i) words in the singular shall be held to include the plural
and vice versa and words of one gender shall be held to include the other gender
as the context requires, (ii) the terms "hereof", "herein", and "herewith" and
words of similar import shall, unless otherwise stated, be construed to refer to
this Agreement as a whole and not to any particular provision of this Agreement,
(iii) the word "including" and words of similar import when used in this
Agreement shall mean "including, without limitation" and (iv) all references to
any plan shall be deemed to include any amendments thereto.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]


                                       21

      IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties as of the date first hereinabove
written.

                                        CONEXANT SYSTEMS, INC.



                                        By: /s/ Dennis E. O'Reilly
                                            -------------------------------
                                            Name: Dennis E. O'Reilly
                                            Title: Senior Vice President,
                                                   General Counsel and
                                                   Secretary

                                        MINDSPEED TECHNOLOGIES, INC.



                                        By: /s/ Bradley W. Yates
                                            -------------------------------
                                            Name: Bradley W. Yates
                                            Title: Senior Vice President and
                                                   Chief Administrative Officer



                                       22

EX-2.3

                                                                     Exhibit 2.3

================================================================================

                            TAX ALLOCATION AGREEMENT

                                 by and between

                             CONEXANT SYSTEMS, INC.

                                       and

                          MINDSPEED TECHNOLOGIES, INC.

             ======================================================

                                  June 27, 2003

             ======================================================

================================================================================



                                TABLE OF CONTENTS



                                                                                                          Page
                                                                                                          ----

                                                                                                       
ARTICLE I             DEFINITIONS.......................................................................    1
     Section 1.01     General...........................................................................    1
     Section 1.02     Schedules, etc....................................................................    8

ARTICLE II            FILING OF TAX RETURNS; PAYMENT OF TAXES; REFUNDS..................................    8
     Section 2.01     Preparation of Tax Returns........................................................    8
     Section 2.02     Payment of Taxes..................................................................   10
     Section 2.03     Tax Refunds and Carrybacks........................................................   13
     Section 2.04     Allocation of Straddle Period Taxes...............................................   14

ARTICLE III           TAX INDEMNIFICATION; TAX CONTESTS.................................................   15
     Section 3.01     Indemnification...................................................................   15
     Section 3.02     Mindspeed Tax Acts................................................................   17
     Section 3.03     Notice of Indemnity...............................................................   18
     Section 3.04     Payments..........................................................................   18
     Section 3.05     Tax Contests......................................................................   20

ARTICLE IV            OPTIONS; COMPENSATION PAYMENTS;  INTEREST CHARGE FOR LATE PAYMENTS; CURRENCY
                      CALCULATIONS; EFFECTIVE TIME OF TRANSACTIONS......................................   21
     Section 4.01     Stock Options; Restricted Shares..................................................   21
     Section 4.02     Compensation Payments.............................................................   23
     Section 4.03     Change in Law.....................................................................   24
     Section 4.04     Interest Charge for Late Payments.................................................   24
     Section 4.05     Currency Calculations.............................................................   24
     Section 4.06     Effective Time of Transaction.....................................................   24

ARTICLE V             COOPERATION AND EXCHANGE OF INFORMATION...........................................   25
     Section 5.01     Inconsistent Actions..............................................................   25
     Section 5.02     [Intentionally Omitted]...........................................................   25
     Section 5.03     [Intentionally Omitted]...........................................................   25
     Section 5.04     Cooperation and Exchange of Information...........................................   25
     Section 5.05     Tax Records.......................................................................   26




                                                                                                       
ARTICLE VI            MISCELLANEOUS.....................................................................   27
     Section 6.01     Entire Agreement; Construction....................................................   27
     Section 6.02     Effectiveness.....................................................................   27
     Section 6.03     Survival of Agreements............................................................   27
     Section 6.04     Governing Law.....................................................................   27
     Section 6.05     Notices...........................................................................   27
     Section 6.06     Amendments........................................................................   28
     Section 6.07     Successors and Assigns............................................................   28
     Section 6.08     Captions; Currency................................................................   28
     Section 6.09     Severability......................................................................   28
     Section 6.10     Parties in Interest...............................................................   28
     Section 6.11     Schedules.........................................................................   29
     Section 6.12     Termination.......................................................................   29
     Section 6.13     Waivers; Remedies.................................................................   29
     Section 6.14     Counterparts......................................................................   29
     Section 6.15     Performance.......................................................................   29
     Section 6.16     Interpretation....................................................................   29
     Section 6.17     Dispute Resolution................................................................   30



                                       ii



                            TAX ALLOCATION AGREEMENT

                  TAX ALLOCATION AGREEMENT (this "AGREEMENT") dated as of June
27, 2003 by and between CONEXANT SYSTEMS, INC., a Delaware corporation
("CONEXANT"), and MINDSPEED TECHNOLOGIES, INC., a Delaware corporation and, as
of the date hereof, a wholly-owned subsidiary of Conexant ("MINDSPEED").

                  WHEREAS, the Conexant Board (as defined herein) has determined
that it is appropriate and desirable, subject to the terms and conditions
contained in the Distribution Agreement by and between Conexant and Mindspeed
dated as of the date hereof ("DISTRIBUTION AGREEMENT") for Conexant to
distribute on a pro rata basis to holders of shares of Conexant Common Stock (as
defined herein) the outstanding shares of Mindspeed Common Stock (as defined
herein) owned by Conexant; and

                  WHEREAS, Conexant and Mindspeed wish to provide for and agree
upon the allocation between the Conexant Tax Group (as defined herein) and the
Mindspeed Tax Group (as defined herein) of all responsibilities, liabilities and
benefits relating to or affecting Taxes (as defined herein) paid or payable by
either of them for all taxable periods, whether beginning before, on or after
the Distribution Date (as defined herein).

                  NOW, THEREFORE, in consideration of the premises and of the
respective agreements contained in this Agreement, the parties hereto hereby
agree as follows:

                                   ARTICLE I

                                  DEFINITIONS

                  SECTION 1.01 GENERAL. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined). Any capitalized
term not otherwise defined in this Agreement shall have the meaning ascribed to
it in the Distribution Agreement.

                  "ACTUALLY REALIZED" shall mean, for purposes of determining
the timing of any Taxes (or related Tax cost or benefit) relating to any
payment, transaction, occurrence or event, the time at which the amount of Taxes
(including



estimated Taxes) payable by any person is increased above or reduced below, as
the case may be, the amount of Taxes that such person would be required to pay
but for the payment, transaction, occurrence or event.

                  "BOEING" shall mean The Boeing Company, a Delaware
corporation.

                  "BOEING TAX GROUP" shall mean Boeing and its affiliates.

                  "CODE" shall mean the Internal Revenue Code of 1986, as
amended, or any successor legislation.

                  "COMPENSATION PAYMENTS" shall mean all non-qualified employee
benefit plan and welfare benefit plan payments made under the Employee Matters
Agreement dated the date hereof by and between Conexant and Mindspeed.

                  "CONEXANT" shall have the meaning ascribed thereto in the
preamble.

                  "CONEXANT BOARD" shall mean the Board of Directors of Conexant
or a duly authorized committee thereof.

                  "CONEXANT COMMON STOCK" shall mean the Common Stock, par value
of $.01 per share, of Conexant and the associated preferred share purchase
rights.

                  "CONEXANT COMMON STOCK OPTIONS" shall mean options to acquire
Conexant Common Stock.

                  "CONEXANT GROUP EMPLOYEES AND FORMER EMPLOYEES" shall mean
individuals (i) who are employees of any member of the Conexant Tax Group on the
date of the event giving rise to a deduction in respect of any Compensation
Payments made to such individuals or Stock Options or Restricted Stock held by
such individuals, or (ii) whose most recent employment with any member of the
Conexant Tax Group or the Mindspeed Tax Group prior to such date was more
closely associated with the Broadband Business or some other business rather
than the Mindspeed Business.

                  "CONEXANT/MINDSPEED TAX GROUP" shall mean any corporation or
other legal entity which is a member of the Conexant Tax Group or the Mindspeed
Tax Group but only with respect to taxable periods (or portions thereof) ending
on or before or including the Distribution Date.

                  "CONEXANT RESTRICTED STOCK" shall mean shares of Conexant
Common Stock subject to restrictions on transferability and subject to a
substantial risk of forfeiture.

                                       2



                  "CONEXANT TAX GROUP" shall mean (i) Conexant, (ii) any
corporation or other legal entity which Conexant directly or indirectly owns
immediately following the Distribution Date other than a member of the Mindspeed
Tax Group, (iii) any other corporation or other legal entity which Conexant
directly or indirectly owned at any time prior to the Distribution Date (but
only with respect to the period such corporation or other entity was so owned by
Conexant) other than a member of the Mindspeed Tax Group, and (iv) solely for
purposes of this Agreement and not for purposes of any other Separation
Agreement, for any taxable period up to or including (A) December 6, 1996, Old
Rockwell and any other corporation or legal entity owned by Old Rockwell other
than a member of the Mindspeed Tax Group and (B) December 30, 1998, Rockwell and
any other corporation or legal entity owned by Rockwell other than a member of
the Mindspeed Tax Group.

                  "DISTRIBUTION" shall mean the distribution of the Mindspeed
Common Stock on a pro rata basis to holders of Conexant Common Stock on the
Distribution Date pursuant to the Distribution Agreement.

                  "DISTRIBUTION AGREEMENT" shall have the meaning ascribed
thereto in the preamble.

                  "DISTRIBUTION TRANSACTION" shall mean any transaction
undertaken in connection with the Distribution.

                  "DISTRIBUTION DATE" shall mean the date on which the
Distribution occurs (or, if different, the date on which the Distribution is
deemed to occur for U.S. federal Income Tax purposes). For purposes of this
Agreement, the Distribution shall be deemed effective as of the end of the day
on the Distribution Date.

                  "FOREIGN INCOME TAX" shall mean any Income Tax other than a
U.S. federal, state or local Income Tax.

                  "FOREIGN INCOME TAX RETURNS" shall mean any Income Tax Return
which is not a U.S. federal, state or local Income Tax Return.

                  "INCOME TAX" shall mean (a) any Tax based upon, measured by,
or calculated with respect to (i) net income or profits (including, but not
limited to, any capital gains, minimum Tax and any Tax on items of Tax
preference, but not including sales, use, real or personal property, gross or
net receipts, transfer or similar Taxes) or (ii) multiple bases (including, but
not limited to, corporate franchise, doing business or occupation Taxes) if one
or more of the bases upon which such Tax may be based, measured by, or
calculated with respect to, is described in clause (i) above, or (b) any U.S.
state or local franchise Tax; including in the case of each of (a) and

                                       3



(b) any related interest and any penalties, additions to such Tax or additional
amounts imposed with respect thereto by any Tax Authority.

                  "INCOME TAX BENEFIT" shall mean for any taxable period the
excess of (i) the hypothetical Income Tax liability of the taxpayer for the
taxable period calculated as if the Timing Difference or Reverse Timing
Difference, as the case may be, had not occurred but with all other facts
unchanged, over (ii) the actual Income Tax liability of the taxpayer for the
taxable period, calculated taking into account the Timing Difference or Reverse
Timing Difference, as the case may be (treating an Income Tax refund or credit
as a negative Income Tax liability for purposes of such calculation).

                  "INCOME TAX DETRIMENT" shall mean for any taxable period the
excess of (i) the actual Income Tax liability of the taxpayer for the taxable
period, calculated taking into account the Timing Difference or Reverse Timing
Difference, as the case may be, over (ii) the hypothetical Income Tax liability
of the taxpayer for the taxable period, calculated as if the Timing Difference
or Reverse Timing Difference, as the case may be, had not occurred but with all
other facts unchanged (treating an Income Tax refund or credit as a negative
Income Tax liability for purposes of such calculation).

                  "INCOME TAX RETURN" shall mean any Tax Return that relates to
Income Taxes.

                  "INDEMNITEE" shall have the meaning set forth in Section 3.03.

                  "INDEMNITOR" shall have the meaning set forth in Section 3.03.

                  "INDEMNITY ISSUE" shall have the meaning set forth in Section
3.03.

                  "IRS" shall mean the Internal Revenue Service.

                  "MINDSPEED" shall have the meaning ascribed thereto in the
preamble.

                  "MINDSPEED COMMON STOCK" shall mean the Common Stock, par
value $.01 per share, of Mindspeed, and the related Rights.

                  "MINDSPEED COMMON STOCK OPTIONS" shall mean options to acquire
Mindspeed Common Stock.

                  "MINDSPEED GROUP EMPLOYEES AND FORMER EMPLOYEES" shall mean
individuals (i) who are employees of any member of the Mindspeed Tax Group on
the date of the event giving rise to a deduction in respect of any Compensation
Payments

                                       4



made to such individuals or Stock Options held by such individuals or (ii) whose
most recent employment with any member of the Conexant Tax Group or the
Mindspeed Tax Group prior to such date was more closely associated with the
Mindspeed Business rather than the Broadband business or some other business.

                  "MINDSPEED TAX ACT" shall have the meaning set forth in
Section 3.02(a).

                  "MINDSPEED TAX GROUP" shall mean (i) Mindspeed and (ii) any
corporation or other legal entity set forth on Schedule 1.01.

                  "MINDSPEED TAX REPRESENTATION LETTER" shall mean the letter
delivered by Mindspeed to Conexant on the Distribution Date, substantially in
the form set forth in Schedule 3.02(b).

                  "NON-INCOME TAX" shall mean any Tax other than an Income Tax.

                  "OLD ROCKWELL" shall mean the corporation, formerly named
Rockwell International Corporation, which owned all of the Rockwell Common Stock
prior to the distribution of the Rockwell Common Stock to the shareholders of
such corporation on December 6, 1996.

                  "PERSON" shall mean any individual, partnership, joint
venture, corporation, limited liability entity, trust, unincorporated
organization or other entity (including a governmental entity).

                  "POST-DISTRIBUTION TAXABLE PERIOD" shall mean a taxable period
beginning after the Distribution Date.

                  "POST-DISTRIBUTION TAX ACT" shall have the meaning set forth
in Section 3.01(a).

                  "POST-TAX INDEMNIFICATION PERIOD" shall mean any
Post-Distribution Taxable Period and that portion of any Straddle Period that
begins on the day after the Distribution Date.

                  "PRE-DISTRIBUTION TAXABLE PERIOD" shall mean a taxable period
ending on or before the Distribution Date.

                  "RESTRICTED STOCK" shall mean Conexant Restricted Stock or
Mindspeed Restricted Stock.

                                       5



                  "REVERSE TIMING DIFFERENCE" shall mean an increase in income,
gain or recapture, or a decrease in deduction, loss or credit, as calculated for
Income Tax purposes, of the taxpayer for the Tax Indemnification Period coupled
with an increase in deduction, loss or credit, or a decrease in income, gain or
recapture, of the taxpayer for any Post-Tax Indemnification Period.

                  "RIGHTS" shall have the meaning ascribed thereto in the
Distribution Agreement.

                  "ROCKWELL" shall mean Rockwell Automation, Inc., formerly
named Rockwell International Corporation, a Delaware corporation.

                  "ROCKWELL COMMON STOCK" shall mean the Common Stock, par value
of $1 per share, of Rockwell.

                  "ROCKWELL TAX GROUP" shall mean Rockwell and its affiliates.

                  "SEPARATION AGREEMENTS" shall have the meaning ascribed
thereto in the Distribution Agreement.

                  "STOCK OPTIONS" shall mean Mindspeed Common Stock Options or
Conexant Common Stock Options.

                  "STRADDLE PERIOD" shall mean a taxable period that includes
but does not end on the Distribution Date.

                  "TAX" and "TAXES" shall mean all forms of taxation, whenever
created or imposed, and whether of the United States or elsewhere, and whether
imposed by a federal, state, municipal, governmental, territorial, local,
foreign or other body, and without limiting the generality of the foregoing,
shall include net income, gross income, gross receipts, sales, use, value added,
ad valorem, transfer, recording, franchise, profits, license, lease, service,
service use, payroll, wage, withholding, employment, unemployment insurance,
workers compensation, social security, excise, severance, stamp, business
license, business organization, occupation, premium, property, environmental,
windfall profits, customs, duties, alternative minimum, estimated or other
taxes, fees, premiums, assessments or charges of any kind whatever imposed or
collected by any governmental entity or political subdivision thereof, together
with any related interest and any penalties, additions to such tax or additional
amounts imposed with respect thereto by any Tax Authority.

                  "TAX AUTHORITY" shall mean, with respect to any Tax, any
governmental entity, quasi-governmental body or political subdivision thereof
that

                                       6



imposes such Tax and the agency (if any) charged with the determination or
collection of such Tax for such entity, body or subdivision.

                  "TAX GROUP" shall mean the Conexant Tax Group or the Mindspeed
Tax Group, as the case may be.

                  "TAX INDEMNIFICATION PERIOD" shall mean any Pre-Distribution
Taxable Period and that portion of any Straddle Period that ends on the
Distribution Date.

                  "TAX RETURN" shall mean any return, filing, questionnaire,
information return, election or other document required or permitted to be
filed, including requests for extensions of time, filings made with respect to
estimated tax payments, claims for refund and amended returns that may be filed,
for any period with any Tax Authority (whether domestic or foreign) in
connection with any Tax (whether or not a payment is required to be made with
respect to such filing).

                  "TIMING DIFFERENCE" means an increase in income, gain or
recapture, or a decrease in deduction, loss or credit, as calculated for Income
Tax purposes, of the taxpayer for any Post-Tax Indemnification Period coupled
with an increase in deduction, loss or credit, or a decrease in income, gain or
recapture, of the taxpayer for the Tax Indemnification Period.

                  "WIRELESS DISTRIBUTION" shall mean the distribution of the
Washington common stock on a pro rata basis to holders of Conexant Common Stock
on June 25, 2002 pursuant to the Contribution and Distribution Agreement by and
between Conexant and Washington Sub, Inc. dated as of December 16, 2001, as
amended as of June 25, 2002.

                  "WIRELESS RULING REQUEST" shall mean the private letter ruling
request dated January 10, 2002 filed by Conexant with the IRS (as modified or
supplemented by any materials submitted to the IRS), seeking rulings that, inter
alia, the Wireless Distribution qualified for U.S. federal Income Tax purposes
as a tax-free reorganization under Section 368(a)(1)(D) of the Code.

                  "WIRELESS TRANSACTION AGREEMENTS" shall have the meaning
ascribed to the phrase "Transaction Agreements" in the Contribution and
Distribution Agreement by and between Conexant and Washington Sub, Inc. dated as
of December 16, 2001, as amended as of June 25, 2002.

                                       7



                  SECTION 1.02 SCHEDULES, ETC. References to a "SCHEDULE" are,
unless otherwise specified, to a Schedule attached to this Agreement; references
to "SECTION" or "ARTICLE" are, unless otherwise specified, to one of the
Sections or Articles of this Agreement; references to "SUB-SECTION" are, unless
the context otherwise requires, references to the section in which the reference
appears; and references to this Agreement include the Schedules.

                                   ARTICLE II

                FILING OF TAX RETURNS; PAYMENT OF TAXES; REFUNDS

                  SECTION 2.01 PREPARATION OF TAX RETURNS.

                  (a)      UNITED STATES FEDERAL INCOME TAX RETURNS.

                  (i)      Conexant shall prepare and file or cause to be
prepared and filed all U.S. federal Income Tax Returns (including amendments
thereto) which are required to be filed in respect of (A) a member of the
Conexant/Mindspeed Tax Group for any Pre-Distribution Taxable Period or Straddle
Period or (B) a member of the Conexant Tax Group for any Post-Distribution
Taxable Period. Mindspeed hereby irrevocably designates, and agrees to cause
each of its affiliates to so designate, Conexant as its agent to take any and
all actions necessary or incidental to the preparation and filing of such U.S.
federal Income Tax Returns of Conexant's affiliated group.

                  (ii)     All U.S. federal Income Tax Returns (including
amendments thereto) required to be filed in respect of a member of the Mindspeed
Tax Group which are not the responsibility of the Conexant Tax Group are the
responsibility of the Mindspeed Tax Group.

                  (b)      UNITED STATES STATE AND LOCAL INCOME TAX RETURNS.

                  (i)      Conexant shall prepare and file or cause to be
prepared and filed all U.S. state and local Income Tax Returns (including
amendments thereto) which are required to be filed in respect of (A) a member of
the Conexant/Mindspeed Tax Group for any Pre-Distribution Taxable Period or
Straddle Period including consolidated, combined and unitary Tax Returns
including a member of the Mindspeed Tax Group, (B) any member of the Mindspeed
Tax Group for any Pre-Distribution Period or Straddle Period in which it
conducts or has conducted both a Conexant business and a Mindspeed business or
(C) a member of the Conexant Tax Group for any Post-Distribution Taxable Period.
Mindspeed hereby irrevocably

                                       8



designates, and agrees to cause each of its affiliates to so designate, Conexant
as its agent to take any and all actions necessary or incidental to the
preparation and filing of such U.S. state and local Income Tax Returns of
members of the Conexant Tax Group.

                  (ii)     All U.S. state and local Income Tax Returns
(including amendments thereto) required to be filed in respect of a member of
the Mindspeed Tax Group which are not the responsibility of the Conexant Tax
Group shall be the responsibility of the Mindspeed Tax Group.

                  (c)      FOREIGN INCOME TAX RETURNS.

                  (i)      Conexant shall prepare and file or cause to be
prepared and filed all Foreign Income Tax Returns (including amendments thereto)
which are required to be filed in respect of (A) a member of the Conexant Tax
Group for any Pre-Distribution Taxable Period or Straddle Period, (B) a member
of the Mindspeed Tax Group for any Pre-Distribution Period or Straddle Period in
which it conducts, or has conducted, both a Conexant business and a Mindspeed
business, or (C) a member of the Conexant Tax Group for any Post-Distribution
Taxable Period. Mindspeed hereby irrevocably designates, and agrees to cause
each of its affiliates to so designate, Conexant as its agent to take any and
all actions necessary or incidental to the preparation and filing of such
Foreign Income Tax Returns of members of the Conexant Tax Group.

                  (ii)     All Foreign Income Tax Returns (including amendments
thereto) required to be filed in respect of a member of the Mindspeed Tax Group
which are not the responsibility of the Conexant Tax Group shall be the
responsibility of the Mindspeed Tax Group.

                  (d)      NON-INCOME TAX RETURNS.

                  (i)      Conexant shall prepare and file or cause to be
prepared and filed all Tax Returns (including amendments thereto) which are
Non-Income Tax Returns which are required to be filed in respect of (A) a member
of the Conexant Tax Group for any Pre-Distribution Taxable Period or Straddle
Period), (B) any member of the Mindspeed Tax Group for any Pre-Distribution
Period or Straddle Period in which it conducts or has conducted both a Conexant
business and a Mindspeed business or (C) a member of the Conexant Tax Group for
any Post-Distribution Taxable Period. Mindspeed hereby irrevocably designates,
and agrees to cause each of its affiliates to so designate, Conexant as its
agent to take any and all actions necessary or incidental to the preparation and
filing of such non-U.S. federal Income Tax Returns.

                                       9



                  (ii)     All Non-Income Tax Returns (including amendments
thereto) required to be filed in respect of a member of the Mindspeed Tax Group
which are not the responsibility of the Conexant Tax Group shall be the
responsibility of the Mindspeed Tax Group.

                  (e)      CONSISTENT WITH PAST PRACTICE; REVIEW BY
NON-RESPONSIBLE PARTY. Unless Conexant and Mindspeed otherwise agree in writing,
all Tax Returns (including amendments thereto) described in this Section 2.01
filed after the date of this Agreement for Pre-Distribution Taxable Periods or
Straddle Periods, in the absence of a controlling change in law or
circumstances, shall be prepared on a basis consistent with the elections,
accounting methods, conventions and principles of taxation used for the most
recent taxable periods for which Tax Returns involving similar matters have been
filed. Upon the request of the non-responsible party, the party responsible
under this Section 2.01 for preparation of a particular Tax Return for
Pre-Distribution Taxable Periods or Straddle Periods shall make available a
draft of such Tax Return (or relevant portions thereof) for review and comment
by such non-responsible party. Subject to the provisions of this Agreement, all
decisions relating to the preparation of Tax Returns shall be made in the sole
discretion of the party responsible under this Agreement for such preparation.

                  (f)      RESPONSIBILITY FOR FILING. Although, pursuant to this
Agreement, Conexant or Mindspeed may be responsible for filing a particular Tax
Return, Conexant and Mindspeed have agreed that the actual preparation and
filing of certain Tax Returns will be done by the non-responsible party.
Schedule 2.01(f) attached hereto sets forth a schedule specifying such Tax
Returns. Conexant and Mindspeed may agree from time to time to additions to or
deletions from Schedule 2.01(f).

                  SECTION 2.02 PAYMENT OF TAXES.

                  (a)      UNITED STATES FEDERAL INCOME TAXES. Except as
otherwise provided in this Agreement:

                  (i)      Conexant shall pay or cause to be paid, on a timely
basis, all Taxes due with respect to the consolidated U.S. federal Income Tax
liability for (A) all members of the Conexant Tax Group for any Pre-Distribution
Taxable Period or Straddle Period, including consolidated Tax Returns also
including a member of the Mindspeed Tax Group, and (B) any member of the
Conexant Tax Group for any Post-Distribution Taxable Period, provided, however,
that Mindspeed, on behalf of the Mindspeed Tax Group hereby assumes and agrees
to pay directly to or at the direction of Conexant, at least five days prior to
the date payment (including estimated payment) thereof is due, the share of such
U.S. federal Income Tax liability

                                       10



of any member of the Mindspeed Tax Group attributable to the Mindspeed business,
assets or activities allocated between the Conexant Tax Group, on the one hand,
and the Mindspeed Tax Group, on the other hand, determined in a manner analogous
to that set forth in Treasury Regulation Section 1.1552-1(a)(2).

                  (ii)     Mindspeed shall pay or cause to be paid, on a timely
basis, all U.S. federal Income Taxes of the Mindspeed Tax Group which are not
the responsibility of the Conexant Tax Group.

                  (b)      UNITED STATES STATE AND LOCAL INCOME TAXES. Except as
otherwise provided in this Agreement:

                  (i)      Conexant shall pay or cause to be paid, on a timely
basis, all Taxes due with respect to the state and local Income Tax liability
for (A) all members of the Conexant Tax Group for any Pre-Distribution Taxable
Period or Straddle Period, including consolidated, combined and unitary Tax
Returns also including a member of the Mindspeed Tax Group, (B) any member of
the Mindspeed Tax Group for any Pre-Distribution Period or Straddle Period in
which it conducts or has conducted both a Conexant business and a Mindspeed
business, and (C) any member of the Conexant Tax Group for any Post-Distribution
Taxable Period, provided, however, that Mindspeed, on behalf of the Mindspeed
Tax Group hereby assumes and agrees to pay directly to or at the direction of
Conexant, at least five days prior to the date payment (including estimated
payment) thereof is due, the share of such U.S. state and local Income Tax
liability of any member of the Mindspeed Tax Group attributable to the Mindspeed
business, assets or activities allocated between the Conexant Tax Group, on the
one hand, and the Mindspeed Tax Group, on the other hand, determined in a manner
analogous to that set forth in Treasury Regulation Section 1.1552-1(a)(2).

                  (ii)     Mindspeed shall pay or cause to be paid, on a timely
basis, all U.S. state and local Income Taxes of the Mindspeed Tax Group which
are not the responsibility of the Conexant Tax Group.

                  (c)      FOREIGN INCOME TAXES. Except as otherwise provided in
this Agreement:

                  (i)      Conexant shall pay or cause to be paid, on a timely
basis, all Taxes due with respect to the Foreign Income Tax liability for (A)
all members of the Conexant Tax Group for any Pre-Distribution Taxable Period or
Straddle Period, (B) any member of the Mindspeed Tax Group for any
Pre-Distribution Period or Straddle Period in which it conducts, or has
conducted, both a Conexant business and a Mindspeed business, or (C) any member
of the Conexant Tax Group for any

                                       11



Post-Distribution Taxable Period, provided, however, that Mindspeed, on behalf
of the Mindspeed Tax Group hereby assumes and agrees to pay directly to or at
the direction of Conexant, at least five days prior to the date payment
(including estimated payment) thereof is due, the share of such Foreign Income
Tax liability of any member of the Mindspeed Tax Group attributable to the
Mindspeed business, assets or activities allocated between the Conexant Tax
Group, on the one hand, and the Mindspeed Tax Group, on the other hand,
determined in a manner analogous to that set forth in Treasury Regulation
Section 1.1552-1(a)(2).

                  (ii)     Mindspeed shall pay or cause to be paid, on a timely
basis, all Foreign Income Taxes which are not the responsibility of the Conexant
Tax Group.

                  (d)      NON-INCOME TAXES. Except as otherwise provided in
this Agreement:

                  (i)      Conexant shall pay or cause to be paid, on a timely
basis, all Taxes which are Non-Income Taxes due with respect to the Tax
liability for (A) all members of the Conexant Tax Group for any Pre-Distribution
Taxable Period, Straddle Period or Post-Distribution Taxable Period, (B) any
member of the Mindspeed Tax Group for any Pre-Distribution Period or Straddle
Period in which it conducts or has conducted both a Conexant business and a
Mindspeed business and (C) a member of the Conexant Tax Group for any
Post-Distribution Taxable Period, provided, however, that Mindspeed, on behalf
of the Mindspeed Tax Group hereby assumes and agrees to pay directly to or at
the direction of Conexant, at least five days prior to the date payment
(including estimated payment) thereof is due, the share of such Non-Income Tax
liability of any member of the Mindspeed Tax Group, attributable to the
Mindspeed business, assets or activities.

                  (ii)     Mindspeed shall pay or cause to be paid, on a timely
basis, all Taxes which are Non-Income Taxes which are not the responsibility of
the Conexant Tax Group.

                  (e)      EMPLOYMENT TAXES. Mindspeed shall pay or cause to be
paid, on a timely basis, all employment Taxes for all Pre-Distribution Taxable
Periods, Straddle Periods and Post-Distribution Taxable Periods attributable to
(I) any employee of the Mindspeed Tax Group on the day following the
Distribution Date or (II) any individual who was neither an employee of the
Mindspeed Tax Group or the Conexant Tax Group on the day following the
Distribution Date but whose most recent employment prior to the Distribution
Date with any member of the Mindspeed Tax Group or the Conexant Tax Group was
more closely associated with the Mindspeed Business rather than the Broadband
Business.

                                       12



                  (f)      POST-DISTRIBUTION DATE TAXES. Except as otherwise
provided in this Agreement, all Taxes for all Post-Distribution Taxable Periods
shall be paid or caused to be paid by the party responsible under this Agreement
for filing the Tax Returns pursuant to which such Taxes are due or, if no such
Tax Returns are due, by the party liable for such Taxes.

                  (g)      CREDIT FOR PRIOR TAX PAYMENTS. To the extent any
member of a Tax Group has made a payment of Taxes (including estimated Taxes) on
or before the Distribution Date, the party liable for paying such Taxes under
this Agreement shall be entitled to treat the payment as having been paid or
caused to have been paid by such party, and such party shall not be required to
reimburse the party which actually paid such Taxes.

                  (h)      RESPONSIBILITY FOR PAYMENT; NOTICE OF PAYMENT DUE.
Although Conexant or Mindspeed may be responsible for paying a particular Tax
liability, Conexant and Mindspeed may agree that the actual payment to a Taxing
Authority of certain Tax liabilities will be made by the non-responsible party.
Conexant and Mindspeed may agree to prepare a schedule setting forth such Tax
liabilities and may agree from time to time to additions to or deletions from
such schedule. In each case where Conexant or Mindspeed, as the case may be, is
required to make payment of Taxes to the other party, Conexant or Mindspeed, as
the case may be shall notify the other party as to the amount of Taxes due from
the other party at least five days prior to the date payment (including
estimated payment) is due.

                  SECTION 2.03 TAX REFUNDS AND CARRYBACKS.

                  (a)      RETENTION AND PAYMENT OF TAX REFUNDS. Except as
otherwise provided in this Agreement, Conexant shall be entitled to retain, and
to receive within ten days after Actually Realized by the Mindspeed Tax Group,
the portion of all refunds or credits of Taxes for which the Conexant Tax Group
is liable pursuant to Section 2.02 or Section 3.01(a) or is treated as having
paid or caused to have been paid pursuant to Section 2.02(d), and Mindspeed
shall be entitled to retain, and to receive within ten days after Actually
Realized by the Conexant Tax Group, the portion of all refunds or credits of
Taxes for which the Mindspeed Tax Group is liable pursuant to Section 2.02 or
Section 3.01(b) or is treated as having paid or caused to have been paid
pursuant to Section 2.02(d). The amount of any refund or credit of Taxes to
which Conexant or Mindspeed is entitled to retain or receive pursuant to the
foregoing sentence shall be reduced to take account of any Taxes incurred by the
Mindspeed Tax Group, in the case of a refund or credit to which Conexant is
entitled, or the Conexant Tax Group, in the case of a refund or credit to which
Mindspeed is entitled, upon the receipt of such refund or credit.

                                       13



                  (b)      CARRYBACKS. Unless the parties otherwise agree in
writing, Mindspeed shall elect and shall cause each member of the Mindspeed Tax
Group to elect, where permitted by law, to carry forward any net operating loss,
net capital loss, charitable contribution or other item arising after the
Distribution Date that could, in the absence of such election, be carried back
to a Pre-Distribution Taxable Period. Except as otherwise provided in this
Agreement, notwithstanding the provisions of Section 2.03(a), (i) any refund or
credit of Taxes resulting from the carryback of any item of Taxes attributable
to the Mindspeed Tax Group arising in a Post-Tax Indemnification Period to a Tax
Indemnification Period shall be for the account and benefit of the Mindspeed Tax
Group, (ii) any refund or credit of Taxes resulting from the carryback of any
item of Taxes attributable to the Conexant Tax Group arising in a Post-Tax
Indemnification Period to a Tax Indemnification Period shall be for the account
and benefit of the Conexant Tax Group, and (iii) any refund or credit of Taxes
resulting from a carryback of any item of federal Income Taxes attributable to
the Conexant/Mindspeed Tax Group (including derivative state and local refunds
or credits) shall be for the account and benefit of the Conexant Tax Group.

                  (c)      REFUND CLAIMS. Conexant shall be permitted to file at
Conexant's sole expense, and Mindspeed shall reasonably cooperate with Conexant
in connection with, any claims for refund of Taxes to which Conexant is entitled
pursuant to this Section 2.03 or any other provision of this Agreement. Conexant
shall reimburse Mindspeed for any reasonable out-of-pocket costs and expenses
incurred by any member of the Mindspeed Tax Group in connection with such
cooperation. Mindspeed shall be permitted to file at Mindspeed's sole expense,
and Conexant shall reasonably cooperate with Mindspeed in connection with, any
claims for refunds of Taxes to which Mindspeed is entitled pursuant to this
Section 2.03 or any other provision of this Agreement. Mindspeed shall reimburse
Conexant for any reasonable out-of-pocket costs and expenses incurred by any
member of the Conexant Tax Group in connection with such cooperation.

                  SECTION 2.04 ALLOCATION OF STRADDLE PERIOD TAXES. In the case
of any Straddle Period:

                  (a)      PERIODIC TAXES. (i) The periodic Taxes of a member of
the Conexant Tax Group or the Mindspeed Tax Group or its business, assets or
activities that are not based on income or receipts (e.g., property Taxes) for
the portion of any Straddle Period ending on the Distribution Date shall be
computed based on the ratio of the number of days in such portion of the
Straddle Period and the number of days in the entire taxable period; and (ii)
the periodic taxes of a member of the Conexant Tax Group or the Mindspeed Tax
Group or its business, assets or activities that are not based on income or
receipts for the portion of any Straddle Period beginning on

                                       14



the day after the Distribution Date shall be computed based on the ratio of the
number of days in such portion of the Straddle Period and the number of days in
the entire taxable period.

                  (b)      NON-PERIODIC TAXES. (i) The Taxes of a member of the
Conexant Tax Group or the Mindspeed Tax Group or its business, assets or
activities for that portion of any Straddle Period ending on the Distribution
Date (other than Taxes described in Section 2.04(a) above), shall be computed on
a "closing-of-the-books" basis as if such taxable period ended as of the close
of business on the Distribution Date, and, in the case of any Taxes of a member
of the Conexant Tax Group or the Mindspeed Tax Group or its business, assets or
activities with respect to any equity interest in any partnership or other
"flowthrough" entity, as if the taxable period of such partnership or other
"flowthrough" entity ended on the Distribution Date; and (ii) the Taxes of a
member of the Conexant Tax Group or the Mindspeed Tax Group or its business,
assets or activities for that portion of any Straddle Period beginning after the
Distribution Date (other than Taxes described in Section 2.04(a) above), shall
be computed on a "closing-of-the-books" basis as if such taxable period began on
the day after the Distribution Date, and, in the case of any Taxes of a member
of the Conexant Tax Group or the Mindspeed Tax Group or its business, assets or
activities with respect to any equity interest in any partnership or other
"flowthrough" entity, as if the taxable period of such partnership or other
"flowthrough" entity began as of the day after the Distribution Date.

                  (c)      The Taxes of the Conexant Tax Group and the Mindspeed
Tax Group with respect to any Tax Return for a Straddle Period which includes a
member of each of the Conexant Tax Group and the Mindspeed Tax Group or their
respective businesses, assets or activities shall be allocated between the
Conexant Tax Group, on the one hand, and the Mindspeed Tax Group, on the other
hand, determined in a manner analogous to that set forth in Treasury Regulation
Section 1.1552-1(a)(2).

                                  ARTICLE III

                        TAX INDEMNIFICATION; TAX CONTESTS

                  SECTION 3.01 INDEMNIFICATION.

                  (a)      CONEXANT INDEMNIFICATION. Subject to Section 3.01(b)
and Section 3.02, Conexant shall indemnify, defend and hold harmless each member
of the Mindspeed Tax Group and each of their respective shareowners, directors,
officers, employees and agents and each of the heirs, executors, successors and
assigns of any of the foregoing from and against:

                                       15



                  (i)      all Taxes of the Conexant Tax Group other than any
Taxes for which Mindspeed is liable pursuant to Section 2.02(e);

                  (ii)     all Taxes of the Mindspeed Tax Group for all
Pre-Distribution Taxable Periods and all Straddle Periods for which Conexant is
liable pursuant to Section 2.02 or 3.02;

                  (iii)    all liability as a result of Treasury Regulation
Section 1.1502-6(a) (which imposes several liability on members of an affiliated
group that file a U.S. federal consolidated Income Tax return) or comparable
U.S. state or local provision for Income Taxes of any person which is or has
ever been affiliated with any member of the Conexant/Mindspeed Tax Group or with
which any member of the Conexant/Mindspeed Tax Group joins or has ever joined
(or is or has ever been required to join) in filing any consolidated, combined
or unitary Income Tax Return for any Tax period ending on or before or including
the Distribution Date except to the extent the Mindspeed Tax Group is liable for
such Taxes pursuant to Section 2.02 or 3.02;

                  (iv)     all Taxes for any Tax period (whether beginning
before, on or after the Distribution Date) that would not have been payable but
for the breach by any member of the Conexant Tax Group of any representation,
warranty, covenant or obligation under this Agreement;

                  (v)      all liability for a breach by any member of the
Conexant Tax Group of any representation, warranty, covenant or obligation under
this Agreement;

                  (vi)     all Taxes imposed in connection with the transactions
contemplated by the Separation Agreements or any other agreement entered into
for the purpose of implementing the Distribution;

                  (vii)    all Taxes for which Conexant is liable pursuant to
Section 3.02; and

                  (viii)   all liability for any reasonable legal, accounting,
appraisal, consulting or similar fees and expenses relating to the foregoing.

Notwithstanding the foregoing and subject to Section 3.01(b) and Section 3.02,
Conexant shall not indemnify, defend or hold harmless any member of the
Mindspeed Tax Group from any liability for Taxes attributable to any action
(including the making of an election under Section 338 of the Code) taken by any
member of the Mindspeed Tax Group after the Distribution (other than any such
action expressly required or otherwise expressly contemplated by the Separation
Agreements or any

                                       16



other agreement entered into for the purpose of implementing the Distribution or
taken in the ordinary course of business) (a "POST-DISTRIBUTION TAX ACT").

                  (b)      MINDSPEED INDEMNIFICATION. Mindspeed shall be liable
for, and shall indemnify, defend and hold harmless each member of the Conexant
Tax Group and each of the respective shareowners, directors, officers, employees
and agents and each of the heirs, executors, successors and assigns of any of
the foregoing from and against:

                  (i)      all Taxes of any member of the Mindspeed Tax Group
(other than Taxes for which Conexant provides indemnification pursuant to
Section 3.01(a));

                  (ii)     all Taxes for which Mindspeed is liable pursuant to
Section 2.02(e).

                  (iii)    all Taxes for any Tax period (whether beginning
before, on or after the Distribution Date) that would not have been payable but
for the breach by any member of the Mindspeed Tax Group of any representation,
warranty, covenant or obligation under this Agreement;

                  (iv)     all liability for a breach by any member of the
Mindspeed Tax Group of any representation, warranty, covenant or obligation
under this Agreement;

                  (v)      all Taxes for which Mindspeed is liable pursuant to
Section 3.02;

                  (vi)     all Taxes attributable to a Post-Distribution Tax
Act; and

                  (vii)    all liability for any reasonable legal, accounting,
appraisal, consulting or similar fees and expenses relating to the foregoing.

                  SECTION 3.02 MINDSPEED TAX ACTS

                  (a)      Notwithstanding Section 3.01, Mindspeed agrees to
indemnify, defend and hold harmless each member of the Conexant Tax Group and
each of the respective shareowners, directors, officers, employees and agents
and each of the heirs, executors, successors and assigns of any of the foregoing
from and against any Taxes resulting from any Mindspeed Tax Act. A Mindspeed Tax
Act shall mean any action specified on Schedule 3.02(a) attached hereto.

                  (b)      Mindspeed shall, and shall cause each member of the
Mindspeed Tax Group to, comply with and take no action inconsistent with the

                                       17



Mindspeed Tax Representation Letter, unless, pursuant to a favorable ruling
letter obtained from the IRS which is satisfactory to Conexant or the advice of
Chadbourne & Parke LLP or other nationally recognized tax counsel to Conexant,
which advice shall be satisfactory to Conexant, such act or omission would not
adversely affect the U.S. federal Income Tax consequences of the Distribution to
Conexant or the shareowners of Conexant. Notwithstanding Sections 3.01(b)(iv),
3.01(b)(v), 3.01(b)(vii) and 3.01(b)(viii), the parties intend that the sole
remedy for breach of the covenants contained in this Section 3.02(b) shall be as
set forth in Section 3.02(a).

                  (c)      Notwithstanding the foregoing, a Mindspeed Tax Act
shall not include any transaction or action specifically disclosed or
specifically described in any of the Separation Agreements or, except as
specifically set forth in Schedule 3.02(c) occurring on or prior to the
Distribution Date, any action taken on or prior to the Distribution Date. A
Mindspeed Tax Act shall not include any action on the part of any member of the
Conexant Tax Group.

                  (d)      Conexant agrees to indemnify, defend and hold
harmless each member of the Mindspeed Tax Group and each of the respective
shareowners, directors, officers, employees and agents and each of the heirs,
executors, successors and assigns of any of the foregoing from and against any
Taxes resulting from any transaction undertaken in connection with the formation
of Mindspeed and the contribution of assets to Mindspeed other than any
employment Taxes.

                  SECTION 3.03 NOTICE OF INDEMNITY. Whenever a party hereto
(hereinafter an "INDEMNITEE") becomes aware of the existence of an issue raised
by any Tax Authority which could reasonably be expected to result in a
determination that would increase the liability for any Tax of the other party
hereto or any member of its Tax Group for any Tax period or require a payment
hereunder by the other party (hereinafter an "INDEMNITY ISSUE"), the Indemnitee
shall in good faith promptly give notice to such other party (hereinafter the
"INDEMNITOR") of such Indemnity Issue. The failure of the Indemnitee to give
such notice shall not relieve the Indemnitor of its obligations under this
Agreement, except to the extent such Indemnitor or a member of its Tax Group is
actually prejudiced by such failure to give notice.

                  SECTION 3.04 PAYMENTS.

                  (a)      TIMING ADJUSTMENTS.

                  (i)      TIMING DIFFERENCES. If a Tax audit proceeding or an
amendment of a Tax Return results in a Timing Difference, and such Timing
Difference results in a decrease in an indemnity obligation Conexant has or
would

                                       18



otherwise have under Section 3.01(a) and/or an increase in the amount of a Tax
refund or credit to which Conexant is entitled under Section 2.03, then in each
Post-Tax Indemnification Period in which the Mindspeed Tax Group Actually
Realizes an Income Tax Detriment, Conexant shall pay to Mindspeed an amount
equal to such Income Tax Detriment; provided, however, that the aggregate
payments which Conexant shall be required to make under this Section 3.04(a)(i)
with respect to any Timing Difference shall not exceed the aggregate amount of
the Income Tax Benefits realized by the Conexant Tax Group for all taxable
periods and the Mindspeed Tax Group for all Tax Indemnification Periods as a
result of such Timing Difference. Conexant shall make all such payments within
ten days after Mindspeed notifies Conexant that the relevant Income Tax
Detriment has been Actually Realized.

                  (ii)     REVERSE TIMING DIFFERENCES. If a Tax audit proceeding
or an amendment to a Tax Return results in a Reverse Timing Difference, and such
Reverse Timing Difference results in an increase in an indemnity payment
obligation of Conexant under Section 3.01(a) and/or a decrease in the amount of
a Tax refund or credit to which Conexant is or would otherwise be entitled under
Section 2.03, then in each Post-Tax Indemnification Period in which the
Mindspeed Tax Group Actually Realizes an Income Tax Benefit, Mindspeed shall pay
to Conexant within ten days after Mindspeed has Actually Realized such Income
Tax Benefit an amount equal to such Income Tax Benefit, provided, however, that
the aggregate payments which Mindspeed shall be required to make under this
Section 3.04(a)(ii) with respect to Reverse Timing Differences shall not exceed
the aggregate amount of the Income Tax Detriments realized by the Mindspeed Tax
Group and the Conexant Tax Group for all Tax Indemnification Periods as a result
of such Reverse Timing Difference.

                  (b)      TIME FOR PAYMENT. Except as otherwise provided in
this Section 3.04(b), any indemnity payment required to be made pursuant to this
Agreement shall be paid within thirty days after the indemnified party makes
written demand upon the indemnifying party, provided that in no event shall such
payment be required to be made earlier than five (5) Business Days prior to the
date on which the relevant Taxes (including estimated Taxes) are required to be
paid (or would be required to be paid if no such Taxes are due) to the relevant
Tax Authority. Notwithstanding any other provision in this Agreement, to
simplify the administration of this Agreement, the payment of any amount less
than $100,000 required to be made pursuant to this Agreement by one party hereto
to another party hereto need not be made to such other party prior to thirty
days following the later of (i) the close of the calendar quarter during which
such payment obligation arose and (ii) the day during such calendar quarter when
the aggregate amount of all such less than $100,000 payment obligations arising
during such calendar quarter exceeds $250,000.

                                       19



                  (c)      PAYMENTS NET OF TAXES AND TAX BENEFITS. The amount of
any payment under this Agreement shall be (i) reduced to take into account any
net Tax benefit realized by the recipient's Tax Group arising from the
incurrence or payment by such recipient's Tax Group of any amount in respect of
which such payment is made and (ii) increased to take into account any net Tax
cost incurred by the recipient's Tax Group as a result of the receipt or accrual
of payments hereunder (grossed-up for such increase), in each case determined by
treating the recipient as recognizing all other items of income, gain, loss,
deduction or credit before recognizing any item arising from the receipt of
accrual of any payment hereunder. Except as otherwise provided in this Agreement
or unless the parties otherwise agree to an alternative method for determining
the present value of any such anticipated Tax benefit or Tax cost, any payment
hereunder shall initially be made without regard to this section and shall be
increased or reduced to reflect any such net Tax cost (including gross-up) or
net Tax benefit only after the recipient's Tax Group has Actually Realized such
Tax cost or Tax benefit.

                  (d)      RIGHT TO OFFSET. Any party making a payment under
this Agreement shall have the right to reduce any such payment by any undisputed
amounts owed to it by the other party to this Agreement.

                  (e)      CHARACTERIZATION OF PAYMENTS. It is the intention of
the parties to this Agreement that payments made pursuant to this Agreement are
to be treated as relating back to the Distribution as an adjustment to capital
(i.e., capital contribution or distribution), and the parties shall not take any
position inconsistent with such intention before any Tax Authority, except to
the extent that a final determination (as defined in Section 1313 of the Code)
with respect to the recipient party causes any such payment not to be so
treated.

                  SECTION 3.05 TAX CONTESTS. The Indemnitor and its
representatives, at the Indemnitor's expense, shall be entitled to participate
(a) in all conferences, meetings and proceedings with any Tax Authority, the
subject matter of which is or includes an Indemnity Issue and (b) in all
appearances before any court, the subject matter of which is or includes an
Indemnity Issue. The party who has responsibility for filing the Tax Return
under this Agreement (the "RESPONSIBLE PARTY") with respect to which there could
be an increase in liability for any Tax or with respect to which a payment could
be required hereunder shall have the right to decide as between the parties
hereto how such matter is to be dealt with and finally resolved with the
appropriate Tax Authority and shall control all audits and similar proceedings.
If no Tax Return is or was required to be filed in respect of an Indemnity
Issue, the Indemnitor shall be treated as the Responsible Party with respect
thereto. The Responsible Party agrees to cooperate in the settlement of any

                                       20



Indemnity Issue with the other party and to take such other party's interests
into account.

                                   ARTICLE IV

                         OPTIONS; COMPENSATION PAYMENTS;
                       INTEREST CHARGE FOR LATE PAYMENTS;
              CURRENCY CALCULATIONS; EFFECTIVE TIME OF TRANSACTIONS

                  SECTION 4.01 STOCK OPTIONS; RESTRICTED SHARES.

                  (a)      STOCK OPTION ADJUSTMENTS. Conexant Common Stock
Options outstanding at the time of the Distribution will be adjusted in
accordance with the terms of the Employee Matters Agreement. Conexant Restricted
Shares outstanding at the time of the Distribution will be adjusted in
accordance with the terms of the underlying plan and award for such Conexant
Restricted Shares and the Distribution Agreement.

                  (b)      TAX DEDUCTIONS. Notwithstanding anything to the
contrary in this Agreement, unless the IRS issues a contrary private letter
ruling to Conexant or Mindspeed, or Conexant and Mindspeed otherwise agree in
writing, (i) the Conexant Tax Group (and not the Mindspeed Tax Group) shall
claim any Post-Distribution Date Tax deductions in respect of Conexant Common
Stock Options exercised by, or Conexant Restricted Shares held by, Conexant
Group Employees and Former Employees, (ii) the Conexant Tax Group (and not the
Mindspeed Tax Group) shall claim any Post-Distribution Date Tax deductions in
respect of Mindspeed Common Stock Options exercised by, or Mindspeed Restricted
Shares held by, Conexant Group Employees and Former Employees and Conexant shall
pay to Mindspeed the amount received as a result of any Tax benefit realized in
respect of such Tax deductions within ten days after such amount is Actually
Realized by Conexant, (iii) the Mindspeed Tax Group (and not the Conexant Tax
Group) shall claim any Post-Distribution Date Tax deductions in respect of
Conexant Common Stock Options exercised by, or Conexant Restricted Shares held
by, Mindspeed Group Employees and Former Employees and Mindspeed shall pay to
Conexant the amount received as a result of any Tax benefit realized in respect
of such Tax deductions within ten days after such amount is Actually Realized by
Mindspeed, and (iv) the Mindspeed Tax Group (and not the Conexant Tax Group)
shall claim the Post-Distribution Date Tax deductions in respect of the
Mindspeed Common Stock Options exercised by, or Mindspeed Restricted Shares held
by, Mindspeed Group Employees and Former Employees. In the case of Skyworks
stock options and Skyworks restricted stock held by Mindspeed Group Employees
and Former

                                       21



Employees, to the extent the tax allocation agreement between Conexant and
Skyworks dated as of June 25, 2002 allocates the Tax deduction to the employer
corporation, Mindspeed shall, within ten days after any Tax refund or credit
arising in respect of the Tax deduction with respect to such stock options and
restricted stock is Actually Realized by Mindspeed, pay such amount to Skyworks.

                  (c)      NOTICES, WITHHOLDING, REPORTING.

                  (i)      Conexant shall promptly notify Mindspeed of any
post-Distribution Date event giving rise to income to any Mindspeed Group
Employees and Former Employees in connection with the Conexant Common Stock
Options and Conexant Restricted Shares and, if required by law, Mindspeed shall
withhold applicable Taxes and satisfy applicable Tax reporting obligations in
connection therewith. Conexant shall within ten days of demand thereof reimburse
Mindspeed for all reasonable out-of-pocket expenses incurred in connection with
the Conexant Common Stock Options and Conexant Restricted Shares, including with
respect to incremental Tax reporting obligations and any incremental employment
Tax obligations; provided that Mindspeed shall use reasonable efforts to collect
any such amounts required to be paid by Mindspeed Group Employees and Former
Employees from such Mindspeed Group Employees and Former Employees.

                  (ii)     Mindspeed shall promptly notify Conexant of any
post-Distribution Date event giving rise to income to any non-Mindspeed Group
Employees and Former Employees in connection with the Mindspeed Common Stock
Options and Mindspeed Restricted Shares and, if required by law, Conexant shall
withhold applicable Taxes and satisfy applicable Tax reporting obligations in
connection therewith. Mindspeed shall within ten days of demand thereof
reimburse Conexant for all reasonable out-of-pocket expenses incurred in
connection with the Mindspeed Common Stock Options and Mindspeed Restricted
Shares, including with respect to incremental Tax reporting obligations and any
incremental employment Tax obligations; provided that Conexant shall use
reasonable efforts to collect any such amounts required to be paid by
non-Mindspeed Group Employees and Former Employees from such non-Mindspeed Group
Employees and Former Employees.

                  (d)      TAX AUDIT ADJUSTMENTS. Notwithstanding the provisions
of Section 4.01(b), in the event a Tax audit proceeding shall determine (by
settlement or otherwise), or the parties otherwise determine pursuant to Section
4.03, that all or a portion of the Tax deductions in respect of Conexant Common
Stock Options and Conexant Restricted Shares or Mindspeed Common Stock Options
and Mindspeed Restricted Shares should have been claimed by the Mindspeed Tax
Group or the Conexant Tax Group, respectively, the Mindspeed Tax Group or the
Conexant Tax Group, respectively, shall claim such Tax deductions (by an amended
Tax Return or

                                       22



otherwise) and shall pay to Conexant or Mindspeed, as the case may be, the
amount of any Tax refund or credit arising in respect of such Tax deduction
within ten days after such Tax refund or credit is Actually Realized by the
Mindspeed Tax Group or the Conexant Tax Group, as the case may be.

                  (e)      STATUS OF DIRECTORS. For purposes of this Section
4.01 (except as it relates to employment and withholding Taxes), (i) Conexant or
Mindspeed Common Stock Options and Restricted Shares held by present or former
non-employee members of the Conexant Board of Directors shall be treated as held
by present or former employees of Conexant, (ii) Conexant or Mindspeed Common
Stock Options and Restricted Shares held by present or former non-employee
members of the Mindspeed Board of Directors shall be treated as held by present
or former employees of Mindspeed, and (iii) notwithstanding (i) or (ii) above,
Conexant or Mindspeed Common Stock Options and Restricted Shares held by
individuals who, as of the Distribution Date, were both non-employee members of
the Conexant Board of Directors and non-employee members of the Mindspeed Board
of Directors shall be treated as (A) employees of Conexant with respect to
Conexant Common Stock Options exercised by, or Conexant Restricted Shares held
by, such individuals and (B) employees of Mindspeed with respect to Mindspeed
Common Stock Options exercised by, or Mindspeed Restricted Shares held by, such
individuals.

                  SECTION 4.02 COMPENSATION PAYMENTS.

                  (a)      TAX DEDUCTIONS. Notwithstanding anything to the
contrary in this Agreement, unless Conexant and Mindspeed otherwise agree in
writing, (i) the Boeing Tax Group (and not the Conexant Tax Group or the
Mindspeed Tax Group) shall claim the Post-Distribution Date Tax deductions in
respect of Compensation Payments paid to Mindspeed Group Employees and Former
Employees who ceased employment on or before December 6, 1996 and Conexant shall
pay to Mindspeed the amount received from Rockwell as a result of any Tax
benefit realized in respect of such Tax deductions within ten days after such
amount is received by Conexant, (ii) the Rockwell Tax Group (and not the
Conexant Tax Group or the Mindspeed Tax Group) shall claim the Post-Distribution
Date Tax deductions in respect of Compensation Payments paid by the Rockwell Tax
Group to Mindspeed Group Employees and Former Employers; (iii) the Mindspeed Tax
Group (and not the Conexant Tax Group) shall claim the Post-Distribution Date
Tax deductions in respect of Compensation Payments paid by the Mindspeed Tax
Group to all other Mindspeed Group Employees and Former Employees, and (iv) the
Conexant Tax Group (and not the Mindspeed Tax Group) shall claim the
Post-Distribution Date Tax deductions in respect of Compensation Payments paid
by the Conexant Tax Group to all other Mindspeed Group Employees and Former
Employees.

                                       23



                  (b)      NOTICES, WITHHOLDING, REPORTING. The party
responsible for making the Compensation Payments pursuant to the Employee
Matters Agreement shall withhold applicable Taxes and satisfy applicable Tax
reporting obligations in connection with the Compensation Payments made to all
Mindspeed Group Employees and Former Employees.

                  (c)      TAX AUDIT ADJUSTMENTS. Notwithstanding the provisions
of Section 4.02(a), in the event a Tax audit proceeding shall determine (by
settlement or otherwise), or the parties otherwise determine pursuant to Section
4.03, that all or a portion of the Tax deductions in respect of Compensation
Payments paid to Mindspeed Group Employees and Former Employees was not
available to the party claiming the Tax deduction, then the appropriate party
shall claim such Tax deductions (by an amended Tax Return or otherwise) and
shall pay to the party which had previously claimed such Tax deduction, within
ten days after such Tax deduction has been Actually Realized by the such
appropriate party, the amount of the resulting Tax benefit to such appropriate
party.

                  SECTION 4.03 CHANGE IN LAW. Notwithstanding the agreement with
respect to reporting of Tax items and the claiming of the deductions set forth
in Article 4 of this Agreement, neither the Mindspeed Tax Group nor the Conexant
Tax Group shall have any obligation to report any such Tax items or claim such
deductions as set forth in such Article in the event that either such party
determines, based on an opinion of nationally recognized tax counsel, which
opinion shall be satisfactory to the other party, that there is no substantial
authority to support reporting such Tax items or claiming such deductions on a
Tax Return filed by such party as a result of a change in or amendment to any
law or regulation, or any change in the official interpretation thereof,
effective or occurring after the date of this Agreement, and such Tax Group
provides prompt notice to the other Tax Group of any such determination.

                  SECTION 4.04 INTEREST CHARGE FOR LATE PAYMENTS. Any amount due
and owing by one party to the other party pursuant to this Agreement that is not
paid when due shall bear interest from the due date thereof until paid at a rate
equal to the JPMorgan Chase Bank base rate in effect from time to time during
such period plus 1%.

                  SECTION 4.05 CURRENCY CALCULATIONS. All currency calculations
shall be made in accordance with Section 7.09 of the Distribution Agreement.

                  SECTION 4.06 EFFECTIVE TIME OF TRANSACTION. Conexant and
Mindspeed agree that any transaction that, pursuant to the Distribution
Agreement, is expressly effective immediately after the Time of Distribution
shall be treated for

                                       24



federal Income Tax purposes as occurring at the beginning of the day following
the Distribution Date.

                                    ARTICLE V

                     COOPERATION AND EXCHANGE OF INFORMATION

                  SECTION 5.01 INCONSISTENT ACTIONS. Each party to this
Agreement agrees (i) to, and to cause each of the relevant members of its Tax
Group to, report the Distribution as a transaction described in Section
368(a)(1)(D) of the Code on all Tax Returns and other filings, (ii) to use its
best efforts to ensure that the Distribution receives such treatment for U.S.
federal Income Tax purposes and (iii) that, unless it has obtained the prior
written consent of the other party, it (and the members of its Tax Group) shall
not take any action inconsistent with, or fail to take any action required by,
the Separation Agreements.

                  SECTION 5.02 [INTENTIONALLY OMITTED].

                  SECTION 5.03 [INTENTIONALLY OMITTED].

                  SECTION 5.04 COOPERATION AND EXCHANGE OF INFORMATION. Each
party hereto agrees to provide, and to cause each member of its Tax Group to
provide, such cooperation and information as such other party shall request, on
a timely basis, in connection with the preparation or filing of any Tax Return
or claim for Tax refund not inconsistent with this Agreement or in conducting
any Tax audit, Tax dispute, or otherwise in respect of Taxes or to carry out the
provisions of this Agreement. To the extent necessary to carry out the purposes
of this Agreement and subject to the other provisions of this Agreement, such
cooperation and information shall include without limitation the non-exclusive
designation of an officer of Conexant as an officer of Mindspeed and each of its
affiliates (for the purpose of signing Tax Returns, cashing refund checks,
pursuing refund claims, dealing with Tax Authorities and defending audits);
promptly forwarding to the other party, where relevant, copies of appropriate
notices and forms or other communications received from or sent to any Tax
Authority which relate to the Tax Indemnification Period; providing copies of
all relevant Tax Returns for the Tax Indemnification Period, together with
accompanying schedules and related workpapers, documents relating to rulings or
other determinations by Tax Authorities, including without limitation, foreign
Tax Authorities, and records concerning the ownership and Tax basis of property,
which either party may possess; and making its employees involved in the
research and development process available to the other party and having such
employees provide such assistance as the other party may require for such
purposes, provided, however,

                                       25



that neither party shall be obligated to provide the other party Tax Returns,
documentation or other information of a proprietary or confidential nature for
purposes of verifying any calculation, and provided further, that in any such
case where one party does not provide the other party with Tax Returns,
documentation or information because it is proprietary or confidential, both
parties shall cooperate in developing mutually acceptable procedures including
retaining a mutually agreeable accounting firm to review such Tax Returns,
documentation or information for purposes of verifying such calculation. Subject
to the rights of the Mindspeed Tax Group under the other provisions of this
Agreement, such officer shall have the authority to execute powers of attorney
(including Form 2848) on behalf of each member of the Mindspeed Tax Group with
respect to Tax Returns for the Tax Indemnification Period. Each party to this
Agreement shall make, or shall cause its affiliates to make, its employees and
facilities available on a mutually convenient basis to provide an explanation of
any documents or information provided hereunder.

                  SECTION 5.05 TAX RECORDS.

                  (a)      Conexant and Mindspeed agree to (and to cause each
member of their respective Tax Group to) (i) retain all Tax Returns, related
schedules and workpapers, and all material records and other documents as
required under Section 6001 of the Code and the regulations promulgated
thereunder relating thereto existing on the date hereof or created through the
Distribution Date, for a period of at least ten years following the Distribution
Date and (ii) allow the party to this Agreement, at times and dates reasonably
acceptable to the retaining party, to inspect, review and make copies of such
records, as Conexant and Mindspeed may reasonably deem necessary or appropriate
from time to time. In addition, after the expiration of such ten-year period,
such Tax Returns, related schedules and workpapers, and material records shall
not be destroyed or otherwise disposed of at any time, unless, prior to such
destruction or disposal, (A) the party proposing to destroy or otherwise dispose
of such records shall provide no less than 30 days' prior written notice to the
other party, specifying in reasonable detail the records proposed to be
destroyed or disposed of and (B) if a recipient of such notice shall request in
writing prior to the scheduled date for such destruction or disposal that any of
the records proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such requested records at the expense of the party
requesting such records.

                  (b)      Notwithstanding anything in this Agreement to the
contrary, if any party fails to comply with the requirements of Section 5.05(a)
hereof, the party failing so to comply shall be liable for, and shall hold the
other party, harmless from, any Taxes (including without limitation, penalties
for failure to comply with the

                                       26



record retention requirements of the Code) and other costs resulting from such
party's failure to comply.

                                   ARTICLE VI

                                  MISCELLANEOUS

                  SECTION 6.01 ENTIRE AGREEMENT; CONSTRUCTION. This Agreement,
the Distribution Agreement, the other Separation Agreements and the Financing
Agreements, including any annexes, schedules and exhibits hereto or thereto, and
other agreements and documents referred to herein and therein, will together
constitute the entire agreement between the parties with respect to the subject
matter hereof and thereof and will supersede all prior negotiations, agreements
and understandings of the parties of any nature, whether oral or written, with
respect to such subject matter. Notwithstanding any other provisions in the
Separation Agreements to the contrary, in the event and to the extent that there
is a conflict relating to Taxes between the provisions of this Agreement and the
provisions of the Distribution Agreement or any other Separation Agreement, the
provisions of this Agreement will control.

                  SECTION 6.02 EFFECTIVENESS. All covenants and agreements of
the parties contained in this Agreement shall be subject to and conditioned upon
the Distribution becoming effective.

                  SECTION 6.03 SURVIVAL OF AGREEMENTS. Except as otherwise
contemplated by the Separation Agreements, all covenants and agreements of the
parties contained in this Agreement will remain in full force and effect and
survive the Time of Distribution.

                  SECTION 6.04 GOVERNING LAW. This Agreement will be governed by
and construed in accordance with the internal laws of the State of Delaware
applicable to contracts made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.

                  SECTION 6.05 NOTICES. All notices, requests, claims, demands
and other communications required or permitted to be given hereunder will be in
writing and will be delivered by hand, telecopied, e-mailed or sent, postage
prepaid, by registered, certified or express mail or reputable overnight courier
service and will be deemed given when so delivered by hand or telecopied, when
e-mail confirmation is received if delivered by e-mail, or three (3) Business
Days after being so mailed (one (1) Business Day in the case of express mail or
overnight courier service). All

                                       27



such notices, requests, claims, demands and other communications will be
addressed as set forth in Section 7.04 of the Distribution Agreement, or
pursuant to such other instructions as may be designated in writing by the party
to receive such notice.

                  SECTION 6.06 AMENDMENTS. This Agreement may not be amended,
modified or supplemented except by a written agreement executed by Conexant and
Mindspeed.

                  SECTION 6.07 SUCCESSORS AND ASSIGNS. Neither party to this
Agreement will convey, assign or otherwise transfer any of its rights or
obligations under this Agreement without the prior written consent of the other
party in its sole and absolute discretion other than as expressly provided
herein, any party may (without obtaining any consent) assign any of its rights
hereunder to a successor to all or any part of its business. Any such
conveyance, assignment or transfer requiring the prior written consent of
another party which is made without such consent will be void ab initio. No
assignment of this Agreement will relieve the assigning party of its obligations
hereunder.

                  SECTION 6.08 CAPTIONS; CURRENCY. The article, section and
paragraph captions herein and the table of contents hereto are for convenience
of reference only, do not constitute part of this Agreement and will not be
deemed to limit or otherwise affect any of the provisions hereof. Unless
otherwise specified, all references herein to numbered articles or sections are
to articles and sections of this Agreement and all references herein to
schedules are to schedules to this Agreement. Unless otherwise specified, all
references contained in this Agreement or in any schedule referred to herein to
dollars or "$" shall mean U.S. dollars.

                  SECTION 6.09 SEVERABILITY. If any provision of this Agreement
or the application thereof to any person or circumstance is determined by a
court of competent jurisdiction to be invalid, void or unenforceable, the
remaining provisions hereof, or the application of such provision to persons or
circumstances other than those as to which it has been held invalid or
unenforceable, will remain in full force and effect and will in no way be
affected, impaired or invalidated thereby. If the economic or legal substance of
the transactions contemplated hereby is affected in any manner adverse to any
party as a result thereof, the parties will negotiate in good faith in an effort
to agree upon a suitable and equitable substitute provision to effect the
original intent of the parties.

                  SECTION 6.10 PARTIES IN INTEREST. Except for the provisions of
Article III relating to Tax Indemnification, this Agreement is solely for the
benefit of the parties hereto and the respective members of their Tax Group and
should not be deemed to confer upon third parties (including any employee of
Conexant or

                                       28



Mindspeed or of any Conexant or Mindspeed subsidiary) any remedy, claim,
reimbursement, claim of action or other right in excess of those existing
without reference to this Agreement.

                  SECTION 6.11 SCHEDULES. All schedules attached hereto are
hereby incorporated in and made a part of this Agreement as if set forth in full
herein. Capitalized terms used in the schedules hereto but not otherwise defined
therein will have the respective meanings assigned to such terms in this
Agreement.

                  SECTION 6.12 TERMINATION. This Agreement may be terminated and
the Distribution abandoned at any time prior to the Distribution Date by and in
the sole discretion of the Conexant Board without the approval of Mindspeed or
Conexant's shareowners. In the event of such termination, neither party will
have any liability of any kind to the other party on account of such
termination.

                  SECTION 6.13 WAIVERS; REMEDIES. No failure or delay by any
party hereto in exercising any right, power or privilege hereunder will operate
as a waiver thereof, nor will any waiver on the part of any party hereto of any
right, power or privilege hereunder operate as a waiver of any other right,
power or privilege hereunder, nor will any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.
Subject to Section 6.17, the rights and remedies herein provided are cumulative
and are not exclusive of any rights or remedies which the parties may otherwise
have at law or in equity.

                  SECTION 6.14 COUNTERPARTS. This Agreement may be executed in
separate counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts will together constitute the same
agreement. This Agreement may be executed and delivered by telecopier with the
same force and effect as if it were a manually executed and delivered
counterpart.

                  SECTION 6.15 PERFORMANCE. Each party hereto will cause to be
performed, and hereby guarantees the performance of all actions, agreements and
obligations set forth herein to be performed by any subsidiary or any member of
such party's Tax Group.

                  SECTION 6.16 INTERPRETATION. Any reference to any federal,
state, local, or foreign law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. For
the purposes of this Agreement, (i) words in the singular shall be held to
include the plural and vice versa and words of one gender shall be held to
include the other gender as the context requires, (ii) the terms "hereof ",
"herein", and "herewith" and words of similar import

                                       29



shall, unless otherwise stated, be construed to refer to this Agreement as a
whole and not to any particular provision of this Agreement and (iii) the word
"including" and words of similar import when used in this Agreement shall mean
"including, without limitation".

                  SECTION 6.17 DISPUTE RESOLUTION. Any dispute, claim or
controversy arising out of or relating to any provision of this Agreement or the
breach, performance or validity thereof will be resolved in accordance with the
procedures set forth in Section 7.05 of the Distribution Agreement.

                                       30



                  IN WITNESS WHEREOF, this Agreement has been duly executed and
delivered by the duly authorized officers of the parties as of the date first
hereinabove written.

                                 CONEXANT SYSTEMS, INC.

                                 By: /s/ Dennis E. O'Reilly
                                     ----------------------------------------
                                     Name:  Dennis E. O'Reilly
                                     Title: Senior Vice President, General
                                              Counsel and Secretary

                                 MINDSPEED TECHNOLOGIES, INC.

                                 By: /s/ Bradley W. Yates
                                     ----------------------------------------
                                     Name:  Bradley W. Yates
                                     Title: Senior Vice President and Chief
                                              Administrative Officer

                                       31

EX-2.4

                                                                     Exhibit 2.4

                                    SUBLEASE

         THIS SUBLEASE (this "Sublease") is entered into as of June 27, 2003
(the "Effective Date"), by and between Conexant Systems, Inc., a Delaware
corporation ("Sublandlord"), and Mindspeed Technologies, Inc., a Delaware
corporation ("Subtenant").

                                    RECITALS

         A.       Sublandlord is the lessee under that certain Lease, dated as
of August 18, 1998 (the "Master Lease"), by and between Deutsche Bank, AG,
having its principal office at 31 West 52nd Street, New York, New York, 10019,
(the "Master Landlord") and Sublandlord (under its previous name of Rockwell
Semiconductor Systems, Inc.). A copy of the Master Lease is attached to this
Sublease as Exhibit "A".

         B.       Under the Master Lease, Sublandlord leases the entire
buildings, consisting of the west tower and the east tower, located at 4000
MacArthur Blvd., Newport Beach, California, 92660 (collectively the "Building").

         C.       Concurrently with the execution of this Sublease, Sublandlord
and Subtenant are entering into that certain Distribution Agreement ("DA")
pursuant to which Subtenant is spinning-off from Sublandlord.

         D.       Subtenant desires to sublease a portion of the Building and
obtain from Sublandlord the right to use associated parking spaces and to access
some of the common areas associated with the Building. Sublandlord has agreed to
sublease and grant the same to Subtenant upon the terms, covenants and
conditions stated in this Sublease.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the mutual covenants contained in
this Sublease, the above recitals, and for valuable consideration, the receipt
and sufficiency of which are acknowledged by the parties, the parties agree as
follows:

         1.       Sublease.

                  1.1      Subleased Premises. Sublandlord hereby subleases to
Subtenant and Subtenant hereby subleases from Sublandlord the entire east tower
of the Building, a small portion of the second floor of the west tower of the
Building and the second floor bridge between the two towers, all as more
particularly depicted or described on Exhibit "B" attached hereto (the
"Subleased Premises"), subject to the terms, covenants, and conditions contained
in this Sublease. The entire Building consists of approximately 360,000 rentable
square feet and the Subleased Premises consist of approximately 189,729 rentable
square feet.

                  1.2      Parking. Subtenant shall have the right to utilize
its Building Share (as defined in Section 5.1 below) of the parking areas
associated with the Building. Parking shall be supplied to Subtenant on the
basis of 3.15 parking spaces per 1,000 square feet of rentable area within the
Subleased Premises. The Parties agree that Subtenant will initially be allotted
598



parking spaces on the Effective Date. If Subtenant wants additional spaces, it
will either acquire such additional spaces directly from the parking vendor or
request Sublandlord to obtain and, if Sublandlord if able to obtain such
additional spaces, then Subtenant shall pay Sublandlord the amount charged to
Sublandlord for such spaces from time to time. In addition, Subtenant shall be
responsible for any costs associated with enforcing any CC&Rs charged to
Sublandlord as a result of Subtenant's acts or omissions. Sublandlord may
regulate the parking areas within the "Common Areas" (as defined in Section 9.5
below) and may utilize parking gates or other methods for controlling entry and
exit to the parking areas; provided, however, that such regulations shall be
non-discriminatory and equally applied to Subtenant's employees and invitees in
the same manner as they are applicable to Sublandlord's employees and invitees.
Sublandlord shall provide Subtenant and its employees with any gate cards or
other security devices necessary for access to the parking areas that Subtenant
can utilize pursuant to this Section, except that the cost of such cards or
devices and their replacement, if necessary, shall be Subtenant's
responsibility.

                  1.3      Campus. The parties agree that Sublandlord shall
provide a license, to the extent it can without obtaining consents from any
landords, to Subtenant to use the other property then-currently owned or leased
by Sublandlord at its "Newport Beach Campus", which is defined as the property
bordered by Jamboree, MacArthur, Von Karman and Birch streets, and as of the
Effective Date are at 4311 Jamboree Road, 5000 Birch and 4340 Von Karman, as
long as such use is in accordance with the CC&Rs and any such other rules or
regulations applicable to such properties.

         2.       Master Lease.

                  2.1      Coverage of Master Lease Provisions. Subtenant
acknowledges that Sublandlord is in possession of the Building pursuant to the
terms of the Master Lease. This Sublease is subject and subordinate to the
Master Lease and the rights of Sublandlord and Master Landlord thereunder. This
Sublease is designed to be a standard lease with Sublandlord providing all
normal services associated with an office building plus extra services specific
to the operation of Subtenant's business as more particularly provided in
Section 5.4. Therefore, the parties agree that the following Articles/Sections
of the Master Lease shall not apply between them: Section 2.4 - Lease
Supplement; Section 3.1 - Rent; Section 3.3 - Supplemental Rent; Section 3.5 -
Method of Payment; Section 4.1 - Utility Charges; Article VII - Property
Ownership; Section 10.1 - Maintenance and Repair; Return; Section 12.2 -
Easements; Section 14.2 - Hazard and Other Insurance; Section 15.1 Casualty;
Article XVI - Condemnation; Article XVII - Events of Default; Article XIX -
Provisions Relating to Termination; Article XX - Purchase Option; Article XXI -
Sale Procedure; Article XXIII - Risk of Loss; Article XXIV--Assignment and
Subletting; Article XXIX - Notices and Section 30.8 - Recordation of Lease.
Except for the Articles and Sections set forth above, and except as otherwise
expressly provided in this Sublease, the covenants, agreements, provisions, and
conditions of the Master Lease, to the extent that they relate to the Building
and to the extent that they are not inconsistent with the terms of this
Sublease, are made a part of and incorporated into this Sublease as if recited
in full herein.

                  2.2      Substitution of Rights. Subject to Section 2.1 above,
the rights and obligations of the Master Landlord and the Tenant under the
Master Lease shall be deemed the rights and obligations of Sublandlord and
Subtenant, respectively, under this Sublease, and shall inure to the benefit of,
and be binding on, Sublandlord and Subtenant, respectively. As between the

                                        2



parties to this Sublease only, in the event of a conflict between the terms of
the Master Lease and the terms of this Sublease, the terms of this Sublease
shall control. In addition, in the event of a conflict between this Sublease and
the DA, but (subject only to the immediately preceding sentence) subject to the
terms of the Master Lease incorporated in this Sublease by reference, the
provisions of the DA shall control

                  2.3      Termination and/or Replacement of Master Lease.
Notwithstanding the foregoing provisions, in the event that the Master Lease
terminates but Sublandlord inserts one or more levels of tenancy above this
Sublease, replaces the Master Lease with another lease or enters into any other
type of financing arrangement (in each case, a "Replacement"), in all such
cases, Subtenant's rights hereunder and this Sublease shall continue in full
force and effect as between Sublandlord and Subtenant pursuant to each of the
terms contained herein; provided, however, Subtenant shall be bound by any
change in or additions required in connection with such Replacement equally with
Sublandlord and shall execute an amendment to this Sublease or such other
documentation to evidence Subtenant's agreement to such changed and/or
additional terms and conditions within ten (10) business days after
Sublandlord's request therefor (failing which an Event of Default shall have
occurred, in connection with which Subtenant shall not have the benefit of the
grace period provided in Section 13.1.2 below). In connection with the
foregoing, it is acknowledged and agreed that Subtenant's agreement to the
immediately preceding sentence has been relied upon by and is material
consideration to Sublandlord in connection with the execution and delivery of
this Sublease.

         3.       Term and Termination.

                  3.1      Base Term. The base term (the "Term") of this
Sublease shall commence at 12:01 am on the Effective Date and shall, unless
sooner terminated in accordance herewith, continue for a period of five (5)
years thereafter.

                  3.2      Option to Extend Term. Sublandlord grants to
Subtenant one (1) option to extend the Term ("Extension Option") for a period of
two (2) years ("Option Term"), subject to the conditions described in this
Section 3.2. Subtenant shall have no other right to extend the Term beyond the
Option Term.

                           3.2.1    Conditions of Option. The Extension Option
is subject to the following conditions: (i) the Extension Option may be
exercised only by written notice delivered by Subtenant to Sublandlord as
provided in this Section 3.2 and only if, as of the date; the Option Term would
commence, no Event of Default has occurred which is continuing; (ii) the rights
contained in this Section 3.2 may be exercised by the originally named Subtenant
or by any assignee of Subtenant's interest in this Sublease if the assignment
has been approved by Sublandlord or is otherwise permitted in Section 12 below;
and (iii) if Subtenant properly exercises the Extension Option, the Term of this
Sublease shall be extended by the Option Term. The Option Term shall be on all
of the terms and conditions of the original Term, except that this Section 3.2
and Exhibit "E" shall have no application thereto.

                           3.2.2    Option Rent. The Rent payable by Subtenant
during the Option Term ("Option Rent") shall be calculated as provided in
Section 2.3 and 5.1.

                                        3



                  3.3      Termination.

                           3.3.1    Special Circumstances. Sublandlord may
terminate this Sublease by providing written notice of such termination to
Subtenant upon the occurrence of any of the following: (i) the failure of
Rockwell Automation, Inc. ("Rockwell") to agree to leave its guarantee on the
Master Lease in place in which case at Sublandlord's option this Sublease shall
terminate on the date which is six (6) months from the date Sublandlord notifies
Subtenant of its knowledge of such failure; (ii) subject to Section 2.3 above,
the failure of Sublandlord to obtain a Replacement, in which case at
Sublandlord's option this Sublease shall terminate upon the later of the
termination of the Master Lease or the surrender by Sublandlord to Master
Landlord of the Building; or (iii) Sublandlord's decision to vacate the Building
in which case this Sublease shall terminate on the date which is twelve (12)
months from the date Sublandlord notifies Subtenant of its decision. In the
event of the occurrence of the termination condition set forth in subclause
(ii), Sublandlord agrees to notify Subtenant as soon as reasonably possible of
the date Subtenant will be required to surrender the Subleased Premises.

                           3.3.2    Casualty and Condemnation.

                                    (i)      Sublandlord shall have the right to
terminate this Sublease upon any "Condemnation" or "Casualty" (as defined in the
Master Lease) which would give Sublandlord the right or obligation to terminate
the Master Lease.

                                    (ii)     Subject to clause (i) above and
Section 9.4 below, in the event the Subleased Premises or the Building, or any
portion thereof, is damaged or destroyed by any Casualty that is covered by
insurance maintained by Sublandlord, then Sublandlord shall rebuild, repair and
restore (collectively, "Repair") the damaged portion thereof, provided that (A)
the amount of insurance proceeds available to Sublandlord equals or exceeds the
cost of such Repair, (B) such Repair can be completed within sixty (60) days
after the work commences in the opinion of a registered architect or engineer
appointed by Sublandlord, (C) the Casualty has occurred more than twelve (12)
months before the expiration of the Term, and (D) such Repair is then permitted,
under applicable Legal Requirements, to be done in such a manner as to return
the damaged portion thereof to substantially its condition immediately prior to
the Casualty, including, without limitation, the same net rentable floor area.
To the extent that insurance proceeds must be paid including, but not limited
to, a mortgagee, beneficiary, ground lessor or master lessor (collectively,
"Mortgagee") under the Master Lease or any Replacement, or must be applied to
reduce any indebtedness secured by, the Master Lease or any Replacement such
proceeds, for the purposes of this clause, shall be deemed not available to
Sublandlord unless such Mortgagee permits Sublandlord to use such proceeds for
the Repair of the damaged portion thereof. Notwithstanding the foregoing,
Sublandlord shall have no obligation to repair any damage to, or to replace any
of, Subtenant's personal property, furnishings, trade fixtures, equipment or
other such property or effects of Subtenant.

                                    (iii)    In the event the Subleased Premises
or the Building, or any portion thereof, is damaged or destroyed by any Casualty
to the extent that Sublandlord is not obligated, under clause (ii) above, to
Repair the damaged portion thereof, then Sublandlord shall, within sixty (60)
days after such Casualty, notify Subtenant of its election, at its option, to
either (A) Repair the damaged portions thereof, in which case Sublandlord's
notice shall specify the

                                        4



time period within which Sublandlord estimates such Repair can be completed; or
(B) terminate this Sublease effective as of the date the Casualty occurred. If
Sublandlord does not give Subtenant written notice within sixty (60) days after
the Casualty occurs of its election to Repair the damaged portions thereof,
Sublandlord shall be deemed to have elected to terminate this Sublease.

                                    (iv)     There shall be an abatement of rent
by reason of Casualty affecting the Subleased Premises or the Building, or any
portion thereof, to the extent that Sublandlord receives insurance proceeds for
loss of rental income attributable to the Subleased Premises, commencing on the
date that the Casualty has occurred. Subtenant shall have no claim against
Sublandlord for any damage suffered by Subtenant by reason of any such Casualty
or Repair. Subtenant waives the provisions of Civil Code Sections 1932(2) and
1933(4) and any present or future laws or case decisions to the same effect.
Upon completion of such Repair, Subtenant shall promptly refixture the Subleased
Premises substantially to the condition they were in prior to the Casualty.

                                    (v)      In connection with any
Condemnation, Sublandlord shall be entitled to the entire award in any
Condemnation, including, without limitation, any award made for the value of the
leasehold estate created by this Sublease. No award for any partial or total
Condemnation shall be apportioned, and Subtenant hereby assigns to Sublandlord
any award that may be made in such Condemnation, together with any and all
rights of Subtenant now or hereafter arising in or to the same or any part
thereof. Notwithstanding the foregoing, Subtenant shall have the right to claim
and recover from the condemnor, but not from Sublandlord, such compensation as
may be separately awarded or recoverable by Subtenant in Subtenant's own right
on account of damages to Subtenant's business by reason of the Condemnation and
for or on account of any cost or loss to which Subtenant might be put in
removing Subtenant's merchandise, furniture and other personal property,
fixtures, and equipment. In the event of a partial Condemnation that does not
result in a termination of this Sublease as to the entire Subleased Premises
pursuant to this clause (v), the Base Rent shall abate in proportion to the
portion of the Subleased Premises taken by such Condemnation. If this Sublease
is terminated, in whole or in part, pursuant to any of the provisions of this
clause (v), the Base Rent payable by Subtenant to Sublandlord hereunder and
attributable to the Subleased Premises taken shall be paid up to the date upon
which actual physical possession shall be taken by the condemnor. Sublandlord
shall be entitled to retain all of the Security Deposit until such time as this
Sublease is terminated as to all of the Subleased Premises.

         4.       Delivery of Building and Furniture, Fixtures and Equipment.

                  4.1      Delivery. Full possession of the Subleased Premises
shall be deemed to have been delivered to Subtenant at 12:01 am on the Effective
Date. Except for mutually approved improvements made or to be made by
Sublandlord and/or Subtenant pursuant to this Sublease, Sublandlord shall
deliver the Building to Subtenant in its current "AS IS" condition.

                  4.2      Furniture, Fixtures and Equipment. Sublandlord and
Subtenant agree that all furniture, fixtures and equipment and any other
personal property to be delivered to Subtenant in connection with the Subleased
Premises shall be specified and conveyed to Subtenant in the DA.

                                        5



         5.       Rent.

                  5.1      Rent. Subtenant shall pay to Sublandlord in monthly
installments during the Term of this Sublease on or before the first day of
every calendar month during the Term Subtenant's Building Share of any and all
costs, expenses, claims, liabilities, losses, actions, causes of action,
judgments (as such are internally accounted for by Sublandlord) actually
incurred in the ownership, use, maintenance and/or operation of the Building
("Rent"). The parties agree that the Rent charged to Subtenant shall be
consistent with Sublandlord's then current accounting practices, which shall be
in conformity with GAAP and shall include Subtenant's share of depreciation for
capital expenditures. The terms "Building Share" shall mean a fraction, the
numerator of which is the number of rentable square feet within the Subleased
Premises, and the denominator of which shall be the total number of rentable
square feet within the Building. The parties agree that Subtenant's initial
Building Share is equal to 52.70% and Subtenant's Building Share as determined
herein shall be modified, based on any increase or decrease in the number of
rentable square feet within the Subleased Premises as permitted under this
Sublease. The parties also agree that, by way of example only and not of
limitation, Exhibit "F" attached hereto shows the parties' initial estimate of
Rent for the first year of the Term but such Exhibit shall not limit or define
Rent, but is merely an illustration as to the calculation of Rent. If
Sublandlord obtains a Replacement, Subtenant shall continue its occupancy of the
Subleased Premises (pursuant to Section 2.3) for the period, which ends five (5)
years after the Effective Date, and Subtenant shall be responsible for paying
the newly calculated Rent, which shall include an additional amount equal to
Subtenant's Building Share of the costs incurred in connection with the
renegotiation, including, without limitation, interest on Sublandlord's equity
investment in the Building, interest on any debt encumbering the campus,
attorneys' fees, and any and all other costs and expenses incurred by
Sublandlord in connection with such Replacement. Upon completion by Sublandlord
of "Sublandlord's Work" described in Exhibit "E" hereto, Sublandlord shall
determine the amount of depreciation to be taken thereon monthly during the Term
in accordance with Sublandlord's accounting policies, which amount shall be
added to the Rent payable hereunder. Sublandlord shall provide notice of such
monthly increase in Rent, and thereafter Subtenant shall pay Rent in the amount
set forth in Sublandlord's notice. In the event such notice is delivered after
the Effective Date, Subtenant shall pay to Sublandlord, on the next date on
which Rent is due, such additional Rent due for any month prior to and including
the month in which such notice is given. In all cases, Subtenant's obligations
under this Section 5.1 shall not include any "accelerated" payments related to
the amortized costs described herein.

                  5.2      Accounting and Reconciliation. Within sixty (60) days
after the end of each quarter during the Term, Sublandlord shall provide to
Subtenant a statement of Rent substantially in the form set forth in Exhibit F
actually incurred during the prior quarter ("Quarterly Statement"). If Subtenant
owes Sublandlord, payment will be made on the next Rent payment date. If
Sublandlord owes Subtenant, such amount will be deducted from the Rent due on
the next payment date. If the Term has ended, then payment shall be made
promptly. In addition, future months' Rent will be based on the revised amounts
set forth in the revised Schedule F delivered to Subtenant at the end of each
quarter. Within nine (9) months of each anniversary of the Effective Date and
upon reasonable written notice, Subtenant, at its expense, shall have the right
to perform an audit of the reasonably necessary books and records of Sublandlord
related to the prior four (4) Quarterly Statements for the sole purpose of
ensuring compliance with this Section 5. The audit shall be performed by
Subtenant itself or an independent certified public account-

                                        6



ant, reasonably acceptable to both Sublandlord and Subtenant, during normal
business hours and with a minimum amount of interruption to Sublandlord's
business. If the audit reveals that Subtenant has paid more or less than its
Building Share of Rent for such year, then payments shall be made as set forth
above. In addition, if the audit reveals that Sublandlord has overcharged
Subtenant by ten percent (10%) or more for the Quarterly Statements under audit,
Sublandlord shall reimburse Subtenant for the reasonable cost of the audit Any
information disclosed to Subtenant or a certified public accountant pursuant to
this Section will be subject to a confidentiality agreement reasonably
acceptable to Sublandlord and signed by Subtenant and its agents, if any.

                  5.3      Adjustments in Last Year. The parties agree that in
the last year of the Term, if Sublandlord voluntarily incurs a capital expense
that is out of Sublandlord's ordinary course of business and is greater than
$50,000, then Subtenant shall have the right to approve such expense before it
is incurred, which approval shall not be unreasonably withheld, delayed or
conditioned.

                  5.4      Additional Services. Attached hereto as Exhibit "C"
and incorporated herein is a schedule of seven (7) categories of services, which
Subtenant may elect Sublandlord to perform with respect to or for the benefit of
the Subleased Premises pursuant to the provisions of this Section (the
"Additional Services"). During the first year of the Term, Sublandlord shall
provide all of the Additional Services and pay the Additional Services fees set
forth in Exhibit F as Rent. By March 31st of each subsequent year during the
Term, Sublandlord shall deliver notice to Subtenant, which shall specify the
categories of Additional Services available for the year along with the
estimated cost of providing the Additional Services to the Subleased Premises.
Such costs shall reflect only the actual cost and expense incurred by
Sublandlord with respect to providing such Additional Services, whether such
Additional Services would be provided by Sublandlord's personnel or by an
outside vendor. By April 30th of each year during the Term, Subtenant shall
provide Sublandlord with notice as to which, if any, of the categories of
Additional Services Subtenant elects Sublandlord to provide during the ensuing
year. Such notice is irrevocable during the year such services are requested,
except that all Additional Services may be terminated by Subtenant in connection
with the expiration or sooner termination of this Sublease, so long as such
termination was not caused by a Subtenant Event of Default. The cost of all
Additional Services elected by Subtenant to be provided shall be paid monthly by
Subtenant together with the payment of all Rent. The provisions of Sections 5.2
and 5.3 shall apply to the payment of all Additional Services. The parties agree
that as long as Sublandlord has a cafeteria and/or auditorium at the Newport
Beach Campus, then access shall be provided to Subtenant as an Additional
Service and that the right to purchase Additional Services is personal to
Subtenant and shall not be offered to any subtenant or assignee of Subtenant.

                  5.5      Utilities. At Sublandlord's option, Subtenant shall
pay the cost of all utilities that are separately metered, if any, to the
Subleased Premises directly to the utility provider or to Sublandlord as Rent.

                  5.6      Real Property Taxes and Assessments. Sublandlord
shall pay, prior to delinquency, all real property taxes and assessments levied
with respect to the Building during the Term.

                                        7



                  5.7      Security Deposit; Holdover Rent. If, in connection
with any Replacement, Sublandlord is required to provide a security deposit,
Subtenant shall provide to Sublandlord, Subtenant's portion of such security
deposit (calculated by multiplying Subtenant's Building Share by such security
deposit), in whatever form and amount as may be required by the Replacement
(herein, a "Security Deposit"), and, if Sublandlord exercises such right,
Subtenant shall deliver to Sublandlord its portion of the Security Deposit
within ten (10) days after Sublandlord's request therefor. It is expressly
understood and agreed that such deposit is not an advance rental deposit or a
measure of Sublandlord's damages in case of Subtenant's default. If Sublandlord
uses all or any portion of Subtenant's portion of the security deposit to cure
any Subtenant default under this Sublease, Subtenant shall immediately on demand
restore its portion of the security deposit to the original amount. If Subtenant
is not in default at the expiration or termination of this Sublease, Sublandlord
shall return the Security Deposit to Subtenant. Sublandlord shall not be
required to keep the Security Deposit separate from its general funds and
Sublandlord, not Subtenant, shall be entitled to all interest, if any, accruing
on any such deposit. Upon any sale or transfer of its interest in the Building,
to the extent the Security Deposit is transferred to Sublandlord's successor in
interest, Sublandlord shall be released from any liability or obligation with
respect thereto. In the event that any increased holdover rental or other
premium is charged to Sublandlord under a Replacement at the expiration or
earlier termination of the term or maturity date thereof (herein, collectively,
a "Holdover Premium"), if Subtenant is then in possession of the Subleased
Premises or any portion thereof, Subtenant shall be required to pay Subtenant's
Building Share thereof.

                  5.8      Other Rent Concepts. As used in this Sublease, the
term "rent" shall mean Rent and additional rent, and the term "additional rent"
shall mean all other amounts payable by Subtenant to Sublandlord pursuant to
this Sublease other than Rent. Where no other time is stated herein for payment,
payment of any amount payable from Subtenant to Sublandlord hereunder shall be
due, and made, within thirty (30) days after Subtenant's receipt of
Sublandlord's invoice or statement therefor. Rent for any period during the term
hereof which is for less than one month shall be a pro rata portion of the
monthly installment. Rent shall be payable in lawful money of the United States
to Sublandlord at the address stated herein or to such other persons or such
other places as Sublandlord may designate in writing. If any payment of Rent is
paid by Subtenant to Sublandlord by check, and the check, when tendered for
payment to the bank upon which it is drawn, is refused, Sublandlord shall
thereafter have the right to require Subtenant to pay all future installments of
rent due hereunder by wire transfer of immediately available funds.

         6.       Use. Subtenant may use the Subleased Premises in accordance
with the purposes specified in the Master Lease, and for no other purpose.

                  6.1      Compliance with Laws. Without in any way limiting
Article V above, Subtenant shall be responsible, at its cost and expense, for
its Building Share of any and all Modifications to the Building required by any
Legal Requirement, including, but not limited to, compliance with the Americans
with Disabilities Act.

         7.       Maintenance; Surrender.

                                        8



                  7.1      Maintenance. Subtenant shall be responsible, at its
cost and expense, for keeping the Subleased Premises in good order, condition
and repair and in compliance with all Legal Requirements and Environmental Laws
(as defined in the Master Lease) except as otherwise set forth herein.
Sublandlord shall be responsible, at its cost and expense, for the maintenance
and repair of all structural elements of the Building and the Subleased
Premises, the Building's foundation, roof, exterior windows and load bearing
interior walls. Subtenant shall reimburse Sublandlord for its Building Share of
such expenses as set forth in Section 5.1.

                  7.2      Surrender. Upon the termination or earlier expiration
of this Sublease, Subtenant shall surrender the Subleased Premises in good
order, condition and repair, subject to reasonable wear and tear, broom clean.

         8.       Performance by Sublandlord; Status of Master Lease.

                  8.1      Sublandlord's Performance Conditioned on Master
Landlord's Performance. Subtenant recognizes that Sublandlord is not in a
position to render any of the services or to perform any of the obligations
required of Master Landlord by the terms of the Master Lease. Therefore, despite
anything to the contrary in this Sublease, Subtenant agrees that performance by
Sublandlord of its obligations under this Sublease is conditioned on performance
by the Master Landlord of its corresponding obligations under the Master Lease,
and Sublandlord will not be liable to Subtenant for any default of the Master
Landlord under the Master Lease.

                  8.2      No Claim. Subtenant will not have any claim against
Sublandlord based on Master Landlord's failure or refusal to comply with any of
the provisions of the Master Lease unless that failure or refusal is a result of
Sublandlord's act or failure to act. Despite Master Landlord's failure or
refusal to comply with any of the provisions of the Master Lease, this Sublease
will remain in full force and effect and Subtenant shall pay all rent and all
other charges provided for in this Sublease without any abatement, deduction or
setoff so long as Subtenant's use and enjoyment of the Subleased Premises is not
disturbed. Except as expressly provided in this Sublease, Subtenant agrees to be
subject to, and bound by, all of the covenants, agreements, terms, provisions,
and conditions of the Master Lease, as though Subtenant was the tenant under the
Master Lease.

                  8.3      Master Landlord's Consent; Performance. Whenever the
consent of Master Landlord is required under the Master Lease, Sublandlord
agrees to use its reasonable, good faith efforts to obtain, at Subtenant's sole
cost and expense, that consent on behalf of Subtenant. Whenever Master Landlord
fails to perform its obligations under the Master Lease, Sublandlord agrees to
use its reasonable, good faith efforts to cause Master Landlord to perform such
obligations on behalf of both Sublandlord and Subtenant.

                  8.4      No Existing Defaults. Sublandlord represents and
warrants to Subtenant that the Master Lease is in full force and effect, and
Sublandlord has neither given nor received a notice of default under the Master
Lease.

                  8.5      Preservation of Master Lease. Except as set forth in
Section 2.3, Sublandlord agrees not to modify the Master Lease in a manner that
materially adversely affects Subtenant's rights under this Sublease. Subtenant
and Sublandlord will each refrain from any act or

                                        9



omission that would result in the failure or breach of any of the covenants,
provisions, or conditions of the Master Lease on the part of the Tenant under
the Master Lease. Sublandlord agrees to timely perform all of its obligations
under the Master Lease, including, without limitation, the payment of all rent
thereunder.

         9.       Insurance; Indemnity; Liability of Sublandlord; Security

                  9.1      From and after the Effective Date, Subtenant shall,
at Subtenant's expense, obtain and keep in force during the term of this
Sublease standard form property insurance insuring Subtenant's personal
property, trade fixtures, furnishings and equipment located within the Subleased
Premises against any perils included within the classification "all risk" as
such term is used in the insurance industry and in an amount equal to the full
replacement value thereof.

                  9.2      Except for gross negligence or willful misconduct on
the part of any Master Lessor Party or Sublandlord, Subtenant hereby agrees that
neither any Master Lessor Party nor Sublandlord shall be liable for injury to
Subtenant's business or any loss of income therefrom or for damages to the
goods, wares, merchandise or other property of Subtenant or Subtenant's Agents
or any other person in or about the Subleased Premises, nor shall any Master
Lessor Party nor Sublandlord be liable for injury to the person of Subtenant or
Subtenant's Agents, whether such damage or injury is caused by or results from
fire, steam, electricity, gas, water or rain or from the breakage, leakage,
obstruction or other defects of pipes, sprinklers, wires, appliances, plumbing,
air conditioning or lighting fixtures or from any other cause, whether the same
damage or injury results from conditions arising upon the Subleased Premises or
upon other portions of the Building or from other sources or places and
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Subtenant, or for any loss or damage to
any property or person occasioned by theft, fire, act of God, public enemy,
injunction, riot, strike, insurrection, war, court order, requisition, or order
of governmental body or authority, or for any damage or inconvenience that may
arise through repair or alteration of any part of the Project, the Building or
the Subleased Premises, or a failure to make any such repairs, except as
expressly provided in this Sublease. Neither any Master Lessor Party nor
Sublandlord shall be liable for any damages arising from any act or neglect of
any other tenant, if any, of the Building.

                  9.3      Sublandlord and Subtenant each hereby waives any and
all rights of recovery against the other, and against the officers, employees,
agents, representatives, customers and business visitors of such other party,
for loss of or damage to such waiving party or its property or the property of
others under its control arising from any cause insured against under any policy
of property insurance required to be carried by such waiving party pursuant to
the provisions of this Sublease (or any other policy of property insurance
carried by such waiving party in lieu thereof) at the time of such loss or
damage. The foregoing waiver shall be effective whether or not a waiving party
actually obtains and maintains such insurance which such waiving party is
required to obtain and maintain pursuant to this Sublease (or any substitute
therefor). Sublandlord and Subtenant shall, upon obtaining the policies of
insurance which they are required to maintain hereunder, give notice to their
respective insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Sublease.

                                       10



                  9.4      Except for gross negligence or willful misconduct on
the part of any Master Lessor Party or Sublandlord, Subtenant agrees to
indemnify, defend and hold Sublandlord, the Master Lessor Parties and its and
their officers, directors, partners and employees (collectively, the
"Sublandlord Parties") entirely harmless from and against all Liabilities, for
injury to or death of any person or for damages to any property or for violation
of law arising out of or in any manner connected with (i) the use, occupancy or
enjoyment of the Subleased Premises, Building or campus by Subtenant or
Subtenant's Agents or any work, activity or other things allowed or suffered by
Subtenant or Subtenant's Agents to be done in or about the Subleased Premises,
Building or Project, including without limitation with respect to Legal
Requirements, Insurance Requirements, Hazardous Activity, Environmental Laws
and/or Environmental Violations, (ii) any breach or default in the performance
of any obligation of Subtenant under this Sublease, and (iii) any act or failure
to act, whether negligent or otherwise tortious, by Subtenant or Subtenant's
Agents in or about the Subleased Premises, Building or campus.

                  9.5      Sublandlord may, but (subject to Section 5.4 above)
shall have no obligation to, from time to time, employ one or more persons or
entities to patrol or provide security for the Subleased Premises and/or the
"Common Areas" which term, as used herein, means all areas, space, equipment and
special services provided by Sublandlord or pursuant to the CC&Rs encumbering
the Building for the common or joint use and benefit of the tenants, their
employees, agents, servants, suppliers, customers and other invitees, including,
by way of illustration, but not limitation, retaining walls, fences, landscaped
areas, parks, curbs, sidewalks, private roads, restrooms, stairways, elevators,
lobbies, hallways, patios, service quarters, parking areas, all common areas and
other areas within the exterior of the Building and in the Project. Subtenant
and its employees shall cooperate with Sublandlord's security personnel,
including those providing Additional Services and/or Common Area security for
employees after closure of the Building. Notwithstanding any such activity,
Subtenant shall have the sole responsibility of providing security for the
Subleased Premises, the persons therein and all vehicles of Subtenant and
Subtenant's Agents.

         10.      Estoppel Certificates. Each party to this Sublease shall, from
time to time as requested in writing by the other party and/or Master Landlord
or any Replacement, on not less than ten (10) days prior written notice,
execute, acknowledge, and deliver to the other party an estoppel certificate
("Estoppel Certificate") in form and substance reasonably satisfactory to the
requesting party, which Estoppel Certificate shall include, at a minimum, a
statement that this Sublease is unmodified and in full force and effect (or if
there have been modifications that this Sublease is in full force and effect as
modified and stating the modifications). Such Estoppel Certificate shall also
certify the dates to which base rent, additional rent, and any other charges
have been paid and state whether, to the knowledge of the person signing the
Estoppel Certificate, the other party is in default beyond any applicable grace
period provided in this Sublease. If the other party is in default beyond any
applicable grace period, the Estoppel Certificate shall specify each default of
which the signer then has knowledge. It is intended that each Estoppel
Certificate may be relied on by others with whom the party requesting that
certificate may be dealing.

         11.      Signage. Upon written request from Subtenant, Sublandlord
agrees to promptly remove its existing sign or signs located on the exterior of
the Subleased Premises at its cost and expense. Subtenant shall have the right
to place exterior building top signs on the Subleased

                                       11



Premises, subject to complying with any applicable laws. Subtenant shall remove
its signs from the exterior of the Subleased Premises upon the termination or
expiration of this Sublease. The installation and removal of Subtenant's sign or
signs shall be at Subtenant's cost and expense.

         12.      Assignment or Subleasing. Subject to the rights of Master
Landlord or any Replacement, Subtenant may assign this Sublease or further
sublet the Subleased Premises to any party after providing Sublandlord with
thirty (30) days' prior written notice of such proposed assignment or subletting
provided that Subtenant remains bound by and subject to this Sublease. At any
time within thirty (30) days after Sublandlord's receipt of Subtenant's notice
of assignment or subletting, Sublandlord may, by written notice to Subtenant,
elect to terminate this Sublease in full with respect to an assignment or
terminate in part with respect to a sublease, and may thereafter in
Sublandlord's sole and absolute discretion enter into a lease directly with the
proposed assignee or subtenant or any other person and/or itself occupy all of
any the portion of the Subleased Premises so recaptured. If Sublandlord
exercises its right to recapture all or a portion of the Subleased Premises as
set forth above, then Subtenant shall completely vacate and surrender the
Subleased Premises in accordance with Section 7.2 within thirty (30) days of its
receipt of Sublandlord's recapture notice ("Surrender Date"). Sublandlord shall,
within thirty (30) days of its receipt of the Subleased Premises, reduce
Subtenant's Building Share by the proportion of the Subleased Premises
recaptured effective as of the Surrender Date.

         13.      Default.

                  13.1     "Event of Default". Any one or more of the following
events shall constitute an "Event of Default" or "Lease Event of Default" (as
defined in the Master Lease):

                           13.1.1   Subtenant shall fail to pay the rent or
other charges within five (5) business days after the same become due hereunder,
or

                           13.1.2   Except as provided in Section 2.3 above,
Subtenant shall fail to perform or observe any other term or condition contained
in this Sublease for thirty (30) days after notice from Sublandlord thereof
unless such default is of such nature that it cannot be cured within such 30-day
period, in which event no Event of Default shall occur so long as Subtenant
shall commence the curing of the default promptly within such 30-day period and
shall thereafter promptly and diligently prosecute and complete the curing of
the same; or

                           13.1.3   Except as otherwise provided by applicable
law, if the estate hereby created shall be taken on execution or by other
process of law, or if Subtenant shall be judicially declared bankrupt or
insolvent according to law, or if any assignment shall be made of the property
of Subtenant for the benefit of creditors, or if a receiver, guardian,
conservator, trustee in involuntary bankruptcy or other similar officer shall be
appointed to take charge of all or any substantial part of Subtenant's property
by a court of competent jurisdiction, or if a petition shall be filed for the
reorganization of Subtenant under any provisions of a law now or hereafter
enacted, and such proceeding is not dismissed within ninety (90) days after it
is begun, or if Subtenant shall file a petition for such reorganization, or for
arrangements under any provisions of such laws providing a plan for a debtor to
settle, satisfy or extend the time for the payment of debts.

                                       12



                  13.2     Remedies. Upon the occurrence and continuance of an
Event of Default, Sublandlord, may do any one or more of the following:

                           13.2.1   Sublandlord may elect to terminate this
Sublease and the tenancy created hereby by giving notice of such election to
Subtenant; thereupon Sublandlord shall have the right and option to re-enter the
Subleased Premises, by summary proceedings or otherwise, and may remove
Subtenant and all other persons and property from the Subleased Premises, and
may store such property in a public warehouse or elsewhere at the cost of and
for the account of Subtenant without resort to legal process and without
Sublandlord being deemed guilty of trespass or becoming liable for any loss or
damage occasioned thereby.

                           13.2.2   Sublandlord may exercise any other legal or
equitable right or remedy which it may have. Sublandlord's re-entry or taking of
possession of the Subleased Premises shall not be construed as an election to
terminate this Sublease unless Sublandlord gives written notice of such
termination. Any re-entry, or taking of possession by Sublandlord shall not
affect or diminish the ongoing obligation or liability of Subtenant for all rent
and other obligations due and owing under this Sublease.

                           13.2.3   Sublandlord may decline to retake possession
of the Subleased Premises and may sue for the rent as the same becomes due.

                           13.2.4   Sublandlord may retake possession of the
Subleased Premises, relet the Subleased Premises and sue for damages. During the
period of time that Sublandlord is trying to relet the Subleased Premises,
Subtenant shall be liable for the full rent. Sublandlord may sue from month to
month for the damages which accrue in accordance with this subsection, or may
sue for the accelerated balance of the rent and other damages or remedies to
which Sublandlord may be entitled in accordance with the measure of damages set
forth in Section 13.3. The election of whether to sue on a month-to-month basis
or for the total amount shall be at the sole option and discretion of
Sublandlord. Acts of maintenance, efforts to relet, and/or the appointment of
receiver to protect the Sublandlord's interests, shall not constitute
termination of the Subtenant's right to possession.

                           13.2.5   Notwithstanding anything herein to the
contrary, Sublandlord may pursue any other remedy now or hereafter available in
law or in equity in the State of California, including without limitation,
California Civil Code Sections 1951.2 through 1952.6, inclusive. Any remedies,
notice provisions or procedures under this Sublease which are inconsistent with
California law shall be deemed modified.

                           13.2.6   In addition to all other remedies provided
in this Sublease, Sublandlord shall be entitled to restrain by injunction any
violation, or any attempted or threatened violation, of any of the covenants,
conditions, or provisions of this Sublease or to sue for specific performance of
any term, covenant or condition to be performed by Subtenant under this
Sublease. Sublandlord's remedies hereunder shall be cumulative with any other
remedies available to it at law or equity. Sublandlord's remedies hereunder
shall be cumulative with any other remedies available to it at law or equity.

                                       13



         14.      Subordination; Attornment; Non-Disturbance.

                  14.1     The rights of Subtenant under this Sublease are and
shall be, at the option of Sublandlord, either subordinate or superior to the
Master Lease and/or any Replacement, or Sublandlord's interest therein or any
part thereof, whether the Master Lease and/or Replacement has heretofore been,
or may hereafter be, placed upon the Subleased Premises by Sublandlord, except
that a non-disturbance must be secured prior to any future subordination of this
Sublease as set forth below in Section 14.2. To further assure the foregoing
subordination or superiority, Subtenant shall, upon Sublandlord's request,
together with the request of Master Landlord or any Mortgagee, execute any
instrument (including without limitation an amendment to this Sublease), or
instruments intended to subordinate this Sublease, or at the option of
Sublandlord, to make it superior to the Master Lease or any Replacement.

                  14.2     Subtenant agrees (i) to attorn to the Master Landlord
and/or any Mortgagee and to any party acquiring title to the Subleased Premises
by judicial foreclosure, trustee's sale, or deed in lieu of foreclosure, as the
successor to Sublandlord hereunder and/or with respect to an interest in the
Building, (ii) to execute any attornment agreement reasonably requested by the
Master Landlord and/or a Mortgagee, or party so acquiring title to the Subleased
Premises, and (iii) that this Sublease, subject to the rights under any
outstanding non-disturbance agreement, at the option of the Master Landlord
and/or such Mortgagee or other party, shall remain in force notwithstanding any
such judicial foreclosure, trustee's sale, deed in lieu of foreclosure, or
merger of titles. Neither the Master Landlord, nor any Mortgagee, nor any party
acquiring title to the Subleased Premises by judicial foreclosure, trustee sale,
or deed in lieu of foreclosure, as the successor to Sublandlord hereunder, shall
be liable or responsible for any breach of a covenant contained in this Sublease
that occurred before such party acquired its interest in the Subleased Premises
or for any continuing breach thereof until after the successor Sublandlord has
received the notice and right to cure as provided herein, and such party shall
not be bound by any payment of rent or additional rent for more than two (2)
months in advance.

                  14.3     Upon payment by Subtenant of the rents herein
provided, and upon the observance and performance of all the covenants, terms
and conditions on Subtenant's part to be observed and performed, Subtenant shall
peaceably and quietly hold and enjoy the Subleased Premises for the term hereof
without hindrance or interruption by Sublandlord or any other person or persons
lawfully or equitably claiming by, through or under Sublandlord, subject,
nevertheless, to the terms and conditions of this Sublease, the Master Lease and
any Replacement to which this Sublease is subordinate.

                  14.4     On any act or omission by Sublandlord which might
give, or which Subtenant claims or intends to claim gives, Subtenant the right
to damages from Sublandlord or the right to terminate this Sublease by reason of
a constructive or actual eviction from all or part of the Subleased Premises, or
otherwise, Subtenant shall not sue for damages or attempt to terminate this
Sublease until it has given written notice of the act or omission to
Sublandlord, Master Landlord and/or any Mortgagee as identified by Sublandlord
and a reasonable period of time for remedying the act or omission has elapsed
following the giving of the notice, during which time Sublandlord, Master
Landlord and/or Mortgagee, or any of them, their agents or employees, may enter
upon the Subleased Premises and do therein whatever is necessary to remedy the
act or omission. During the period after the giving of notice and during the
remedying of the act or omission, the Rent payable by Subtenant shall not be
abated and apportioned except to the extent that the Subleased Premises are
untenantable.

                                       14



         15.      Miscellaneous Provisions.

                  15.1     No Brokers. The parties to this Sublease warrant to
each other that neither party dealt with any broker or finder in connection with
the consummation of this Sublease and each party agrees to protect, defend,
indemnify and hold the other party harmless from and against any and all claims
or liabilities for brokerage commissions or finder's fees arising out of that
party's acts in connection with this Sublease.

                  15.2     Notices. Any notice that may or must be given by
either party under this Sublease shall be delivered: (i) personally, (ii) by
certified mail, return receipt requested, or (iii) by a nationally recognized
overnight courier, addressed to the party for whom it is intended. Any notice
given to Sublandlord or Subtenant shall be sent to the respective address set
forth below, or to such other address as that party may designate. A notice sent
pursuant to the terms of this section shall be deemed delivered: (A) when
delivery is attempted, if delivered personally and during business hours, (B)
three (3) business days after deposit into the United States mail, or (C) the
business day following deposit with a nationally recognized overnight courier.

                           If to Sublandlord:       Conexant Systems, Inc.
                                                    4311 Jamboree Road
                                                    Newport Beach, CA  92660
                                                    Attn: Director of Facilities

                           With a copy to:          Business law team at the
                                                    same address

                           If to Subtenant:         Mindspeed Technologies, Inc.
                                                    4000 MacArthur Boulevard,
                                                    East Tower
                                                    Newport Beach, CA  92660
                                                    Attn: Facilities Manager


                           With a copy to:          Mindspeed Technologies, Inc.
                                                    4000 MacArthur Boulevard,
                                                    East Tower
                                                    Newport Beach, CA 92660
                                                    Attn: Mindspeed Legal Team

                           If to Master Landlord:   pursuant to Section 29 of
                                                    the Master Lease.

                  15.3     Survival of Provisions. In the event of a termination
of this Sublease, Sections 6, 9, 15.13 and 15.14 shall survive and continue to
be binding upon the parties for a period of ten (10) years following such
termination.

                  15.4     Entire Agreement; Waiver. This Sublease together with
all Exhibits incorporated or referred to herein, constitute the final, complete
and exclusive statement between the parties to this Sublease pertaining to the
subject matter hereof, supersedes all prior and contemporaneous understandings
or agreements of the parties, and is binding on and inures to the benefit of the
heirs, representatives, successors, and assigns of the respective parties
hereto. No party has been induced to enter into this Sublease by, nor is any
party relying on, any representa-

                                       15



tion or warranty outside those expressly set forth in this Sublease. Any
agreement made after the date of this Sublease is ineffective to modify, waive,
release, terminate, or effect an abandonment of this Sublease, in whole or in
part, unless that agreement is in writing, is signed by the parties to this
Sublease, and specifically states that that agreement modifies this Sublease.

                  15.5     Captions. Captions to the sections in this Sublease
are included for convenience only and do not modify any of the terms of this
Sublease.

                  15.6     Further Assurances. Each party to this Sublease
shall, at its own cost and expense, execute and deliver such further documents
and instruments and shall take such other actions as may be reasonably required
or appropriate to evidence or carry out the intent and purposes of this
Sub-lease.

                  15.7     Capitalized Terms. All terms spelled with initial
capital letters in this Sublease that are not expressly defined in this Sublease
will have the respective meanings given such terms in the Master Lease.

                  15.8     Rules and Regulations. Sublandlord hereby represents
that the rules and regulations set forth on Exhibit "D" attached hereto are
those currently in effect for Sublandlord and its employees and such rules and
regulations are hereby incorporated herein with respect to Subtenant's use and
occupancy of the Subleased Premises. Both parties agree to amend said Exhibit
"D" if and when such rules and regulations change.

                  15.9     Access to Subleased Premises. Subject to the terms
and conditions of this Sublease, Subtenant shall have the right to access to the
Subleased Premises twenty-four (24) hours per day, seven (7) days per week.

                  15.10    Rooftop Communication Equipment. Subtenant shall have
the right to maintain any currently existing rooftop communication equipment,
and to install additional rooftop communication equipment on the roof of the
east tower of the Building in such locations and pursuant to any existing CC&Rs,
rules or regulations on the Subleased Premises as well as any plans and
specifications which are reasonably acceptable to Sublandlord, such approval not
to be unreasonably withheld or delayed.

                  15.11    Severability. If any provision of this Sublease or
the application of any provision of this Sublease to any person or circumstance
is, to any extent, held to be invalid or unenforceable, then unless the
severance of such provision could cause material failure of consideration to a
party hereto, the remainder of this Sublease or the application of that
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, will not be affected, and each provision of this
Sublease will be valid and be enforced to the fullest extent permitted by law.

                  15.12    Tenant Improvement Work. Sublandlord agrees to
construct, or cause to be constructed, certain tenant improvement work within
the lobby of the Subleased Premises pursuant to the terms and conditions set
forth on the Construction Work Letter attached hereto as Exhibit "E". All
improvements to be constructed in accordance with Exhibit "E" hereto shall be
constructed by Sublandlord at Sublandlord's sole cost and expense.

                                       16



                  15.13    Attorneys' Fees, Costs and Expenses. In any action or
proceeding arising out of this Sublease, or the transactions contemplated
hereby, the prevailing party therein shall be entitled to recover from the other
party thereto the reasonable attorneys' and paralegals' fees, court costs,
filing fees, publication costs and other expenses incurred by the prevailing
party in connection therewith, at trial and all appellate proceedings, and in
all bankruptcy, administrative and similar proceedings.

                  15.14    Governing Law. This Sublease shall be governed by,
and in all respects construed in accordance with, the laws of the State of New
York, without regard for its conflict or choice of laws provisions, except as
noted herein or in the Master Lease.

                  15.15    Escalation. In the event that any dispute claim or
controversy ("collectively a "Dispute") arises out of or relates to any
provision of this Agreement and is not an Event of Default, the parties agree
that an appropriate authorized manager of Sublandlord and an appropriate
authorized manager of Subtenant shall attempt a good faith resolution of such
Dispute within thirty (30) days after either Party notifies the other of such
Dispute. If such Dispute is not resolved within thirty (30) days of such
notification, such Dispute will be referred for resolution to the Parties
respective senior executives. Should they be unable to resolve such Dispute
within thirty (30) days following such referral to them, or within such other
time as they may agree, Subtenant and Sublandlord shall submit such Dispute to
binding arbitration, initiated and conducted in accordance with the
then-existing American Arbitration Association Commercial Arbitration Rules,
before a single arbitrator selected jointly by Sublandlord and Subtenant. The
arbitration shall be conducted in the County of Orange, California and shall be
governed by the United States Arbitration Act, 9 USC Section 116, and judgment
upon the award may be entered by any court having jurisdiction thereof. The
arbitrator shall have case management authority and shall resolve the Dispute in
a final award within one hundred eighty (180) days from the commencement of the
arbitration action, subject to any extension of time thereof allowed by the
arbitrator upon good cause shown. There shall be no appeal from the arbitral
award, except for fraud committed by an arbitrator in carrying out his or her
duties under the aforesaid rules; otherwise the Parties irrevocably waive their
rights to judicial review of any Dispute arising out of or related to this
Sublease.

                                       17



         IN WITNESS WHEREOF, the parties hereto, by their duly authorized
representatives, have executed this Sublease as of the date last set forth below
to be effective as of the Effective Date.

SUBLANDLORD                                SUBTENANT

CONEXANT SYSTEMS, INC.,                    MINDSPEED TECHNOLOGIES, INC.,
a Delaware corporation                     a Delaware corporation

By: /s/  Dennis E. O'Reilly                By: /s/  Bradley W. Yates
    -----------------------------------        ---------------------------------
Name: Dennis E. O'Reilly                   Name: Bradley W. Yates
      Senior Vice President, General             Senior Vice President and Chief
          Counsel and Secretary                      Administrative Officer

                                       18

EX-2.5

                                                                     Exhibit 2.5

================================================================================

                                CREDIT AGREEMENT

                            Dated as of June 27, 2003

                                      among

                          MINDSPEED TECHNOLOGIES, INC.,
                                  as Borrower,

                     THE SUBSIDIARY GUARANTORS PARTY HERETO,
                                 as Guarantors,

                                       and

                             CONEXANT SYSTEMS, INC.,
                                    as Lender

================================================================================



                                TABLE OF CONTENTS



                                                                                                         Page
                                                                                                         ----
                                                                                                      
ARTICLE I  Defined Terms; Rules of Construction.........................................................   1
         SECTION 1.01.         Defined Terms............................................................   1
         SECTION 1.02.         Rules of Construction....................................................   1

ARTICLE II  The Loans...................................................................................   1
         SECTION 2.01.         Commitment...............................................................   1
         SECTION 2.02.         Loans....................................................................   1
         SECTION 2.03.         Borrowing Procedure......................................................   2
         SECTION 2.04.         Repayment of Loans; Evidence of Debt.....................................   2
         SECTION 2.05.         Interest on Loans........................................................   3
         SECTION 2.06.         Termination and Reduction of Commitment..................................   4
         SECTION 2.07.         Optional and Mandatory Prepayments of Loans..............................   4
         SECTION 2.08.         Payments Generally.......................................................   5
         SECTION 2.09.         Taxes....................................................................   5

ARTICLE III  Representations and Warranties.............................................................   7
         SECTION 3.01.         Organization; Powers.....................................................   7
         SECTION 3.02.         Authorization; Enforceability............................................   7
         SECTION 3.03.         Governmental Approvals; No Conflicts.....................................   8
         SECTION 3.04.         Financial Statements.....................................................   8
         SECTION 3.05.         Properties...............................................................   9
         SECTION 3.06.         Equity Interests and Subsidiaries; Consent...............................  10
         SECTION 3.07.         No Event of Default......................................................  10
         SECTION 3.08.         Agreements...............................................................  11
         SECTION 3.09.         No Material Misstatements................................................  11
         SECTION 3.10.         Solvency.................................................................  11
         SECTION 3.11.         Security Documents.......................................................  11
         SECTION 3.12.         Representations and Warranties Concerning Collateral.....................  12

ARTICLE IV  Conditions of Lending.......................................................................  14
         SECTION 4.01.         All Loans................................................................  14
         SECTION 4.02.         Closing Date Items.......................................................  15

ARTICLE V  Affirmative Covenants........................................................................  18
         SECTION 5.01.         Financial Statements, Reports, Etc.......................................  18
         SECTION 5.02.         Litigation and Other Notices.............................................  20
         SECTION 5.03.         Existence; Businesses and Properties.....................................  20
         SECTION 5.04.         Insurance................................................................  21
         SECTION 5.05.         Taxes....................................................................  22
         SECTION 5.06.         Maintaining Records; Access to Properties and Inspections................  22


                                       -i-



                                                                                                       
         SECTION 5.07.         Use of Proceeds..........................................................  22
         SECTION 5.08.         Payment of Obligations...................................................  23
         SECTION 5.09.         Compliance with Laws.....................................................  23
         SECTION 5.10.         Additional Collateral; Additional Guarantors.............................  23
         SECTION 5.11.         Security Interests; Further Assurances...................................  28
         SECTION 5.12.         Post-Closing Matters.....................................................  29

ARTICLE VI  Negative Covenants..........................................................................  29
         SECTION 6.01.         Indebtedness.............................................................  29
         SECTION 6.02.         Liens....................................................................  30
         SECTION 6.03.         Investments, Loans and Advances..........................................  33
         SECTION 6.04.         Mergers, Consolidations, Asset Sales and Purchases of Assets.............  34
         SECTION 6.05.         Dividends................................................................  36
         SECTION 6.06.         Transactions with Affiliates.............................................  36
         SECTION 6.07.         Limitation on Capital Expenditures.......................................  36
         SECTION 6.08.         Limitation on Modifications of Indebtedness; Modifications of
                               Certificate of Incorporation, Other Constitutive Documents or Bylaws and
                               Certain Other Agreements, Etc. ..........................................  36
         SECTION 6.09.         Limitation on Certain Restrictions on Subsidiaries.......................  37
         SECTION 6.10.         Limitation on Issuance of Capital Stock..................................  37
         SECTION 6.11.         Limitation on Creation of Subsidiaries...................................  38
         SECTION 6.12.         Sale and Leaseback Transactions..........................................  38
         SECTION 6.13.         Limitation on Lease Obligations..........................................  38
         SECTION 6.14.         Business.................................................................  38
         SECTION 6.15.         Limitation on Accounting Changes.........................................  38
         SECTION 6.16.         Restricted Payments......................................................  38
         SECTION 6.17.         Fiscal Year..............................................................  39
         SECTION 6.18.         Foreign Subsidiaries.....................................................  39

ARTICLE VII  Guarantee..................................................................................  39
         SECTION 7.01.         The Guarantee............................................................  39
         SECTION 7.02.         Obligations Unconditional................................................  40
         SECTION 7.03.         Reinstatement............................................................  42
         SECTION 7.04.         Subrogation; Subordination...............................................  42
         SECTION 7.05.         Remedies.................................................................  42
         SECTION 7.06.         Instrument for the Payment of Money......................................  43
         SECTION 7.07.         General Limitation on Guarantee Obligations..............................  43
         SECTION 7.08.         Continuing Guarantee.....................................................  43
         SECTION 7.09.         Release of Guarantors....................................................  43

ARTICLE VIII  Events of Default.........................................................................  44

ARTICLE IX  Miscellaneous...............................................................................  47
         SECTION 9.01.         Notices..................................................................  47
         SECTION 9.02.         Waivers; Amendment.......................................................  48



                                      -ii-



                                                                                                       
         SECTION 9.03.         Expenses; Indemnity......................................................  49
         SECTION 9.04.         Successors and Assigns...................................................  50
         SECTION 9.05.         Survival of Agreement....................................................  51
         SECTION 9.06.         Counterparts; Integration; Effectiveness.................................  51
         SECTION 9.07.         Severability.............................................................  52
         SECTION 9.08.         Right of Set-off.........................................................  52
         SECTION 9.09.         Governing Law; Jurisdiction; Consent to Service of Process...............  52
         SECTION 9.10.         WAIVER OF JURY TRIAL.....................................................  53
         SECTION 9.11.         Confidentiality..........................................................  53



Exhibit A         Defined Terms; Rules of Construction        A-1

                                      -iii-





ANNEXES
- -------
                        
Annex I                    Limitations on Guarantees and Indemnities Under Applicable Foreign Laws
Annex II                   Lenders' Notice Information and Commitments
Annex III                  Foreign Subsidiary Pledge and Guarantee Documentation

SCHEDULES
Schedule 1.01(a)           Immaterial Subsidiaries
Schedule 1.01(b)           Subsidiary Guarantors
Schedule 1.01(d)           Certain Foreign Subsidiary Guarantors
Schedule 3.03              Governmental Approvals; Compliance with Laws
Schedule 3.05(b)           Leased Properties
Schedule 3.06(a)           Subsidiaries; Non-Guarantor Subsidiaries
Schedule 3.12(a)           Material Items of Collateral
Schedule 3.12(b)           Location of Certain Collateral
Schedule 3.12(c)           Location of Loan Parties
Schedule 4.02(n)           Landlord Lien Waiver and Access Agreement Properties
Schedule 5.10(b)           Section 5.10(b) Listed Subsidiaries
Schedule 5.12              Post-Closing Matters
Schedule 6.01              Existing Indebtedness
Schedule 6.02              Certain Permitted Liens
Schedule 6.03              Existing Investments
Schedule 6.13              Existing Lease Obligations

EXHIBITS
Exhibit A                  Defined Terms; Rules of Construction
Exhibit B                  Form of Assignment and Acceptance
Exhibit C                  Form of Borrowing Request
Exhibit D                  Form of Monthly Cash Balance Report
Exhibit E-1                Form of Agreement and Estoppel Certificate
Exhibit E-2                Form of Landlord Lien Waiver and Access Agreement
Exhibit F                  Form of U.S. Security Agreement
Exhibit G                  Form of Intercompany Note
Exhibit H                  Form of Joinder Agreement
Exhibit I-1                Form of Perfection Certificate
Exhibit I-2                Form of Perfection Certificate Supplement
Exhibit J                  Form of Note
Exhibit K                  Form of Financial Officer's Compliance Certificate


                                      -iv-



                                CREDIT AGREEMENT

       AGREEMENT, dated as of June 27, 2003 among MINDSPEED TECHNOLOGIES, INC.,
a Delaware corporation ("BORROWER"); and EACH OF THE SUBSIDIARY GUARANTORS
LISTED ON THE SIGNATURE PAGES HERETO OR FROM TIME TO TIME BECOMING A PARTY
HERETO BY EXECUTION OF A JOINDER AGREEMENT (together with each other Subsidiary
Guarantor from time to time executing a Guarantee (defined herein) as required
hereunder, "GUARANTORS"); and CONEXANT SYSTEMS, INC. ("CONEXANT" or "LENDER").

                                    ARTICLE I

                      DEFINED TERMS; RULES OF CONSTRUCTION

       SECTION 1.01        DEFINED TERMS. In this Agreement, terms defined in
Exhibit A shall have the meanings set forth therein, terms defined in the
preamble or other sections of this Agreement shall have the meanings set forth
therein, terms defined in the UCC and not otherwise defined in this Agreement or
the Security Documents shall have the meanings set forth in the UCC, and
capitalized terms used but not otherwise defined in this Agreement which are
defined in the Security Documents shall have the meanings set forth in the
Security Documents.

       SECTION 1.02.       RULES OF CONSTRUCTION. The rules of construction set
forth in Exhibit A shall apply to this Agreement and the other Loan Documents.

                                   ARTICLE II

                                    THE LOANS

       SECTION 2.01.       COMMITMENT. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, Lender agrees
to make Loans to Borrower, at any time and from time to time during the
Availability Period, in an aggregate principal amount at any time outstanding
that will not result in Lender's Exposure exceeding its Commitment. Within the
limits set forth above and subject to the terms, conditions and limitations set
forth herein, Borrower may borrow, pay or prepay and reborrow Loans.

       SECTION 2.02.       LOANS.

                  (a)      Each Loan shall be in an aggregate principal amount
         that is (i) an integral multiple of $1.0 million and not less than $2.0
         million or (ii) equal to the remaining available balance of the
         Commitment.

                  (b)      Lender shall make each Loan to be made by it
         hereunder not later than 11:00 a.m., Pacific time on the proposed date
         thereof by wire transfer of immediately



         available dollars to such bank deposit account in the United States as
         Borrower may designate in the applicable Borrowing Request.

       SECTION 2.03.       BORROWING PROCEDURE. To request a Loan, Borrower
shall notify Lender of such request by delivering a duly completed Borrowing
Request not later than 10:30 a.m., Pacific time, three Business Days before the
date of the proposed Loan. Each such Borrowing Request shall specify the
following information in compliance with Section 2.02:

                  (a)      the amount of such Loan;

                  (b)      the date of such Loan, which shall be a Business Day;
         and

                  (c)      the location and number of Borrower's account to
         which funds are to be disbursed, which shall comply with the
         requirements of Section 2.02(b).

       SECTION 2.04.       REPAYMENT OF LOANS; EVIDENCE OF DEBT.

                  (a)      Borrower hereby unconditionally promises to pay to
         Lender the then unpaid principal amount of each Loan on the Final
         Maturity Date, together with all accrued and unpaid interest on such
         principal amount to the date of payment.

                  (b)      Lender shall maintain in accordance with its usual
         practice an account or accounts evidencing the indebtedness of Borrower
         to Lender resulting from each Loan made by Lender from time to time,
         including the amounts of principal and interest payable and paid to
         Lender from time to time under this Agreement, including:

                           (i)      the amount and the borrowing date of each
           Loan made hereunder;

                           (ii)     the amount of any principal or interest due
           and payable or to become due and payable from Borrower to Lender
           hereunder;

                           (iii)    the amount of any principal paid, pre-paid
           and repaid and the amount of any interest paid by Borrower to Lender
           or added to principal hereunder; and

                           (iv)     the amount of any other sum received by
           Lender.

                  (c)      The entries made in the accounts maintained pursuant
         to Section 2.04(b) shall be prima facie evidence of the existence and
         amounts of the obligations therein recorded (in the absence of manifest
         error); provided, however, that the failure of Lender to maintain such
         accounts or any error therein shall not in any manner affect the
         obligations of Borrower to repay the Loans in accordance with their
         terms.

                                        2



                  (d)      Lender may request that its Loans be evidenced by a
         Note. In such event, Borrower shall prepare, execute and deliver to
         Lender a Note payable to the order of Lender (or, if requested by
         Lender, to Lender and its registered assigns) and substantially in the
         form of Exhibit J or in a form otherwise approved by Lender.
         Thereafter, the Loans evidenced by such Note and interest thereon shall
         at all times (including after assignment pursuant to Section 9.04) be
         represented by one or more Notes in such form payable to the order of
         the payee named therein (or, if such Note is a registered note, to such
         payee and its registered assigns).

       SECTION 2.05.       INTEREST ON LOANS.

                  (a)      Subject to Section 2.05(b), the principal amount of
         Loans, including the amount of any accrued and unpaid interest which is
         not paid in cash and added to principal as provided in Section 2.05(d),
         shall bear interest at a rate of ten percent (10%) per annum.

                  (b)      Notwithstanding the foregoing, upon the occurrence
         and during the continuation of any Event of Default, the outstanding
         principal amount of all Loans and, to the extent permitted by
         applicable law, any interest thereon and any fees and other amounts
         payable hereunder, shall thereafter bear interest (including
         post-petition interest in any proceeding under the Bankruptcy Code or
         other applicable bankruptcy laws) payable upon demand at a rate that is
         12% per annum. Payment or acceptance of the increased rates of interest
         provided for in this Section 2.05(b) is not a permitted alternative to
         timely payment and shall not constitute a waiver of any Event of
         Default or otherwise prejudice or limit any rights or remedies of
         Lender.

                  (c)      Accrued interest on each Loan may be paid in arrears
         on the last Business Day of each calendar quarter and all accrued and
         unpaid interest shall be paid on the Final Maturity Date and upon
         termination of the Commitment; provided that, (i) interest accrued
         pursuant to Section 2.05(b) shall be payable on demand and, (ii) in the
         event of any repayment or prepayment of any Loan, accrued interest on
         the principal amount repaid or prepaid shall be payable on the date of
         such repayment or prepayment.

                  (d)      Accrued interest not paid in cash on the last
         Business Day of each calendar quarter shall be added to the principal
         amount outstanding as of the last Business Day of each calendar quarter
         and thereafter accrue interest (at the applicable interest rate) until
         paid in cash. Any such capitalized interest shall be treated as
         principal of Loans for all purposes of the Loan Documents, except that
         such capitalized interest shall not be deemed Exposure for purposes of
         determining the amount of principal that may be borrowed pursuant to
         Section 2.01.

                  (e)      All interest hereunder shall be computed on the basis
         of a year of 365/366 days, and shall be payable for the actual number
         of days elapsed (including the first day but excluding the last day).

                                       3



                  (f)      Notwithstanding anything herein to the contrary, if
         at any time the interest rate applicable to any Loan, together with all
         fees, charges and other amounts that are treated as interest on such
         Loan under applicable law (collectively the "CHARGES"), shall exceed
         the maximum lawful rate (the "MAXIMUM RATE") that may be contracted
         for, charged, taken, received or reserved by Lender in accordance with
         applicable law, the rate of interest payable in respect of such Loan
         hereunder, together with all Charges payable in respect thereof, shall
         be limited to the Maximum Rate and, to the extent lawful, the interest
         and Charges that would have been payable in respect of such Loan but
         were not payable as a result of the operation of this Section 2.05(f)
         shall be cumulated and the interest and Charges payable to such Lender
         in respect of other Loans or periods shall be increased (but not above
         the Maximum Rate therefor) until such cumulated amount, together with
         interest thereon at the Federal Funds Effective Rate to the date of
         repayment, shall have been received by Lender.

       SECTION 2.06.       TERMINATION AND REDUCTION OF COMMITMENT.

                  (a)      The Commitments shall automatically terminate on the
         Final Maturity Date.

                  (b)      Borrower may at any time terminate, or from time to
         time reduce, the Commitments; provided that, (i) each reduction of the
         Commitments shall be in an amount that is an integral multiple of $1.0
         million and not less than $2.0 million and (ii) the Commitments shall
         not be terminated or reduced if, after giving effect to any concurrent
         prepayment of the Loans in accordance with Section 2.07(b), the
         Exposure would exceed the Commitment.

                  (c)      Borrower shall notify Lender of any election to
         terminate or reduce its Commitment under Section 2.06(b) at least one
         Business Day prior to the effective date of such termination or
         reduction, specifying such election and the effective date thereof.
         Each notice delivered by Borrower pursuant to this Section 2.06(b)
         shall be irrevocable. Any termination or reduction of the Commitment
         shall be permanent.

                  (d)      The Commitment may be terminated at any time an Event
         of Default has occurred pursuant to and in accordance with the terms of
         Article XIII.

       SECTION 2.07.       OPTIONAL AND MANDATORY PREPAYMENTS OF LOANS.

                  (a)      OPTIONAL PREPAYMENTS. Borrower shall have the right
         at any time and from time to time to prepay any Loan, in whole or in
         part without premium or penalty, subject to the requirements of this
         Section 2.07; provided that, each partial prepayment shall be in an
         amount that is an integral multiple of $1.0 million and not less than
         $2.0 million.

                                        4



                  (b)      COMMITMENT AMOUNT LOAN PREPAYMENTS. In the event of
         any termination of all the Commitments, Borrower shall, on the date of
         such termination, repay or prepay all its outstanding Loans. In the
         event of any partial reduction of the Commitments, if the Exposure
         would exceed the amount of Commitment after giving effect to such
         reduction, then Borrower shall, on the date of such reduction, repay or
         prepay Loans in an amount sufficient to eliminate such excess.

                  (c)      CASH BALANCE LOAN PREPAYMENT. Borrower must repay
         Loans hereunder to the extent its Cash Balance as shown in the most
         recent Monthly Cash Balance Report exceeds $25,000,000.

       SECTION 2.08.       PAYMENTS GENERALLY. Borrower shall make each payment
required to be made by it hereunder or under any other Loan Document (whether of
principal, interest, or of amounts payable under Section 2.09, or otherwise) on
or before the time expressly required hereunder or under such other Loan
Document for such payment (or, if no such time is expressly required, prior to
11:00 a.m., Pacific time), on the date when due, in immediately available
dollars, without set-off or counterclaim. Any amounts received after such time
on any date may, in the discretion of Lender, be deemed to have been received on
the next succeeding Business Day for purposes of calculating interest thereon.
All such payments shall be made to Comerica Bank, Detroit, Michigan, ABA #
072000096, Account No. 1850967629 or such other account as Lender may designate
from time to time in a written notice given to Borrower not later than two
Business Days prior to the date such payment must be made. If any payment under
any Loan Document shall be due on a day that is not a Business Day, the date for
payment shall be extended to the next succeeding Business Day, and, in the case
of any payment accruing interest, interest thereon shall be payable for the
period of such extension. All payments under each Loan Document shall be made in
dollars.

       SECTION 2.09.       TAXES.

                  (a)      Any and all payments by or on account of any
         obligation of Borrower hereunder or under any other Loan Document shall
         be made without set-off, counterclaim or other defense and free and
         clear of and without deduction or withholding for any and all
         Indemnified Taxes or Other Taxes; provided that, if Borrower shall be
         required by law to deduct any Indemnified Taxes or Other Taxes from
         such payments, then (i) the sum payable shall be increased as necessary
         so that after making all required deductions or withholdings (including
         deductions or withholdings applicable to additional sums payable under
         this Section 2.09) Lender receives an amount equal to the sum it would
         have received had no such deductions or withholdings been made, (ii)
         Borrower shall make such deductions or withholdings and (iii) Borrower
         shall pay the full amount deducted or withheld to the relevant
         Governmental Authority in accordance with applicable law.

                  (b)      In addition, Borrower shall pay any Other Taxes to
         the relevant Governmental Authority in accordance with applicable law.

                                        5



                  (c)      Borrower shall indemnify Lender, within ten Business
         Days after written demand therefor, for the full amount of any
         Indemnified Taxes or Other Taxes paid by Lender on or with respect to
         any payment by or on account of any Obligation of Borrower hereunder or
         under any other Loan Document (including Indemnified Taxes or Other
         Taxes imposed or asserted on or attributable to amounts payable under
         this Section 2.09) and any penalties, interest and reasonable expenses
         arising therefrom or with respect thereto, whether or not such
         Indemnified Taxes or Other Taxes were correctly or legally imposed or
         asserted by the relevant Governmental Authority. If in the reasonable
         opinion of Borrower, any amount has been paid to, by or on behalf of
         Lender pursuant to clause (a), (b) or this (c) of this Section 2.09
         with respect to Taxes or Other Taxes which are not correctly or legally
         asserted, Lender will cooperate with Borrower in seeking to obtain a
         refund for the benefit of Borrower of such amount, provided that, the
         rendering of any such cooperation by Lender would not, in the
         reasonable opinion of Lender (i) cause Lender to incur any expense or
         liability (which is not otherwise paid in full by Borrower prior to or
         at the time that such expense or liability is incurred) or (ii) have
         any adverse effect on Lender. A certificate as to the amount of such
         payment or liability delivered to Borrower by Lender shall be
         conclusive absent manifest error. If Lender receives a written notice
         of Tax assessment from any Governmental Authority regarding any Tax in
         respect of which indemnification may be required pursuant to this
         Section 2.09(c), Lender shall notify Borrower within 120 days following
         the receipt of such notice that such notice has been received;
         provided, however, that the failure of Lender to provide such notice
         shall not relieve Borrower of its obligation to make any
         indemnification payment under this Agreement.

                  (d)      As soon as practicable after any payment of
         Indemnified Taxes or Other Taxes by Borrower to a Governmental
         Authority, Borrower shall deliver to Lender the original or a certified
         copy of a receipt issued by such Governmental Authority evidencing such
         payment, a copy of the return reporting such payment or other evidence
         of such payment reasonably satisfactory to Lender.

                  (e)      On or before the Closing Date in the case of Lender,
         or on or before the effective date of an Assignment and Acceptance
         pursuant to which it became a Lender in the case of an assignee, and if
         otherwise reasonably requested from time to time by Borrower, within 30
         days of such request, each Lender which is not a U.S. Person within the
         meaning of Section 7701(a)(30) of the Tax Code shall provide to
         Borrower two duly completed and signed copies of Internal Revenue
         Service Forms W-8BEN, or W-8ECI or successor form(s), as the case may
         be, certifying as to such Lender's status for purposes of determining
         exemption from United States withholding taxes with respect to all
         payments to be made to Lender under this Agreement. Until Borrower and
         Lender have received such forms and indicating that payments under this
         Agreement are subject to an exemption from or reduction of United
         States withholding tax, Borrower or Lender (if not withheld by
         Borrower) shall withhold taxes from such payments at the applicable
         statutory rate, without any obligation to "gross-up" or make Lender
         whole under clause (a) of this Section. In

                                        6



         case Lender is subject to a reduction of, rather than exemption from,
         United States withholding tax, the obligation of Borrower to "gross-up"
         under clause (a) of this Section shall not apply in respect of the
         amount of United States withholding tax that Lender is subject to at
         the time they become a party to this Agreement (provided, however, that
         in the case of an assignee that becomes a Lender pursuant to Section
         10.04, the obligation of Borrower to "gross-up" under clause (a) of
         this Section, or indemnify for Indemnified Taxes under clause (c) of
         this Section, shall apply in respect of the amount of United States
         withholding tax that is applicable to payments made on or after the
         date upon which the assignee first becomes a Lender to the same extent
         that Borrower would have been obligated to "gross-up" under clause (a)
         of this Section, or indemnify for Indemnified Taxes under clause (c) of
         this Section, had Lender not made such assignment to such assignee).

                  (f)      If (i) Lender receives a cash refund in respect of an
         overpayment of Indemnified Taxes or Other Taxes from a Governmental
         Authority with respect to, and actually resulting from, an amount of
         Indemnified Taxes or Other Taxes actually paid to or on behalf of
         Lender by Borrower (a "TAX REFUND") and (ii) Lender determines in its
         reasonable opinion that such Tax Refund has been correctly paid by such
         Governmental Authority and will not be required to be repaid to such
         Governmental Authority, then Lender shall use its reasonable efforts to
         notify Borrower of such Tax Refund and to forward the proceeds of such
         Tax Refund (or relevant portion thereof) to Borrower as reduced by any
         expense or liability incurred by such Lender in connection with
         obtaining such Tax Refund.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

       Each of the Loan Parties, as applicable, represents and warrants to
Lender (with references to the Companies being references thereto after giving
effect to the Transactions unless otherwise expressly stated) that:

       SECTION 3.01.       ORGANIZATION; POWERS. Each Company (a) is duly
organized and validly existing under the laws of the jurisdiction of its
organization, (b) has all requisite power and authority to carry on its business
as now conducted, and (c) is qualified and in good standing (to the extent such
concept is applicable in the applicable jurisdiction) to do business in every
jurisdiction where such qualification is required, except in such jurisdictions
where the failure to so qualify, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.

       SECTION 3.02.       AUTHORIZATION; ENFORCEABILITY. The Transactions to be
entered into by each Loan Party are within such Loan Party's powers and have
been duly authorized by all necessary action. This Agreement has been duly
executed and delivered by each Loan Party and constitutes, and each other Loan
Document to which any Loan Party is to be a party, when

                                        7



executed and delivered by such Loan Party, will constitute, a legal, valid and
binding obligation of such Loan Party, enforceable in accordance with its terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally and subject to general
principles of equity, regardless of whether considered in a proceeding in equity
or at law.

       SECTION 3.03.       GOVERNMENTAL APPROVALS; NO CONFLICTS. Except as set
forth on Schedule 3.03, the Transactions:

                  (a)      do not require any consent or approval of,
         registration or filing with, or any other action by, any Governmental
         Authority, except (i) such as have been obtained or made and are in
         full force and effect, (ii) filings necessary to perfect Liens created
         under the Loan Documents, (iii) consents, approvals, registrations,
         filings or actions the failure of which to obtain or perform could not
         reasonably be expected to result in a Material Adverse Effect and (iv)
         registrations and filings contemplated by the Registration Rights
         Agreement;

                  (b)      will not violate (i) any applicable law or regulation
         except for violations that could not reasonably be expected to result
         in a Material Adverse Effect, or (ii) the charter, bylaws or other
         organizational documents of any Company or any order of any
         Governmental Authority;

                  (c)      will not violate, result in a default or require any
         consent or approval under any indenture, agreement, lease or other
         instrument binding upon any Company or its assets, or give rise to a
         right thereunder to require any payment to be made by any Company,
         except for violations, defaults or the creation of such rights that
         could not reasonably be expected to result in a Material Adverse
         Effect; and

                  (d)      will not result in the creation or imposition of any
         Lien on any asset of any Company, except Liens created under the Loan
         Documents and Permitted Liens.

       SECTION 3.04.       FINANCIAL STATEMENTS.

                  (a)      The historical financial statements and the notes
         thereto included in the Form 10 present fairly in all material respects
         the consolidated financial position, income statement, cash flows and
         changes in stockholder's equity of Borrower and its Subsidiaries at the
         respective dates and for the respective periods indicated. All such
         financial statements have been prepared in accordance with GAAP applied
         on a consistent basis throughout the periods presented (except as
         disclosed therein). The unaudited pro forma financial statements and
         the notes thereto included in the Form 10 have been prepared on a basis
         consistent with the historical financial statements of Borrower and its
         Subsidiaries and give effect to assumptions used in the preparation
         thereof on a reasonable basis and in good faith and present fairly in
         all material respects the historical and proposed transactions
         contemplated by the Form 10; and such pro forma financial statements
         comply as to form in all material respects with

                                        8



         the requirements applicable to pro forma financial statements set forth
         in Regulation S-X under the Securities Act. The other financial and
         statistical information and data included in the Form 10 (other than
         industry and market-related data) are accurately presented in all
         material respects and prepared on a basis consistent with the financial
         statements and the books and records of Borrower and its Subsidiaries.

                  (b)      Since March 31, 2003, there has been no event,
         condition or circumstance that could reasonably be expected to result
         in a Material Adverse Effect.

                  (c)      When delivered, each Monthly Cash Balance Report is
         true and correct and presents fairly Borrower's Cash Balance as of the
         date indicated therein.

       SECTION 3.05.       PROPERTIES.

                  (a)      As of the Closing Date, no Loan Party owns any Real
         Property. Each Loan Party has valid leasehold interests in or other
         valid rights to use, all of its Real Property. Each Loan Party has good
         title, valid leasehold interests in or licenses to or other valid
         rights to use all of its personal property material to its business.
         The property of the Companies, taken as a whole, (i) is in good
         operating order, condition and repair (ordinary wear and tear excepted)
         and (ii) constitutes all the properties that are required for the
         business and operations of the Companies as currently conducted.

                  (b)      Schedule 3.05(b) contains a true and complete list of
         (1) each parcel of Real Property leased, subleased or otherwise
         occupied or utilized by any Loan Party, as lessee or sublessee, as of
         the Closing Date (each, a "COMPANY FACILITY LEASE"), including a
         description of the type of interest therein held by such Loan Party and
         the name of the Loan Party holding such interest; and (2) each lease or
         license agreement for any property other than Real Property which is
         material to the business, operations, condition (financial or other),
         assets or prospects of the Companies, taken as a whole, and in effect
         as of the Closing Date (each a "COMPANY PROPERTY LEASE"), including a
         description of the type of property subject to such lease or license
         agreement, the lessors or licensors parties thereto and the name of the
         Loan Party that is a party thereto. Each Company Lease is a legal,
         valid and binding agreement, enforceable in accordance with its terms,
         of the Loan Party that is a party thereto, and, to the knowledge of
         Borrower, each of the Lessors or Licensors parties thereto. There is
         no, nor has any Loan Party received notice of any, default under any
         Company Lease (or to the knowledge of any Loan Party, any condition or
         event that, after notice or a lapse of time or both, would constitute a
         default thereunder). No Loan Party, and, to the knowledge of each Loan
         Party, no third party to any Company Lease, has assigned any Company
         Property Lease or sublet any part of the property covered thereby or
         exercised any renewal or purchase option thereunder. None of the Loan
         Parties has granted any options or rights of first refusal, or rights
         of first offer to third parties to purchase or otherwise acquire an
         interest in any of the property subject to any Company Property Lease.
         True and complete copies of all

                                        9



         Company Leases, together with all modifications, extensions, amendments
         and assignments thereof have heretofore been made available to Lender.
         All improvements required to be made by any Loan Party under any
         Company Facility Lease have been completed and fully paid for.

                  (c)      Each Company owns, or is licensed to use, all
         Intellectual Property used in the conduct of its business as currently
         conducted, except for those the failure to own or license that,
         individually or in the aggregate, could not reasonably be expected to
         result in a Material Adverse Effect. No claim has been asserted and is
         pending by any person challenging or questioning the use of any such
         Intellectual Property or the validity or effectiveness of any such
         Intellectual Property, nor does any Company know of any valid basis for
         any such claim. The use of such Intellectual Property by each Company
         does not infringe the rights of any person, except for such claims and
         infringements that, individually or in the aggregate, could not
         reasonably be expected to result in a Material Adverse Effect.

       SECTION 3.06.       EQUITY INTERESTS AND SUBSIDIARIES; CONSENT.

                  (a)      Schedule 3.06(a) sets forth a list, as of the Closing
         Date, of (i) all Subsidiaries of Borrower and their jurisdiction of
         organization; (ii) the number of shares of each class of its Equity
         Interests authorized, and the number outstanding, and the number of
         shares covered by all outstanding options, warrants, rights of
         conversion or purchase and similar rights of each such Subsidiary; and
         (iii) a designation as to whether such Subsidiary constitutes a
         Non-Guarantor Subsidiary. All Equity Interests of each Subsidiary of
         Borrower are duly and validly issued, are fully paid and non-assessable
         and, except as disclosed on Schedule 3.06(a), are owned directly or
         indirectly by Borrower. Each Loan Party is the record and beneficial
         owner of, and has good and marketable title to, the Equity Interests
         pledged by it under the applicable Security Agreement, free of any and
         all Liens, rights or claims of other persons, except for the security
         interest created by the Security Agreements.

                  (b)      No consent of any person including any other general
         or limited partner, any other member of a limited liability company,
         any other shareholder or any trust beneficiary is necessary or
         desirable in connection with the creation, perfection or first priority
         status of the security interest of Lender in any Equity Interests
         pledged to Lender under any Security Agreement or the exercise by
         Lender of the voting or other rights provided for in any Security
         Agreement or the exercise of remedies in respect thereof.

       SECTION 3.07.       NO EVENT OF DEFAULT. No Default or Event of Default
has occurred and is continuing.

                                       10



       SECTION 3.08.       AGREEMENTS.

                  (a)      No Company is a party to any agreement or instrument
         or subject to any corporate or other constitutional restriction that
         has resulted or could reasonably be expected to result in a Material
         Adverse Effect.

                  (b)      No Company is in default in any manner under any
         provision of any indenture or other agreement or instrument evidencing
         Indebtedness, or any other agreement, lease or instrument to which it
         is a party or by which it or any of its property are or may be bound,
         where such default could reasonably be expected to result in a Material
         Adverse Effect.

       SECTION 3.09.       NO MATERIAL MISSTATEMENTS. None of any information,
report, financial statement, exhibit or schedule furnished by or on behalf of
any Company to Lender in connection with the negotiation of any Loan Document or
included therein or delivered pursuant thereto (including the Form 10), taken
together with all related information so furnished, contained, contains or will
contain any material misstatement of fact or omitted, omits or will omit to
state any material fact necessary to make the statements therein, in the light
of the circumstances under which they were, are or will be made, not misleading
as of the date such information is dated or certified; provided that, to the
extent any such information, report, financial statement, exhibit or schedule
was based upon or constitutes a forecast, projection or pro forma adjustment,
each Company represents only that it acted in good faith and utilized reasonable
assumptions and due care in the preparation of such information, report,
financial statement, exhibit or schedule (it being understood that, with respect
to projected financial information, actual results may vary significantly from
such projected results).

       SECTION 3.10.       SOLVENCY. Immediately after the consummation of the
Transactions to occur on the Closing Date, (a) the fair value of the assets of
the Loan Parties, taken as a whole, will exceed their debts and liabilities,
subordinated, contingent or otherwise; (b) the present fair saleable value of
the property of the Loan Parties, taken as a whole, will be greater than the
amount that will be required to pay the probable liability of their collective
debts and other liabilities, subordinated, contingent or otherwise, as such
debts and other liabilities become absolute and matured; (c) the Loan Parties,
taken as a whole, will be able to pay their debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured; and (d) the Loan Parties, taken as a whole, will not have unreasonably
small capital with which to conduct the business in which they are engaged as
such business is now conducted and is proposed to be conducted following the
Closing Date.

       SECTION 3.11.       SECURITY DOCUMENTS.

                  (a)      The Security Agreements are effective to create in
         favor of Lender, a legal, valid and enforceable security interest in
         and Lien on the Security Agreement Collateral and, when (i) financing
         statements and other filings in appropriate form are filed in the
         offices specified in Section III.B of the Perfection Certificate and
         (ii) the Loan Parties have complied with Article III of the U.S.
         Security Agreement, the U.S.

                                       11



         Security Agreement shall constitute a fully perfected Lien on, and
         security interest in, all right, title and interest of the grantors
         thereunder in such Collateral (other than (A) the Intellectual Property
         (as defined in the U.S. Security Agreement) and (B) such Collateral in
         which a security interest cannot be perfected under the Uniform
         Commercial Code as in effect at the relevant time in the relevant
         jurisdiction for filing), in each case subject to no Liens other than
         Permitted Liens.

                  (b)      When the U.S. Security Agreement is filed in the
         United States Patent and Trademark Office and the United States
         Copyright Office, the U.S. Security Agreement shall constitute a fully
         perfected Lien on, and security interest in, all right, title and
         interest of the grantors thereunder in the Intellectual Property (as
         defined in the U.S. Security Agreement), in each case subject to no
         Liens other than Permitted Liens (it being understood that subsequent
         recordings in the United States Patent and Trademark Office and the
         United States Copyright Office may be necessary to perfect a Lien on
         registered trademarks, trademark applications and copyrights acquired
         by the grantors after the Closing Date).

                  (c)      Each Security Document delivered pursuant to Section
         5.10 will, upon execution and delivery thereof, be effective to create
         in favor of Lender a legal, valid and enforceable Lien on all of the
         Loan Parties' right, title and interest in and to the Collateral
         described therein, and when such Security Document is filed or recorded
         in the appropriate offices as may be required under applicable law,
         such Security Document will constitute a fully perfected Lien on, and
         security interest in, all right, title and interest of the Loan Parties
         in such Security Agreement Collateral, in each case subject to no Liens
         other than the applicable Permitted Liens.

       SECTION 3.12.       REPRESENTATIONS AND WARRANTIES CONCERNING COLLATERAL.

                  (a)      TYPES OF COLLATERAL. Set forth in Schedule 3.12(a) is
         a complete and accurate description of each Material Item of Collateral
         in which any Loan Party has any right, title or interest on the Closing
         Date that is:

                                    (1)      Real Property, Fixtures or an
                                    interest therein;

                                    (2)      Deposit Accounts, Security Accounts
                                    or similar accounts maintained with
                                    financial institutions in the United States;

                                    (3)      Investment Property (other than
                                    Security Accounts), including Pledged Equity
                                    Interests;

                                    (4)      Letter-of-Credit Rights held by or
                                    on behalf of any Loan Party in the United
                                    States;

                                    (5)      Instruments held by or on behalf of
                                    any Loan Party in the United States;

                                       12



                                    (6)      Patents;

                                    (7)      registered Trademarks or
                                    applications for registration that have been
                                    filed in the United States Patent and
                                    Trademark Office; and

                                    (8)      registered Copyrights or
                                    applications for registration that have been
                                    filed in the United States Copyright Office.

                  (b)      LOCATION OF CERTAIN COLLATERAL. Set forth in Schedule
         3.12(b) is a complete and accurate description for each Material Item
         of Collateral located in the United States in which any Loan Party has
         any right, title or interest on the Closing Date, of:

                                    (1)      the location of any Real Property
                                    or Fixture;

                                    (2)      the jurisdiction of any bank or
                                    other financial institution at which each
                                    Deposit Account or similar account is
                                    maintained, determined in accordance with
                                    Section 9-304 of the UCC;

                                    (3)      the jurisdiction in which any
                                    certificated security is located, the
                                    jurisdiction of the issuer of any
                                    uncertificated security, the jurisdiction of
                                    any securities intermediary at which any
                                    security entitlement or securities account
                                    is held, and the jurisdiction of any
                                    commodity intermediary at which any
                                    commodity account or commodity contract is
                                    held, determined in each case in accordance
                                    with Section 9-305 of the UCC;

                                    (4)      the jurisdiction of the issuer or
                                    nominated person in respect of any
                                    Letter-of-Credit Rights, determined in
                                    accordance with Section 9-306 of the UCC;
                                    and

                                    (5)      the jurisdiction where any
                                    Instrument is located.

                  (c)      LOCATION OF LOAN PARTIES. Set forth in Schedule
         3.12(c) is the location of each Loan Party, determined in accordance
         with Section 9-307 of the UCC.

                  (d)      NO LIENS. None of the Collateral is subject to any
         Lien of any kind, other than Permitted Liens. As of the Closing Date,
         there is no financing statement (or similar statement or instrument
         under the laws of any jurisdiction in the United States) covering or
         purporting to cover any interest of any kind in the Collateral, other
         than financing statements filed pursuant to this Agreement or the other
         Security Documents or in respect of (i) Permitted Liens or financing
         statements for which proper termination statements have been delivered
         to Lender for filing or (ii) other obligations which in the aggregate
         do not exceed $10,000.

                                       13



                  (e)      PLEDGED EQUITY INTERESTS. So long as Lender has
         possession of the Pledged Equity Interests, it will have a fully
         perfected, first priority security interest in the Pledged Equity
         Interests of the Domestic Subsidiaries. No filings or recordings are
         required to perfect (or maintain the perfection or priority of) the
         security interests created in the Pledged Equity Interests of the
         Domestic Subsidiaries. Lender will have a fully perfected pledge of the
         Pledged Equity Interests of the Foreign Subsidiaries upon compliance by
         Borrower and such Foreign Subsidiaries with Section 4.02(h)(ix).

                  (f)      INVESTMENT PROPERTY. Upon execution and delivery of
         the Control Agreements by each of the parties thereto, and assuming
         compliance by each securities intermediary or commodity intermediary
         which is a party thereto, Lender will have (x) "control" within the
         meaning of Section 9-106 of the UCC of each account referred to in such
         agreements and all security entitlements or commodity contracts carried
         in such accounts and (y) a fully perfected, first priority security
         interest in each account referred to therein and all Investment
         Property credited to any such account subject to such Control
         Agreement.

                  (g)      DEPOSIT ACCOUNTS; BANK ACCOUNTS. Upon execution and
         delivery of the Control Agreements by each of the parties thereto, and
         assuming compliance by each bank or depositary which is a party
         thereto, Lender will have (x) "control" within the meaning of Section
         9-104 of the UCC with respect to each Deposit Account subject to such
         Control Agreement, (y) exclusive dominion and control with respect to
         each bank or depositary account subject to such Control Agreement which
         is not a Deposit Account or Securities Account, and (z) a fully
         perfected, first priority security interest in all funds held in each
         account subject to such Control Agreement.

                                   ARTICLE IV

                              CONDITIONS OF LENDING

       The obligation of Lender to make Loans hereunder is subject to the
satisfaction of the following conditions:

       SECTION 4.01.       ALL LOANS. On the date of each Loan:

                  (a)      Lender shall have received a Borrowing Request in
         accordance with Section 2.03.

                  (b)      Borrower and each other Loan Party shall be in
         compliance with all the terms and provisions set forth herein and in
         each other Loan Document on its part to be observed or performed,
         including its obligation to deliver Monthly Cash Balance Reports
         pursuant to Section 5.01(d).

                                       14



                  (c)      At the time of and immediately after such Loan, no
         Default or Event of Default shall have occurred and be continuing.

                  (d)      Each of the representations and warranties set forth
         in Article III hereof or in any other Loan Document shall be true and
         correct in all material respects (except that any representation and
         warranty that is qualified as to "materiality" or "Material Adverse
         Effect" shall be true and correct in all respects) on and as of the
         date of such Loan with the same effect as though made on and as of such
         date, except to the extent such representations and warranties
         expressly relate to an earlier date (in which case such representations
         and warranties shall have been true and correct in all material
         respects (except that those that are qualified as to "materiality" or
         "Material Adverse Effect" shall be true and correct in all respects) on
         and as of such earlier date).

                  (e)      After giving effect to the Loan, Borrower's Cash
         Balance shall not exceed $25,000,000.

Each Loan shall be deemed to constitute a representation and warranty by
Borrower and each other Loan Party on the date of such Loan as to the matters
specified in paragraphs (b) through (e) above.

       SECTION 4.02.       CLOSING DATE ITEMS. On the Closing Date:

                  (a)      LOAN DOCUMENTS. All legal matters incident to this
         Agreement, the Loans hereunder and the other Loan Documents shall be
         satisfactory to Lender and there shall have been delivered to Lender an
         executed counterpart of each of the Loan Documents, including this
         Agreement, each Security Agreement, the Perfection Certificate and each
         other applicable Loan Document and each of such agreements shall be in
         full force and effect.

                  (b)      CORPORATE DOCUMENTS. Lender shall have received:

                           (i)      a certificate of the Secretary or Assistant
           Secretary of each Loan Party dated the Closing Date and certifying
           (A) that attached thereto is a true and complete copy of the
           certificate or articles of incorporation or other constitutive
           documents, including all amendments thereto certified as of a recent
           date by the Secretary of State (or like official) of the jurisdiction
           of its organization (if such document is of a type that may be so
           certified), (B) that attached thereto is a true and complete copy of
           the bylaws or other organizational documents of each Loan Party as in
           effect on the Closing Date and at all times since a date prior to the
           date of the resolutions described in clause (C) below, (C) that
           attached thereto is a true and complete copy of resolutions duly
           adopted by the Board of Directors or other governing body of such
           person authorizing the execution, delivery and performance of the
           Loan Documents to which such person is a party and, in the case of
           Borrower, the borrowings hereunder, and that

                                       15



           such resolutions have not been modified, rescinded or amended and are
           in full force and effect, and (D) as to the incumbency and specimen
           signature of each officer executing any Loan Document or any other
           document delivered in connection herewith on behalf of such person
           (together with a certificate of another officer as to the incumbency
           and specimen signature of the Secretary or Assistant Secretary
           executing the certificate in this clause (i));

                           (ii)     a long form certificate as to the good
           standing of each Loan Party as of a recent date, from the Secretary
           of State (or like official) of the jurisdiction of its organization,
           to the extent such certificates or their equivalent are issued by
           such jurisdiction; and

                           (iii)    such other documents as Lender may
           reasonably request.

                  (c)      OFFICER'S CERTIFICATE. Lender shall have received a
         certificate, dated the Closing Date and signed by a Financial Officer
         or the Chief Executive Officer of Borrower, confirming compliance with
         the conditions precedent set forth in paragraphs (b), (c) and (d) of
         Section 4.01, to the extent applicable.

                  (d)      INDEBTEDNESS. After giving effect to the Transactions
         and the other transactions contemplated hereby, no Company shall have
         outstanding any Indebtedness, preferred stock or minority interests
         other than (i) the Loans hereunder and (ii) the minority interests
         described on Schedule 3.06(a) attached hereto.

                  (e)      REQUIREMENTS OF LAW. Lender shall be satisfied that
         the Transactions shall be in full compliance with all material
         Requirements of Law.

                  (f)      CONSENTS. Lender shall be satisfied that all material
         consents and approvals required from Governmental Authorities and third
         parties in connection with the Transactions have been obtained and
         remain in effect, and there shall be no governmental or judicial action
         (or any adverse development therein), actual or threatened, that Lender
         shall reasonably determine has or could have, singly or in the
         aggregate, a material adverse effect on the Transactions.

                  (g)      LITIGATION. There shall be no litigation, public or
         private, or administrative proceedings, governmental investigation or
         other legal or regulatory developments that, singly or in the
         aggregate, could reasonably be expected to result in a Material Adverse
         Effect, or could materially and adversely affect the ability of any
         Company to fully and timely perform its respective obligations under
         the Transaction Documents, or the ability of the parties to consummate
         the financings contemplated hereby or the other Transactions.

                  (h)      PERSONAL PROPERTY REQUIREMENTS. Lender shall have
         received from each Loan Party (other than any Non-Guarantor
         Subsidiary):

                                       16



                           (i)      all certificates, agreements or instruments
           representing or evidencing the Pledged Equity Interests and the
           Pledged Intercompany Debt accompanied by instruments of transfer and
           stock powers endorsed in blank shall have been delivered to Lender;

                           (ii)     all other certificates, agreements,
           including Control Agreements, or instruments necessary to perfect
           security interests in all Chattel Paper, all Instruments, all Deposit
           Accounts and all Investment Property of each Loan Party (as each such
           term is defined in the U.S. Security Agreement and to the extent
           required by the terms of the U.S. Security Agreement);

                           (iii)    UCC financing statements in appropriate form
           for filing under the UCC and such other documents under applicable
           Requirements of Law in each jurisdiction as may be necessary or
           appropriate to perfect the Liens created, or purported to be created,
           by the Security Documents;

                           (iv)     certified copies of Requests for Information
           (Form UCC-11), tax lien, judgment lien, bankruptcy and pending
           lawsuit searches or equivalent reports or lien search reports, each
           of a recent date listing all effective financing statements, lien
           notices or comparable documents that name (A) any domestic Loan Party
           as debtor and that are filed in those state and county jurisdictions
           in which any of the property of such domestic Loan Party is located
           and the state and county jurisdictions in which such domestic Loan
           Party's principal place of business is located, and (B) any foreign
           Loan Party, to the extent obtainable from the District of Columbia,
           none of which encumber the Collateral covered or intended to be
           covered by the Security Documents (other than those relating to Liens
           acceptable to Lender);

                           (v)      evidence of the completion of all recordings
           and filings of, or with respect to, each Security Agreement,
           including filings with the United States Patent, Trademark and
           Copyright Offices, and the execution and/or delivery of such other
           security and other documents, and the taking of all actions as may be
           necessary or, in the reasonable opinion of Lender, desirable, to
           perfect the Liens created, or purported to be created, by the
           Security Agreements, except for any of the foregoing to be provided
           after the Closing Date pursuant to Section 5.12 hereof;

                           (vi)     any documents required to be submitted to
           Lender by the Loan Parties as may be necessary or desirable to
           perfect the security interest of Lender pursuant to each Foreign
           Security Agreement, except for any of the foregoing to be provided
           after the Closing Date pursuant to Section 5.12 hereof;

                           (vii)    with respect to each Real Property located
           in the United States in which a Loan Party holds the tenant's
           interest thereunder set forth on Schedule 4.02(n) where the Loan
           Parties maintain Collateral having a value in excess of

                                       17



           $1.0 million (other than the MacArthur Sublease) or which Real
           Property is operationally significant to such Loan Party's business,
           as reasonably determined by Lender, a Landlord Lien Waiver and Access
           Agreement and a Collateral Assignment of Lease, except for any of the
           foregoing to be provided after the Closing Date pursuant to Section
           5.12 hereof;

                           (viii)   evidence acceptable to Lender of payment by
           the Loan Parties of all applicable recording taxes, fees, charges,
           costs and expenses required for the recording of the Security
           Documents, except for any of the foregoing to be provided after the
           Closing Date pursuant to Section 5.12 hereof; and

                           (ix)     with respect to Pledged Equity Interests
           issued by Foreign Subsidiaries, the documentation specified in Annex
           III.

                  (i)      INSURANCE. Lender shall have received a copy of, or a
         certificate as to coverage under, the insurance policies required by
         Section 5.04 and the applicable provisions of the Security Documents,
         each of which (other than directors' and officers' liability insurance
         policies) shall be endorsed or otherwise amended to include a
         "standard" or "New York" lender's loss payable endorsement and to name
         Lender as additional insured, in form and substance satisfactory to
         Lender.

                  (j)      SUBSIDIARY GUARANTORS. Each Subsidiary Guarantor
         listed on Schedule 1.01(b) that is a Foreign Subsidiary and is not a
         signatory to this Agreement shall have executed and delivered a
         Guarantee in form and substance satisfactory to Lender.

                                    ARTICLE V

                              AFFIRMATIVE COVENANTS

       Each Loan Party covenants and agrees with Lender that so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the principal of and interest on each Loan and all other expenses or amounts
payable under any Loan Document shall have been paid in full, unless Lender
shall otherwise consent in writing, each Loan Party will, and will cause each of
its Subsidiaries to:

       SECTION 5.01.       FINANCIAL STATEMENTS, REPORTS, ETC. In the case of
Borrower, furnish to Lender:

                  (a)      ANNUAL REPORTS. Within 90 days after the end of each
         fiscal year, or such other period in which the Borrower must file its
         Form 10-K with the Securities and Exchange Commission, the consolidated
         balance sheet of Borrower as of the end of such fiscal year and related
         consolidated statements of income, cash flows and stockholders' equity
         for such fiscal year, and notes thereto, all prepared in

                                       18



         accordance with Regulation S-X under the Securities Act and in a manner
         acceptable to the Securities and Exchange Commission and accompanied by
         an opinion of Deloitte & Touche or other independent public accountants
         of recognized national standing satisfactory to Lender (which opinion
         shall not be qualified as to scope or contain any going concern or
         other qualification), stating that such financial statements fairly
         present, in all material respects, the consolidated financial
         condition, results of operations, cash flows and changes in
         stockholders' equity of the Consolidated Companies as of the end of and
         for such fiscal year in accordance with GAAP;

                  (b)      QUARTERLY REPORTS. Commencing with the filing of
         Borrower's Form 10-Q for the fiscal quarter ending June 30, 2003,
         within 45 days after the end of each of the first three fiscal quarters
         of each fiscal year, or such other period in which the Borrower must
         file its Form 10-Q with the Securities and Exchange Commission, the
         consolidated balance sheet of Borrower as of the end of such fiscal
         quarter and related consolidated statements of income and cash flows
         for such fiscal quarter and for the then elapsed portion of the fiscal
         year, in comparative form with the consolidated statements of income
         and cash flows for the comparable periods in the previous fiscal year,
         and notes thereto, all prepared in accordance with Regulation S-X under
         the Securities Act and in a manner acceptable to the Securities and
         Exchange Commission and accompanied by a certificate of a Financial
         Officer stating that such financial statements fairly present, in all
         material respects, the consolidated financial condition, results of
         operations and cash flows of the Consolidated Companies as of the date
         and for the periods specified in accordance with GAAP and on a basis
         consistent with the audited financial statements referred to in Section
         5.01(a), subject to normal year-end audit adjustments and the absence
         of footnotes;

                  (c)      FINANCIAL OFFICER'S COMPLIANCE CERTIFICATE.
         Concurrently with any delivery of financial statements under Sections
         5.01(a) and (b), a certificate of a Financial Officer, substantially in
         the form of Exhibit K attached hereto, certifying that no Default has
         occurred or, if such a Default has occurred, specifying the nature and
         extent thereof and any corrective action taken or proposed to be taken
         with respect thereto;

                  (d)      MONTHLY CASH BALANCE REPORT. Within ten (10) Business
         Days of the end of each fiscal month, a report signed by a Financial
         Officer of Borrower setting forth Borrower's Cash Balance as of the
         last Business Day of such month substantially in the form of Exhibit D
         hereto, appropriately completed and signed by a Financial Officer of
         the Borrower (the "MONTHLY CASH BALANCE REPORT");

                  (e)      PERFECTION CERTIFICATE SUPPLEMENT. Concurrently with
         any delivery of financial statements under Sections 5.01(a) and (b), a
         Perfection Certificate Supplement;

                                       19



                  (f)      PUBLIC REPORTS. Promptly after the same become
         publicly available, copies of all periodic and other reports, proxy
         statements and other materials filed by any Company with the Securities
         and Exchange Commission, or any Governmental Authority succeeding to
         any or all of the functions of said Commission, or with any national
         securities exchange, or distributed to holders of its Indebtedness
         pursuant to the terms of the documentation governing such Indebtedness
         (or any trustee, agent or other representative therefor), as the case
         may be;

                  (g)      MANAGEMENT LETTERS. Promptly after the receipt
         thereof by any Company, a copy of any "management letter" received by
         any such person from its certified public accountants and management's
         responses thereto; and

                  (h)      OTHER INFORMATION. Promptly, from time to time, such
         other information regarding the operations, property, business affairs
         and financial condition of any Company, or any Collateral, or
         compliance with the terms of any Loan Document, as Lender may
         reasonably request.

       SECTION 5.02.       LITIGATION AND OTHER NOTICES. Furnish to Lender
prompt written notice upon any Responsible Officer of a Loan Party becoming
aware of the following:

                  (a)      the filing or commencement of, or any threat or
         notice of intention of any person to file or commence, any action, suit
         or proceeding, whether at law or in equity by or before any
         Governmental Authority (i) against any Company (or any Affiliate
         thereof) that could reasonably be expected to result in a Material
         Adverse Effect or (ii) with respect to any Loan Document;

                  (b)      any Default, specifying the nature and extent thereof
         and the corrective action (if any) taken or proposed to be taken with
         respect thereto;

                  (c)      any development that has resulted in, or could
         reasonably be expected to result in, a Material Adverse Effect;

                  (d)      the occurrence of a Casualty Event in excess of
         $500,000; and

                  (e)      the incurrence of any Lien (other than Permitted
         Liens) on, or claim asserted against, any Material Item of Collateral.

       SECTION 5.03.       EXISTENCE; BUSINESSES AND PROPERTIES.

                  (a)      Do or cause to be done all things necessary to
         preserve, renew and keep in full force and effect its legal existence,
         except as otherwise expressly permitted under Section 6.05 or, in the
         case of any Subsidiary, where the failure to perform such obligations,
         individually or in the aggregate, could not reasonably be expected to
         result in a Material Adverse Effect.

                                       20



                  (b)      Do or cause to be done all things necessary to
         obtain, preserve, renew, extend and keep in full force and effect the
         rights, licenses, permits, franchises, authorizations, patents,
         copyrights, trademarks and trade names material to the conduct of its
         business;

                  (c)      Maintain and operate its business in substantially
         the manner in which it is presently conducted and operated;

                  (d)      Pay and perform its obligations under all Company
         Leases; and

                  (e)      Maintain and preserve all property material to the
         conduct of such business and keep such property in good repair, working
         order and condition and from time to time make, or cause to be made,
         all needful and proper repairs, renewals, additions, improvements and
         replacements thereto necessary in order that the business carried on in
         connection therewith may be properly conducted at all times;

provided, however, that nothing in this Section 5.03 shall prevent (i) sales of
assets, consolidations or mergers by or involving any Company in accordance with
Section 6.04; (ii) the withdrawal by any Company of its qualification as a
foreign corporation, partnership or company in any jurisdiction where such
withdrawal, individually or in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect; or (iii) the abandonment by any Company
of any property, rights, franchises, licenses, trademarks, tradenames,
copyrights or patents that such person reasonably determines are not useful to
its business.

       SECTION 5.04.       INSURANCE.

                  (a)      Keep its insurable property adequately insured at all
         times by financially sound and reputable insurers; maintain such other
         insurance, to such extent and against such risks, including fire and
         other risks insured against by extended coverage, as is customary with
         companies in the same or similar businesses operating in the same or
         similar locations, including public liability insurance against claims
         for personal injury or death or property damage occurring upon, in,
         about or in connection with the use of any property owned, occupied or
         controlled by it, to the extent obtainable on commercially reasonable
         terms; and maintain such other insurance as may be required by law;
         and, with respect to any Mortgaged Real Property, otherwise maintain
         all insurance coverage required under the applicable Mortgage, such
         policies to be in such form and amounts and having such coverage as may
         be reasonably satisfactory to Lender; provided, that, unless a Default
         has occurred and is continuing, any proceeds of insurance policies (x)
         insuring the Collateral may be applied by the Borrower to promptly
         replace, rebuild or restore such Collateral and (y) insuring
         liabilities to third parties may be applied by the Borrower to promptly
         pay, discharge or bond such liabilities, in each case on commercially
         reasonable terms.

                                       21



                  (b)      Assure that all such insurance shall (i) provide that
         no cancellation, material reduction in amount or material change in
         coverage thereof shall be effective until at least 30 days after
         receipt by Lender of written notice thereof; (ii) name Lender as
         insured party or loss payee; (iii) if reasonably requested by Lender,
         include a breach-of-warranty clause; and (iv) be reasonably
         satisfactory in all other respects to Lender.

                  (c)      Notify Lender immediately whenever any separate
         insurance concurrent in form or contributing in the event of loss with
         that required to be maintained under this Section 5.04 is taken out by
         any Company; and promptly deliver to Lender a duplicate original copy
         of, or a certificate as to coverage under, such policy or policies.

                  (d)      Deliver to Lender a report of a reputable insurance
         broker annually with respect to such insurance and such supplemental
         reports with respect thereto as Lender may from time to time reasonably
         request.

       SECTION 5.05.       TAXES. File or cause to be filed all federal Tax
Returns and all material state, local and foreign Tax Returns or materials
required to have been filed by it and pay and discharge promptly when due all
Taxes before the same shall become delinquent or in default; provided, however,
that such payment and discharge shall not be required with respect to any such
Taxes so long as the validity or amount thereof shall be contested in good faith
by appropriate proceedings and the applicable Company shall have set aside on
its books adequate reserves with respect thereto in accordance with GAAP and
such proceedings (or orders entered in connection with such proceedings) operate
to prevent the forfeiture or sale of the property or assets subject to any such
Lien and suspend collection of the contested Tax and enforcement of a Lien and,
in the case of Collateral, the applicable Company shall have otherwise complied
with the provisions of the applicable Security Document in connection with such
nonpayment.

       SECTION 5.06.       MAINTAINING RECORDS; ACCESS TO PROPERTIES AND
INSPECTIONS. Keep proper books of record and account (i) in which full, true and
correct entries are made in conformity with GAAP and all Requirements of Law,
and (ii) in which all material dealings and transactions in relation to its
business and activities are recorded. Each Company will permit any
representatives designated by Lender to visit and inspect the financial records
and the property of such Company at reasonable times during normal business
hours and upon reasonable advance notice and to make extracts from and copies of
such financial records, and permit any representatives designated by Lender to
discuss the affairs, finances and condition of any Company with and be advised
as to the same by the officers thereof and the independent accountants therefor.

       SECTION 5.07.       USE OF PROCEEDS. Use the proceeds of the Loans only
to maintain Cash Balances, subject to the limitations on the amount of such Cash
Balances set forth in this Agreement. No part of the proceeds of any Loan will
be used in any manner, whether directly or indirectly, for any purpose that
violates, or that is inconsistent with, the provisions of Regulation T, U or X.
Subject to the limitations in this Agreement and the other Loan Documents
proceeds

                                       22



of Loans may be used for general corporate purposes of Borrower and its
Subsidiaries, including working capital expenditures.

       SECTION 5.08.       PAYMENT OF OBLIGATIONS. Pay and discharge at or
before maturity, all its respective material obligations and liabilities
(including, without limitation, claims of materialmen, warehousemen and the like
or for labor, materials or supplies or other obligations which if unpaid would
reasonably be expected to give rise to a Lien), except where the same may be
contested in good faith by appropriate proceedings (including administrative
proceedings), and appropriate reserves are maintained for the accrual of any of
the same.

       SECTION 5.09.       COMPLIANCE WITH LAWS. Comply with all applicable
Requirements of Law and decrees and orders of Governmental Authorities, now or
hereafter in effect, except where the failure to so comply, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse
Effect.

       SECTION 5.10.       ADDITIONAL COLLATERAL; ADDITIONAL GUARANTORS.

                  (a)      Subject to this Section 5.10 and except to the extent
         Lender, in its sole discretion, otherwise determines, with respect to
         any assets acquired after the Closing Date by Borrower or any other
         Loan Party that are intended to be subject to the Lien created by any
         of the Security Documents but that are not so subject, and with respect
         to any assets held by Borrower or any other Loan Party on the Closing
         Date not made subject to a Lien created by any of the Security
         Documents but of a type intended to be subject to the Lien created by
         the applicable Security Documents, promptly (and in any event within 30
         days after the acquisition thereof or upon Lender's request): (i)
         execute and deliver to Lender such amendments or supplements to the
         relevant Security Documents or such other documents (including, without
         limitation, a Mortgage or Collateral Assignment of Lease) as Lender
         shall deem necessary or advisable to grant to Lender, for its benefit,
         a Lien on such properties or assets (including using its reasonable
         efforts to deliver a Landlord Lien Waiver and Access Agreement with
         respect to each Real Property located in the United States in which a
         Loan Party holds the tenant's interest thereunder and where the Loan
         Parties maintain Collateral having a value in excess of $1.0 million
         (other than with respect to the MacArthur Sublease) or which Real
         Property is operationally significant to such Loan Party's business as
         reasonably determined by Lender), subject to no Liens other than
         Permitted Liens, and (ii) take all actions necessary to cause such Lien
         to be duly perfected to the extent required by such Security Document
         in accordance with all applicable Requirements of Law, including the
         filing of a Mortgage or Collateral Assignment of Lease and financing
         statements in such jurisdictions as may be reasonably requested by
         Lender. Borrower shall otherwise take such actions and execute and/or
         deliver to Lender such documents as Lender shall require to confirm the
         validity, perfection and priority of the Lien of Security Documents
         against such after-acquired properties or assets, and such assets held
         on the Closing Date not made subject to a Lien created by any of the
         Security Documents. For purposes of this Section 5.10(a), Lender and
         Borrower agree that the Lien referred to in this Section

                                       23



         5.10(a) is intended to cover all assets and properties of Borrower and
         all other Loan Parties whether now owned or hereafter acquired, except
         for such properties or assets which are expressly excluded pursuant to
         the terms of this Agreement.

                  (b)      For any person that is a Wholly Owned Subsidiary of
         Parent or any of its Subsidiaries that are listed on Schedule 5.10(b)
         (a "SECTION 5.10(b) LISTED SUBSIDIARY"), and any person that becomes a
         Wholly Owned Subsidiary of Borrower or any of its Subsidiaries after
         the Closing Date (a "NEW WHOLLY OWNED SUBSIDIARY"), promptly (and in
         any event (x) in the case of a New Wholly Owned Subsidiary, no later
         than 30 days after each such person becomes a New Wholly Owned
         Subsidiary, and (y) in the case of each Section 5.10(b) Listed
         Subsidiary or a New Wholly Owned Subsidiary that is required to become
         a Guarantor, or the stock or assets of which are required to be
         pledged, pursuant to clauses (i) and (ii) immediately below, no later
         than 30 days following the Closing Date), cause such Subsidiary (i) to
         become a Guarantor and deliver to Lender the certificates representing
         the Equity Interests of such Subsidiary (provided that, in no event
         shall the stock of any such Subsidiary be required to be pledged if
         such pledge is illegal under applicable law and no reasonable
         alternative structure can be devised having substantially the same
         effect as such pledge that would not be illegal under applicable law),
         together with undated stock powers executed and delivered in blank by a
         duly authorized officer of such Subsidiary's parent, as the case may
         be, and all Intercompany Notes owing from such Subsidiary to any Loan
         Party; and (ii) (A) to execute a Joinder Agreement or such comparable
         documentation, in form and substance reasonably satisfactory to Lender,
         and (B) to take all actions reasonably necessary or advisable to cause
         the Lien created by each Security Agreement to be duly perfected to the
         extent required by such agreement in accordance with all applicable
         Requirements of Law, including the filing of financing statements in
         such jurisdictions as may be reasonably requested by Lender (provided
         that any such Subsidiary shall not be required to comply with clause
         (ii)(A) and (B) above if satisfying such requirements is illegal under
         applicable law and no reasonable alternative structure can be devised
         having substantially the same effect as such pledge that would not be
         illegal under applicable law).

                  (c)      Notwithstanding anything to the contrary contained
         herein:

                           (i)      in the case of any (x) Section 5.10(b)
           Listed Subsidiary and New Wholly Owned Subsidiary that has not
           previously become a Guarantor and (y) other Non-Guarantor Subsidiary,
           100% of the Equity Interests of any such Subsidiary, except in the
           case of any Foreign Subsidiary where a security interest of 100% of
           its Equity Interests could reasonably be expected to have a material
           adverse effect on the tax position of Borrower or such Foreign
           Subsidiary, in which case 65% of the Equity Interests of such Foreign
           Subsidiary, shall be subject to a Lien and be required to be pledged
           under the applicable Loan Document except to the extent Lender, in
           its sole discretion, otherwise determines; and

                                       24



                           (ii)     notwithstanding clause (c)(i) immediately
           above and as of the end of any fiscal quarter of Borrower:

                                    (1)      if the aggregate consolidated
                                    revenues of the Non-Guarantor Subsidiaries
                                    exceeds 10.0% of Borrower's consolidated
                                    revenues, then within 60 days of such date
                                    Borrower shall cause a sufficient number of
                                    the Non-Guarantor Subsidiaries to become
                                    Guarantors hereunder so that, after giving
                                    pro forma effect to such action, the
                                    aggregate consolidated revenues of the
                                    Subsidiaries remaining as Non-Guarantor
                                    Subsidiaries is less than 10.0% of
                                    Borrower's consolidated revenues; or

                                    (2)      if the aggregate consolidated sum
                                    of the Non-Guarantor Subsidiaries' fixed
                                    assets, receivables and inventories exceeds
                                    10.0% of the aggregate consolidated sum of
                                    Borrower's fixed assets, receivables and
                                    inventories (which fixed assets, receivables
                                    and inventories shall be computed after
                                    eliminating intercompany profit), then
                                    within 60 days of such date Borrower shall
                                    cause a sufficient number of the
                                    Non-Guarantor Subsidiaries to become
                                    Guarantors hereunder so that, after giving
                                    pro forma effect to such action, the
                                    aggregate consolidated sum of fixed assets,
                                    receivables and inventories of the
                                    Subsidiaries remaining as Non-Guarantor
                                    Subsidiaries is less than 10.0% of the
                                    aggregate consolidated sum of Borrower's
                                    fixed assets, receivables and inventories.

         If the condition set forth in clause (ii)(1) or (ii)(2) above is
    established, Borrower shall, or shall cause the applicable Foreign
    Subsidiaries to, take all such further action and execute and deliver all
    such further agreements or documents as Lender deems necessary or advisable
    to receive the full benefits of the Guarantees and Security Documents to be
    entered into by such Foreign Subsidiaries to the extent necessary to
    preclude the 10.0% thresholds set forth in the immediately preceding clauses
    (ii)(1) and (ii)(2) from being exceeded, except to the extent such actions,
    executions, or, deliveries are illegal under applicable law, and no
    reasonable alternative structure can be devised having substantially the
    same effect as such actions, executions, or deliveries that would not be
    illegal under applicable law.

                  (d)      Upon the written request of Lender, each Loan Party
         will promptly grant to Lender, within 30 days of such request, security
         interests and Mortgages in such owned or leased Real Property of such
         Loan Party located in the United States as is acquired or leased by
         such Loan Party after the Closing Date by Borrower or such Subsidiary
         and has a value as determined in good faith by Lender in excess of $1.0
         million or is otherwise material to the business operations of Borrower
         or such Subsidiary, as additional security for the Secured Obligations
         (unless (i) the subject

                                       25



         property is already mortgaged to a third party to the extent permitted
         by Section 6.02 or (ii) if the encumbrancing of such leased Real
         Property requires the consent of any applicable lessor, where Borrower
         and its Subsidiaries have attempted in good faith, but are unable, to
         obtain such lessor's consent). Such Mortgages shall be granted pursuant
         to documentation reasonably satisfactory in form and substance to
         Lender and shall constitute valid and enforceable perfected Liens
         subject only to Permitted Liens and such other Liens reasonably
         acceptable to Lender. The Mortgages or instruments related thereto
         shall be duly recorded or filed in such manner and in such places as
         are required by law to establish, perfect, preserve and protect the
         Liens in favor of Lender required to be granted pursuant to the
         Mortgages and all taxes, fees and other charges payable in connection
         therewith shall be paid in full by such Loan Party. Such Loan Party
         shall otherwise take such actions and execute and/or deliver to Lender
         such documents as Lender shall require to confirm the validity,
         perfection and priority of the Lien of any existing Mortgage or new
         Mortgage against such after-acquired Real Property within 30 days of
         the written request of Lender, including the following:

                           (i)      Mortgages encumbering each Mortgaged Real
           Property in favor of Lender, duly executed and acknowledged by the
           Loan Party that is the owner of or holder of an interest in such
           Mortgaged Real Property, and otherwise in form for recording in the
           recording office of each political subdivision where each such
           Mortgaged Real Property is situated, and such certificates,
           affidavits, questionnaires or returns as shall be required in
           connection with the recording or filing thereof to create a Lien
           under applicable law, and such UCC financing statements and fixture
           filings, all of which shall be in form and substance reasonably
           satisfactory to Lender, and any other instruments necessary to grant
           a mortgage lien under the laws of any applicable jurisdiction;

                           (ii)     with respect to each Mortgaged Real Property
           for which a Mortgage is obtained in accordance with clause (i) above,
           an Agreement and Estoppel Certificate executed by the applicable Loan
           Party and fee interest holder, and such other consents, approvals,
           amendments, supplements, memoranda of lease estoppels, tenant
           non-disturbance or subordination agreements or other instruments as
           shall reasonably be deemed necessary by Lender in order for the owner
           or holder of the fee or leasehold interest constituting such
           Mortgaged Real Property to grant the Lien contemplated by the
           Mortgage with respect to such Mortgaged Real Property;

                           (iii)    with respect to each Mortgage, a policy of
           title insurance insuring the Lien of such Mortgage as a valid first
           mortgage Lien on the Real Property and fixtures described therein in
           an amount equal to 115% of the fair market value of the fee or
           leasehold interest, as applicable, of such Real Property which
           policies (each, a "TITLE POLICY") shall (A) be issued by the Title
           Company, (B) to the extent necessary, include such reinsurance
           arrangements (with provisions for direct access, if necessary) as
           shall be reasonably acceptable to

                                       26



           Lender, (C) contain a "tie-in" or "cluster" endorsement (if available
           under applicable law) (i.e., policies that insure against losses
           regardless of location or allocated value of the insured property up
           to a stated maximum coverage amount), (D) have been supplemented by
           such endorsements (or where such endorsements are not available,
           opinions of special counsel, architects or other professionals
           reasonably acceptable to Lender to the extent that such opinions can
           be obtained at a cost that is reasonable with respect to the value of
           the Real Property subject to such Mortgage) as shall be requested by
           Lender, to the extent such endorsements are available in the
           applicable jurisdiction (including endorsements on matters relating
           to usury, first loss, last dollar, zoning, contiguity, revolving
           credit, doing business, non-imputation, public road access, survey,
           variable rate, environmental lien and so-called comprehensive
           coverage over covenants and restrictions), and (E) contain no
           exceptions to title other than exceptions for the Permitted Liens
           applicable to such Mortgaged Real Property and otherwise acceptable
           to Lender;

                           (iv)     with respect to each Mortgaged Real Property
           for which a Mortgage is obtained in accordance with clause (i) above,
           such affidavits, certificates, information (including financial data)
           and instruments of indemnification (including a so-called "gap,"
           "mechanics lien," and "owner's" indemnifications and affidavits) as
           shall be required to induce the Title Company to issue the Title
           Policy/ies and endorsements contemplated in clause (iii) above;

                           (v)      evidence reasonably acceptable to Lender of
           payment by Borrower of all Title Policy premiums, escrow, search and
           examination charges, and related charges, mortgage recording taxes,
           fees, charges, costs and expenses required for the recording of the
           Mortgages and issuance of the Title Policies referred to in clause
           (iii) above;

                           (vi)     with respect to each Real Property or
           Mortgaged Real Property, copies of all Leases in which Borrower or
           any Subsidiary holds the lessor's interest or other agreements
           relating to possessory interests, if any. To the extent any of the
           foregoing affect any Mortgaged Real Property for which a Mortgage is
           obtained in accordance with clause (i) above, such agreement shall be
           subordinate to the Lien of the Mortgage to be recorded against such
           Mortgaged Real Property, either expressly by its terms or pursuant to
           a subordination, non-disturbance and attornment agreement, and shall
           otherwise be acceptable to Lender;

                           (vii)    with respect to each Mortgaged Real Property
           for which a Mortgage is obtained in accordance with clause (i) above,
           Borrower and each Subsidiary shall have made all notification,
           registrations and filings, to the extent required by, and in
           accordance with, all Requirements of Law; and

                                       27



                           (viii)   with respect to each Mortgaged Real Property
           for which a Mortgage is obtained in accordance with clause (i) above,
           an Officers' Certificate or other evidence reasonably satisfactory to
           Lender that as of the date thereof (A) there is no outstanding
           citation, violation or similar notice indicating that the Mortgaged
           Real Property contains conditions that are not in compliance in any
           material respect with local codes or ordinances relating to building
           or fire safety or structural soundness, (B) there has not occurred
           any taking or destruction of any Mortgaged Real Property and (C)
           there are no material disputes regarding boundary lines, location,
           encroachment or possession of such Mortgaged Real Property, and to
           the best knowledge of Borrower or any Subsidiary that is the owner of
           or holder of an interest in such Mortgaged Real Property, no state of
           facts exist that could give rise to any such claim.

       SECTION 5.11.       SECURITY INTERESTS; FURTHER ASSURANCES. Each Loan
Party shall, at its own cost and expense, take any and all actions necessary to
defend title to the Collateral against all persons and to defend the security
interest of Lender in the Collateral and the priority thereof against any Lien
not expressly permitted pursuant to Section 6.02. Promptly, upon the reasonable
request of Lender, at Borrower's expense, execute, acknowledge and deliver, or
cause the execution, acknowledgment and delivery of, and thereafter register,
file or record, or cause to be registered, filed or recorded, in an appropriate
governmental office, any document or instrument supplemental to or confirmatory
of the Security Documents or otherwise deemed by Lender reasonably necessary or
desirable for the continued validity, perfection and priority of the Liens on
the Collateral covered thereby superior and prior to the rights of all third
persons other than the holders of Permitted Liens and subject to no other Liens
except as permitted by the Security Documents, or obtain any consents, including
landlord or similar Lien waivers and consents, as may be necessary or
appropriate in connection therewith, to the extent contemplated hereby. Each
Loan Party shall, at its own cost and expense, deliver or cause to be delivered
to Lender from time to time such other documentation, consents, authorizations,
approvals and orders in form and substance reasonably satisfactory to Lender as
Lender shall deem necessary to perfect or maintain the Liens on the Collateral
pursuant to the Security Documents. Upon the exercise by Lender of any power,
right, privilege or remedy pursuant to any Loan Document that requires any
consent, approval, registration, qualification or authorization of any
Governmental Authority or any other person, execute and deliver and/or obtain
all applications, certifications, instruments and other documents and papers
that Lender may be so required to obtain. Notwithstanding anything to the
contrary contained herein, if an Event of Default has occurred and is
continuing, Lender shall have the right to require any Loan Party to execute and
deliver documentation, consents, authorizations, approvals and orders in form
and substance reasonably satisfactory to Lender as Lender shall deem necessary
to grant to Lender, for its benefit, a valid and perfected Lien subject to no
Liens other than Permitted Liens on such assets and properties not otherwise
required hereunder, except to the extent such requirements are illegal under
applicable law, and no reasonable alternative structure can be devised having
substantially the same effect as such actions that would not be illegal under
applicable law. If Lender determines that it is required by law or regulation to
have appraisals prepared in respect of the Real Property of any Loan Party
constituting Collateral, Borrower shall provide to Lender appraisals that
satisfy the applicable requirements of the Real Estate Appraisal Reform
Amendments of the Federal

                                       28



Institutions Reform, Recovery and Enforcement Act of 1989 and are in form and
substance satisfactory to Lender.

       SECTION 5.12.       POST-CLOSING MATTERS. Execute and deliver the
documents and complete the tasks set forth on Schedule 5.12, in each case within
the time limits specified on such schedule. Notwithstanding any other provision
in this Agreement, the Availability Period shall not commence and Borrower shall
have no right to borrow under this Agreement until such time as the Loan Parties
have executed and delivered the documents and completed the tasks set forth on
Schedule 5.12.

                                   ARTICLE VI

                               NEGATIVE COVENANTS

       Each Loan Party covenants and agrees with Lender that, so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the principal of and interest on each Loan and all other expenses or amounts
payable under any Loan Document have been paid in full, unless Lender shall
otherwise consent in writing, no Loan Party will, nor will any Loan Party cause
or permit any of its Subsidiaries to:

       SECTION 6.01.       INDEBTEDNESS. Incur, create, assume or permit to
exist, directly or indirectly, any Indebtedness, except:

                  (a)      Indebtedness incurred pursuant to this Agreement and
         the other Loan Documents;

                  (b)      Indebtedness under Hedging Agreements entered into
         from time to time by any Company in accordance with Section 6.03(c);

                  (c)      intercompany Indebtedness of the Companies
         outstanding to the extent permitted by Sections 6.03(d), (g) and (k)
         and Section 6.18;

                  (d)      Indebtedness in respect of workers' compensation
         claims, self-insurance obligations, performance bonds, surety, appeal
         or similar bonds and completion guarantees provided by a Company in the
         ordinary course of its business consistent with past practices;

                  (e)      (i) Indebtedness actually outstanding on the Closing
         Date and listed on Schedule 6.01, provided that, any such scheduled
         Indebtedness that constitutes intercompany Indebtedness (A) must be
         subordinated to the Obligations of the Loan Parties in accordance with
         a subordination agreement in form and substance reasonably satisfactory
         to Lender, and (B) except for any intercompany Indebtedness of the
         Companies permitted by Section 6.01(c), shall not be repaid, prepaid,
         refinanced or renewed unless the repayment, prepayment, refinancing or
         renewal

                                       29



         thereof is treated as an Investment and permitted under Section 6.03;
         and (ii) refinancings or renewals thereof, provided that, (A) any such
         refinancing Indebtedness is in an aggregate principal amount not
         greater than the aggregate principal amount of the Indebtedness being
         renewed or refinanced, plus the amount of any premiums required to be
         paid thereon and fees and expenses associated therewith, (B) such
         refinancing Indebtedness has a later or equal final maturity and longer
         or equal weighted average life than the Indebtedness being renewed or
         refinanced and (C) the covenants, events of default, subordination and
         other provisions thereof (including any guarantees thereof) shall be,
         in the aggregate, no less favorable to the Loan Parties than those
         contained in the Indebtedness being renewed or refinanced;

                  (f)      Indebtedness to the extent permitted as part of a
         Permitted Refinancing; and

                  (g)      other Indebtedness, including Purchase Money
         Obligations and Capital Lease Obligations, of Borrower and its
         Subsidiaries not to exceed $10 million in aggregate principal amount at
         any time outstanding.

       SECTION 6.02.       LIENS. Create, incur, assume or permit to exist,
directly or indirectly, any Lien on any property now owned or hereafter acquired
by it or on any income or revenues or rights in respect of any thereof, except
(each of the following being the "PERMITTED LIENS"):

                  (a)      inchoate Liens for Taxes not yet due and payable or
         delinquent and Liens for Taxes that (i) are being contested in good
         faith by appropriate proceedings for which adequate reserves have been
         established in accordance with GAAP, which proceedings (or orders
         entered in connection with such proceedings) have the effect of
         preventing the forfeiture or sale of the property or assets subject to
         any such Lien, or (ii) in the case of any such charge or claim that has
         or may become a Lien against any of the Collateral, such Lien and the
         contest thereof shall satisfy the Contested Collateral Lien Conditions;

                  (b)      Liens imposed by law that were incurred in the
         ordinary course of business consistent with past practices of the
         Companies and do not secure Indebtedness for borrowed money, such as
         carriers', warehousemen's, materialmen's, landlords', workmen's,
         suppliers', repairmen's and mechanics' Liens and other similar Liens
         arising in the ordinary course of business consistent with past
         practices of the Companies (i) for amounts not yet overdue or (ii) for
         amounts that are overdue and that are being contested in good faith by
         appropriate proceedings, so long as (A) adequate reserves have been
         established in accordance with GAAP, and (B) in the case of any such
         Lien that has or may become a Lien against any of the Collateral, such
         Lien and the contest thereof shall satisfy the Contested Collateral
         Lien Conditions;

                                       30



                  (c)      easements, rights-of-way, restrictions (including
         zoning restrictions), covenants, encroachments, protrusions and other
         similar charges or encumbrances, and minor title deficiencies on or
         with respect to any Real Property, in each case whether now or
         hereafter in existence, not (i) securing Indebtedness and (ii)
         individually or in the aggregate materially interfering with the
         conduct of the business of the Companies at such Real Property;

                  (d)      Liens arising out of judgments or awards not
         resulting in an Event of Default and in respect of which such Company
         shall in good faith be prosecuting an appeal or proceedings for review
         in respect of which there shall be secured a subsisting stay of
         execution pending such appeal or proceedings;

                  (e)      Liens (other than any Lien imposed by ERISA or
         Section 401(a)(29) or 412(n) or the Tax Code) (i) imposed by law or
         deposits made in connection therewith in the ordinary course of
         business consistent with past practices in connection with workers'
         compensation, unemployment insurance and other types of social
         security; (ii) incurred in the ordinary course of business consistent
         with past practices to secure the performance of tenders, statutory
         obligations (other than excise taxes), surety, stay, customs and appeal
         bonds, statutory bonds, bids, leases, government contracts, trade
         contracts, performance and return of money bonds and other similar
         obligations (including obligations imposed by the applicable laws of
         foreign jurisdictions and exclusive of obligations for the payment of
         borrowed money); or (iii) arising by virtue of deposits made in the
         ordinary course of business consistent with past practices to secure
         liability for premiums to insurance carriers; provided that, (x) with
         respect to clauses (i), (ii) and (iii) above such Liens are set amounts
         not yet due and payable or delinquent or, to the extent such amounts
         are so due and payable, such amounts are being contested in good faith
         by appropriate proceedings for which adequate reserves have been
         established in accordance with GAAP, which proceedings for orders
         entered in connection with such proceedings have the effect of
         preventing the forfeiture or sale of the property or assets subject to
         any such Lien, (y) to the extent such Liens are not imposed by Law,
         such Liens shall in no event encumber any property other than cash and
         cash equivalents, and (z) in the case of any such Lien against any of
         the Collateral, such Lien and the contest thereof shall satisfy the
         Contested Collateral Lien Conditions;

                  (f)      Liens arising out of conditional sale, title
         retention, consignment or similar arrangements for the sale of goods
         entered into by any of the Companies in the ordinary course of business
         in accordance with the past practices of the Companies;

                  (g)      Liens arising pursuant to Purchase Money Obligations
         or Capital Lease Obligations incurred pursuant to Section 6.01(f);
         provided that, (i) the Indebtedness secured by any such Lien (including
         refinancings thereof) does not exceed 100% of the cost (including
         financing cost) of the property being acquired or leased at the time of
         the incurrence of such Indebtedness and (ii) any such Liens

                                       31



         attach only to the property being financed pursuant to such Purchase
         Money Obligations or Capital Lease Obligations and directly related
         assets, such as proceeds (including insurance proceeds), products,
         accessions and substitutions, and do not encumber any other property of
         any Company;

                  (h)      bankers' Liens, rights of set-off and other similar
         Liens existing solely with respect to cash and cash equivalents on
         deposit in one or more accounts maintained by any of the Companies, in
         each case granted in the ordinary course of business consistent with
         past practices in favor of the bank or banks with which such accounts
         are maintained, securing amounts owing to such bank with respect to
         cash management and operating account arrangements, including those
         involving pooled accounts and netting arrangements; provided that, in
         no case shall any such Liens secure (either directly or indirectly) the
         repayment of any Indebtedness;

                  (i)      Liens on assets of a person existing at the time such
         person is acquired or merged with or into or consolidated with Borrower
         or any of its Subsidiaries (and not created in anticipation or
         contemplation thereof); provided that, such Liens do not extend to
         assets not subject to such Liens at the time of acquisition (other than
         improvements thereon) and are no more favorable to the lienholders than
         the existing Lien;

                  (j)      Liens pursuant to the Security Documents;

                  (k)      Liens in existence on the Closing Date and set forth
         on Schedule 6.02; provided that, (i) the aggregate principal amount of
         the Indebtedness, if any, secured by such Liens does not increase; and
         (ii) such Liens do not encumber any property other than the property
         subject thereto on the Closing Date;

                  (l)      Liens on cash and cash equivalents securing
         reimbursement obligations to financial institutions that have issued
         letters of credit or guarantees to secure obligations of any Loan Party
         or its subsidiaries under leases or licensing agreements entered into
         in the ordinary course of business, consistent with past practice;
         provided, however, that the amount of cash and cash equivalents subject
         to such Liens, when taken together with fair market value of any
         property subject to Liens set forth on Schedule 6.02, shall not exceed
         the sum of (i) $2,000,000 plus (ii) the face amount of any letter of
         credit issued to or for the benefit of Lender;

                  (m)      Licenses of Intellectual Property granted by any of
         the Companies in the ordinary course of business and not interfering in
         any material respect with the ordinary conduct of the business
         consistent with past practices of the Companies; and

                  (n)      restrictions on transfers of securities imposed by
         applicable securities laws;

                                       32



provided, however, that no Liens shall be permitted to exist, directly or
indirectly, on any Securities Collateral (as defined in the U.S. Security
Agreement) except to the extent permitted under Section 6.02(n) above).

       SECTION 6.03.       INVESTMENTS, LOANS AND ADVANCES. Directly or
indirectly, lend money or credit or make advances to any person, or purchase or
acquire (using money, securities, obligations or property of any kind) any
stock, obligations or securities of, or any Equity Interests or other interest
in, or make any capital contribution to, any other person, or purchase or own a
futures or forward contract or otherwise become liable for the purchase or sale
of commodities at a future date in the nature of a futures or forward contract
(all of the foregoing, collectively, "INVESTMENTS"), except that the following
shall be permitted:

                  (a)      the Companies may consummate the Transactions in
         accordance with the provisions of the Transaction Documents;

                  (b)      any Company may (i) acquire and hold accounts
         receivables owing to any of them if created or acquired in the ordinary
         course of business consistent with past practices and payable or
         dischargeable in accordance with customary terms, (ii) acquire and hold
         cash and cash equivalents, (iii) endorse negotiable instruments for
         collection in the ordinary course of business consistent with past
         practices, or (iv) make lease, utility and other similar deposits in
         the ordinary course of business consistent with past practices;

                  (c)      any Company may enter into and perform its
         obligations under Hedging Agreements entered into in the ordinary
         course of business consistent with past practices and so long as any
         such Hedging Agreement is not speculative in nature and is (i) related
         to income related to foreign currency exposure of any Company or
         otherwise related to purchases permitted hereunder from foreign
         suppliers or (ii) entered into to protect such Companies against
         fluctuations in the prices of raw materials used in their businesses or
         changes in interest rates on Indebtedness that (x) is permitted under
         Section 6.01 and (y) bears interest at a fluctuating rate per annum;

                  (d)      any Company may make intercompany loans and advances
         to any Loan Party and any Loan Party may make intercompany loans and
         advances to any other Loan Party, and any Subsidiary that is not a Loan
         Party may make intercompany loans and advances to any other Subsidiary
         that is not a Loan Party; provided that, (i) no Loan Party may make
         loans to any Foreign Subsidiary or Non-Guarantor Subsidiary pursuant to
         this Section 6.03(d) unless otherwise permitted under this Section 6.03
         or Section 6.18, and (ii) any loan or loans made by any Foreign
         Subsidiary or Non-Guarantor Subsidiary to any Loan Party pursuant to
         this Section 6.03(d) shall be subordinated to the obligations of the
         Loan Parties pursuant to an Intercompany Note if any such loan or
         loans, individually or in the aggregate to any one Loan Party, has an
         outstanding principal amount in excess of $1.0 million;

                                       33



                  (e)      any Company may make Investments in the form of
         advances to employees for travel, relocation and like expenses, in each
         case, in the ordinary course of business and consistent with such
         Company's past practices;

                  (f)      any Company may sell or transfer amounts to the
         extent permitted by Section 6.04;

                  (g)      Investments (other than as described in Section
         6.03(d)) (i) by Borrower in any existing Subsidiary Guarantor, (ii) by
         any Company in Borrower or any existing Subsidiary Guarantor, and (iii)
         by a Subsidiary Guarantor in another existing Subsidiary Guarantor (in
         each case only for so long as a Subsidiary Guarantor remains a
         Guarantor);

                  (h)      Investments in securities of trade creditors or
         customers in the ordinary course of business and consistent with such
         Company's past practices that are received in the settlement of bona
         fide disputes or pursuant to any plan of reorganization or liquidation
         or similar arrangement upon the bankruptcy or insolvency of such trade
         creditors or customers;

                  (i)      Investments made by any Company as a result of
         consideration received in connection with an Asset Sale or other
         transaction effected in compliance with Section 6.04;

                  (j)      Investments outstanding on the Closing Date and
         identified on Schedule 6.03;

                  (k)      any Company may make loans, advances or capital
         contributions to any Wholly Owned Foreign Subsidiary in accordance with
         Section 6.18; and

                  (l)      any Company may make Permitted Acquisitions.

       SECTION 6.04.       MERGERS, CONSOLIDATIONS, ASSET SALES AND PURCHASES OF
ASSETS. Wind up, liquidate or dissolve its affairs or enter into any transaction
of merger or consolidation, or make any Asset Sale or purchase or otherwise
acquire (in one or a series of related transactions) any part of the property or
assets (other than purchases or other acquisitions of inventory, equipment or
other assets used or useful in the Companies' business, but not (x) Investments
or (y) all or any material part of a person's assets) of any person (or agree to
do any of the foregoing at any future time), except that:

                  (a)      Capital Expenditures by any Company shall be
         permitted to the extent permitted by Section 6.07;

                  (b)      (i) Asset Sales of used, worn out, obsolete or
         surplus property by any Company in the ordinary course of business
         consistent with past practices and the abandonment or other Asset Sale
         of Intellectual Property that is, in the reasonable judgment of
         Borrower, no longer economically practicable to maintain or useful in

                                       34



         the conduct of the business of the Companies taken as a whole shall be
         permitted; and (ii) any other Asset Sale shall be permitted if (1) the
         aggregate consideration received or value of property disposed of
         (based on the value thereof shown on the Borrower's balance sheet
         prepared in accordance with GAAP) in respect of all Asset Sales
         pursuant to this clause (ii) does not exceed $5.0 million in any four
         consecutive fiscal quarters of Borrower (excluding for purposes of this
         amount, any property sold by a Non-Guarantor Subsidiary in connection
         with its liquidation and dissolution, the proceeds of which are
         promptly distributed to the Borrower or another Loan Party), (2) such
         property is sold for cash or cash equivalents, (3) such property is
         sold for at least eighty percent (80%) of its Fair Market Value, and
         (4) such property is not a Business Unit;

                  (c)      Investments shall be permitted to the extent
         permitted by Section 6.03;

                  (d)      any Company may sell cash equivalents in the ordinary
         course of business consistent with past practices;

                  (e)      any Company may lease (as lessee or lessor) real or
         personal property to the extent permitted by Section 6.12 and Section
         6.13;

                  (f)      the Transactions shall be permitted;

                  (g)      any Subsidiary may be merged into Borrower (as long
         as Borrower is the surviving corporation of such merger) or any other
         Wholly Owned Subsidiary Guarantor; provided, however, that the Lien on
         and security interest in such property granted in favor of Lender under
         the Security Documents shall be maintained in accordance with the
         provisions of Section 5.10;

                  (h)      any Subsidiary may convey, sell, transfer, assign or
         otherwise dispose of assets to Borrower or any other Loan Party,
         subject, in the case of any sale by a Foreign Subsidiary, to Section
         6.18;

                  (i)      Permitted Acquisitions and Consent Acquisitions shall
         be permitted;

                  (j)      Permitted Business Dispositions shall be permitted;

                  (k)      any Company may settle or release tort or other
         litigation claims in the ordinary course of business consistent with
         past practices; and

                  (l)      any Immaterial Subsidiary may voluntarily dissolve,
         liquidate or wind up.

To the extent Lender waives the provisions of this Section 6.04 with respect to
the sale of any Collateral, or any Collateral is sold as permitted by this
Section 6.04, such Collateral (unless sold to a Company) shall be sold free and
clear of the Liens created by the Security Documents, and Lender shall take all
actions deemed appropriate to release such Liens.

                                       35



       SECTION 6.05.       DIVIDENDS. Authorize, declare or pay, directly or
indirectly, any Dividends with respect to any Company, except that any
Subsidiary of Borrower may pay cash Dividends to (x) Borrower, (y) any Guarantor
Subsidiary or (z) any Non-Guarantor Subsidiary, provided that, in the case of
clause (z), any such Dividend is distributed within ten Business Days of receipt
thereof by such Non-Guarantor Subsidiary to Borrower or any other Loan Party.

       SECTION 6.06.       TRANSACTIONS WITH AFFILIATES. Enter into, directly or
indirectly, any transaction or series of related transactions with any Affiliate
of any Company, other than in the ordinary course of business consistent with
past practices and on terms and conditions substantially as favorable to such
Company as would reasonably be obtained by such Company at that time in a
comparable arm's-length transaction with a person other than an Affiliate,
except that:

                  (a)      Dividends may be paid to the extent provided in
         Section 6.05;

                  (b)      loans may be made and other transactions may be
         entered into between and among any Company and its Affiliates to the
         extent permitted by Sections 6.01, 6.03 and 6.18;

                  (c)      customary fees may be paid to non-officer directors
         of the Loan Parties, and customary indemnities may be provided to all
         directors of the Loan Parties;

                  (d)      the Transactions may be effected; and

                  (e)      payments may be made between Loan Parties pursuant to
         the Tax Sharing Agreement.

       SECTION 6.07.       LIMITATION ON CAPITAL EXPENDITURES. Make or commit to
make any Capital Expenditures, other than Capital Expenditures made or committed
to be made by Borrower and its Consolidated Subsidiaries which in the aggregate
do not exceed during any fiscal year of the Borrower $25 million multiplied by
the Pro Rata Percentage for such fiscal year, reduced dollar for dollar by the
Purchase Price for any Permitted Acquisitions made during such period.
Notwithstanding anything to the contrary contained in the prior sentence, to the
extent that the Capital Expenditures made by Borrower and its Consolidated
Subsidiaries in any fiscal year are less than the amount permitted to be made in
such period (without giving effect to any additional amount available as a
result of this sentence), the amount of such difference may be carried forward
and used to make Capital Expenditures in the next succeeding fiscal year of
Borrower, but only to such next succeeding fiscal year.

       SECTION 6.08.       LIMITATION ON MODIFICATIONS OF INDEBTEDNESS;
MODIFICATIONS OF CERTIFICATE OF INCORPORATION, OTHER CONSTITUTIVE DOCUMENTS OR
BYLAWS AND CERTAIN OTHER AGREEMENTS, ETC. (i) Amend or modify, or permit the
amendment or modification of, any provision of any existing Indebtedness, any
Transaction Document, or Borrower's investment policy statement as in effect on
the Closing Date, other than any amendments or modifications to

                                       36



any Indebtedness, any Transaction Document, or such corporate policy that do not
in any way adversely affect the interests of Lender; (ii) amend, modify or
change its articles of incorporation or other constitutive documents (including
by the filing or modification of any certificate of designation) or bylaws, or
any agreement entered into by it, with respect to its capital stock (including
any shareholders' agreement), or enter into any new agreement with respect to
its capital stock, other than any amendments, modifications, agreements or
changes pursuant to this clause (ii) or any such new agreements pursuant to this
clause (ii) that do not in any way adversely affect the interests of Lender; or
(iii) amend or terminate any Company Lease relating to any Mortgaged Property
other than any amendments or terminations that do not in any way adversely
affect the interests of Lender or take any action or fail to take any action
that, with or without either notice or lapse of time, would constitute a default
under any Company Lease relating to any Mortgaged Real Property.

       SECTION 6.09.       LIMITATION ON CERTAIN RESTRICTIONS ON SUBSIDIARIES.
Directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary to:

                  (a)      pay dividends or make any other distributions on its
         capital stock or any other interest or participation in its profits
         owned by Borrower or any Subsidiary of Borrower, or pay any
         Indebtedness owed to Borrower or a Subsidiary of Borrower;

                  (b)      make loans or advances to Borrower or any of
         Borrower's Subsidiaries; or

                  (c)      transfer any of its properties to Borrower or any of
         Borrower's Subsidiaries, except for such encumbrances or restrictions
         existing under or by reason of (i) applicable law, (ii) this Agreement
         and the other Loan Documents, (iii) customary provisions restricting
         subletting or assignment of any lease governing a leasehold interest of
         Borrower or a Subsidiary of Borrower, or (iv) customary provisions with
         respect to the disposition or distribution of assets in joint venture
         agreements and other similar agreements (to the extent otherwise
         permitted by this Agreement) relating solely to the assets subject to
         such agreement.

       SECTION 6.10.       LIMITATION ON ISSUANCE OF CAPITAL STOCK. Issue any
Equity Interest of any Subsidiary (including by way of sales of treasury stock)
or any options or warrants to purchase, or securities convertible into, Equity
Interests of any Subsidiary, except (i) for stock splits, stock dividends and
additional Equity Interest issuances that do not decrease the percentage
ownership of Borrower or any Subsidiary in any class of the Equity Interest of
such Subsidiary; (ii) Borrower Common Stock may be issued, at then Fair Market
Value, to pay (in whole or in part) the purchase price for any Permitted
Acquisition; (iii) Subsidiaries of Borrower formed after the Closing Date
pursuant to Section 6.11 may issue Equity Interests to Borrower or the
Subsidiary of Borrower that is to own such stock; (iv) the Borrower or any
Subsidiary of the Borrower may issue Equity Interests to the extent permitted as
part of a Permitted Refinancing; and (v) only to the extent required in
accordance with applicable law, any Foreign Subsidiary

                                       37



may issue directors' qualifying shares. All Equity Interests issued in
accordance with this Section 6.10 shall, to the extent required by Section 5.10
or the applicable Security Agreement, be delivered to Lender for pledge pursuant
to the applicable Security Agreement.

       SECTION 6.11.       LIMITATION ON CREATION OF SUBSIDIARIES. Establish,
create or acquire any additional Subsidiaries without the prior written consent
of Lender, except that (i) Borrower may acquire one or more Wholly Owned
Subsidiaries in any Permitted Acquisition and (ii) Borrower may establish or
create one or more Wholly Owned Subsidiaries of Borrower or one of its Wholly
Owned Subsidiaries without such consent so long as (except to the extent any of
the following is expressly exempted or otherwise limited pursuant to Section
5.10(b), but subject, in any event, to the requirements of Section 5.10(c)): (a)
100% of the Equity Interest of any new Subsidiary is upon the acquisition,
creation or establishment of any such new Subsidiary pledged and delivered to
Lender for its benefit under the applicable Security Agreement; and (b) upon the
acquisition, creation or establishment of any such new Subsidiary, such
Subsidiary becomes a party to the applicable Security Documents and shall become
a Subsidiary Guarantor hereunder and execute a Joinder Agreement and other
applicable Loan Documents all in accordance with Section 5.10(b); and (c) any
Investment made in any such Subsidiary is permitted under Section 6.03.

       SECTION 6.12.       SALE AND LEASEBACK TRANSACTIONS. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property that it intends to use for substantially the same purpose or
purposes as the property being sold or transferred, except such transactions
among Loan Parties, unless (i) the sale of such property is permitted by Section
6.04 and (ii) any Liens arising in connection with its use of such property are
permitted by Section 6.02.

       SECTION 6.13.       LIMITATION ON LEASE OBLIGATIONS. Incur, create,
assume or permit to exist, directly or indirectly, any obligation as a lessee in
an amount exceeding, during any fiscal year of Borrower, $2 million multiplied
by the Pro Rata Percentage for such fiscal year in respect of any lease
obligation other than (i) a Capital Lease Obligation, (ii) obligations under the
MacArthur Sublease, and (iii) lease obligations under leases in effect on the
Closing Date and set forth on Schedule 6.13.

       SECTION 6.14.       BUSINESS. Unless otherwise expressly provided herein,
engage (directly or indirectly) in any business other than those businesses in
which Borrower and its Subsidiaries are engaged on the Closing Date (or that are
complementary or substantially related thereto or are reasonable extensions
thereof).

       SECTION 6.15.       LIMITATION ON ACCOUNTING CHANGES. Make or permit any
change in accounting policies or reporting practices without the consent of
Lender except changes that are required by GAAP.

       SECTION 6.16.       RESTRICTED PAYMENTS. Redeem, retire, purchase or
otherwise acquire, directly or indirectly, for any consideration, any shares of
any class of its capital stock or

                                       38



interest of any of its shareholders, in each case now or hereafter outstanding
(or any options or warrants issued by Borrower or any of its Subsidiaries with
respect to Borrower or any of its Subsidiaries' capital stock); except that
Borrower and its Subsidiaries may redeem, retire, purchase or otherwise acquire
any of Borrower's Subsidiaries' capital stock.

       SECTION 6.17.       FISCAL YEAR. Change its fiscal year-end from that in
effect on the Closing Date.

       SECTION 6.18.       FOREIGN SUBSIDIARIES. Sell, lease, contribute, loan,
advance, assign or otherwise transfer any property that is Collateral to any
Foreign Subsidiary, except that:

                  (a)      Borrower or any of its Subsidiaries may make loans,
         capital contributions or advances to any Wholly Owned Foreign
         Subsidiary, in the ordinary course of business consistent with past
         practice, to fund working capital, operating expenses and, to the
         extent permitted by this Agreement, Capital Expenditures, of any such
         Wholly Owned Foreign Subsidiary, required in the ordinary course of
         business consistent with past practice, in no event to exceed $8
         million in the aggregate for any fiscal quarter (excluding any amounts
         invested in any Wholly Owned Foreign Subsidiary that is as of the
         Closing Date or subsequently becomes a Guarantor (effective only upon
         such person being or becoming a Guarantor and only for so long as such
         person remains a Guarantor)); and provided further that, any such
         investment in excess of $1.0 million must be in the form of an
         intercompany loan to such Wholly Owned Foreign Subsidiary and shall be
         evidenced by an Intercompany Note pledged (and delivered) by the Loan
         Party that is the lender of such intercompany loan as Collateral
         pursuant to the applicable Security Agreement.

                  (b)      Borrower or any of its Subsidiaries may sell for cash
         (but not otherwise transfer) any property that is Collateral to any
         Foreign Subsidiary to the extent that any such sale would be a sale of
         assets permitted by Section 6.04(b)(ii).

                                   ARTICLE VII

                                    GUARANTEE

       SECTION 7.01.       THE GUARANTEE. The Guarantors hereby irrevocably and
unconditionally, jointly and severally guarantee as primary obligors and not as
sureties to Lender and its successors and assigns the prompt payment in full
when due (whether at stated maturity, by acceleration or otherwise) of the
principal of and interest on (including any interest, fees, costs or charges
that would accrue but for the provisions of Title 11 of the United States Code
after any bankruptcy or insolvency petition under Title 11 of the United States
Code) the Loans made by Lender to, and the Notes held by Lender of, Borrower,
and all other Obligations from time to time owing to Lender by any Loan Party
under any Loan Document strictly in accordance with the terms thereof (such
obligations being herein collectively called the "GUARANTEED OBLIGATIONS"). The
Guarantors hereby irrevocably and unconditionally, jointly and severally agree
that if

                                       39



Borrower or other Guarantor(s) shall fail to pay in full when due (whether at
stated maturity, by acceleration or otherwise) any of the Guaranteed
Obligations, the Guarantors will promptly pay the same, without any demand or
notice whatsoever, and that in the case of any extension of time of payment or
renewal of any of the Guaranteed Obligations, the same will be promptly paid in
full when due (whether at extended maturity, by acceleration or otherwise) in
accordance with the terms of such extension or renewal.

       SECTION 7.02.       OBLIGATIONS UNCONDITIONAL. The obligations of the
Guarantors under Section 7.01 shall constitute a guaranty of payment (and not of
collection) and are absolute, irrevocable and unconditional, joint and several
(except to the extent otherwise limited in accordance with applicable
Requirements of Law as described in Annex I attached hereto or in any other
Guarantee required by applicable Requirements of Law), irrespective of the
value, genuineness, validity, regularity or enforceability of the Guaranteed
Obligations of Borrower under this Agreement, the Notes, if any, or any other
agreement or instrument referred to herein or therein, or any substitution,
release or exchange of any other guarantee of or security for any of the
Guaranteed Obligations and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or Guarantor
(except for payment in full). Without limiting the generality of the foregoing,
it is agreed that the occurrence of any one or more of the following shall not
alter or impair the liability of the Guarantors hereunder, which shall remain
absolute, irrevocable and unconditional under any and all circumstances as
described above:

                           (i)      at any time or from time to time, without
           notice to the Guarantors, the time for any performance of or
           compliance with any of the Guaranteed Obligations shall be extended,
           or such performance or compliance shall be waived;

                           (ii)     any of the acts mentioned in any of the
           provisions of this Agreement or the Notes, if any, or any other
           agreement or instrument referred to herein or therein shall be done
           or omitted;

                           (iii)    the maturity of any of the Guaranteed
           Obligations shall be accelerated, or any of the Guaranteed
           Obligations shall be amended in any respect, or any right under the
           Loan Documents or any other agreement or instrument referred to
           herein or therein shall be amended or waived in any respect or any
           other guarantee of any of the Guaranteed Obligations or any security
           therefor shall be released or exchanged in whole or in part or
           otherwise dealt with;

                           (iv)     any Lien or security interest granted to, or
           in favor of, Lender as security for any of the Guaranteed Obligations
           shall fail to be perfected; or

                           (v)      the release of any other Guarantor.

                                       40



       The Guarantors hereby expressly waive diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that any Loan
Party exhaust any right, power or remedy or proceed against Borrower under this
Agreement or the Notes, if any, or any other agreement or instrument referred to
herein or therein, or against any other person under any other guarantee of, or
security for, any of the Guaranteed Obligations. The Guarantors waive any and
all notice of the creation, renewal, extension, waiver, termination or accrual
of any of the Guaranteed Obligations and notice of or proof of reliance by
Lender upon this Guarantee or acceptance of this Guarantee, and the Guaranteed
Obligations, and any of them, shall conclusively be deemed to have been created,
contracted or incurred in reliance upon this Guarantee, and all dealings between
Borrower and Lender shall likewise be conclusively presumed to have been had or
consummated in reliance upon this Guarantee. This Guarantee shall be construed
as a continuing, absolute, irrevocable and unconditional guarantee of payment
without regard to any right of offset with respect to the Guaranteed Obligations
at any time or from time to time held by Lender, and the obligations and
liabilities of the Guarantors hereunder shall not be conditioned or contingent
upon the pursuit by Lender or any other person at any time of any right or
remedy against Borrower or against any other person that may be or become liable
in respect of all or any part of the Guaranteed Obligations or against any
collateral or guarantee therefor or right of offset with respect thereto. This
Guarantee shall remain in full force and effect and be binding in accordance
with and to the extent of its terms upon the Guarantors and the successors and
assigns thereof, and shall inure to the benefit of Lender, and its successors
and assigns, notwithstanding that from time to time during the term of this
Agreement there may be no Guaranteed Obligations outstanding.

       For purposes of this paragraph only, references to the "principal"
include each Loan Party and references to the "creditor" includes Lender and its
successors and permitted assigns. In accordance with Section 2856 of the
California Civil Code, each Guarantor waives all rights and defenses (i)
available to such Guarantor by reason of Sections 2787 through 2855, 2899, and
3433 of the California Civil Code, including all rights or defenses such
Guarantor may have by reason of protection afforded to the principal with
respect to any of the Guaranteed Obligations, or to any other guarantor of any
of the Guaranteed Obligations with respect to any of such guarantor's
obligations under its guarantee, in either case in accordance with the
antideficiency or other laws of the State of California limiting or discharging
the principal's Indebtedness or such other guarantor's obligations, including
Sections 580a, 580b, 580d and 726 of the California Code of Civil Procedure; and
(ii) arising out of an election of remedies by the creditor, even though such
election, such as a nonjudicial foreclosure with respect to security for any
Guaranteed Obligation (or any obligation of any other guarantor of any of the
Guaranteed Obligations), has destroyed such Guarantor's right of subrogation and
reimbursement against the principal (or such other guarantor) by the operation
of Section 580d of the California Code of Civil Procedure or otherwise. No other
provision of this Guarantee shall be construed as limiting the generality of any
of the covenants and waivers set forth in this paragraph. As provided below,
this Agreement shall be governed by, and shall be construed and enforced in
accordance with the laws of the State of New York. This paragraph is included
solely out of an abundance of caution, and shall not be construed to mean that
any of the above-referenced provisions of California law are in any way
applicable to this Agreement or to any of the Guaranteed Obligations.

                                       41



       SECTION 7.03.       REINSTATEMENT. The obligations of the Guarantors
under this Article VII shall be automatically reinstated if and to the extent
that for any reason any payment by or on behalf of Borrower or any other Loan
Party in respect of the Guaranteed Obligations is rescinded or must be otherwise
restored by any holder of any of the Guaranteed Obligations, whether as a result
of any proceedings in bankruptcy or reorganization or otherwise. The Guarantors
jointly and severally (except to the extent otherwise limited in accordance with
applicable Requirements of Law as described in Annex I attached hereto or in any
other Guarantee required by applicable Requirements of Law) agree that they will
indemnify Lender on demand for all reasonable costs and expenses (including
reasonable fees of counsel) incurred by Lender in connection with such
rescission or restoration, including any such costs and expenses incurred in
defending against any claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law, other than any costs or expenses resulting from the gross
negligence, bad faith or willful misconduct of Lender.

       SECTION 7.04.       SUBROGATION; SUBORDINATION. Each Guarantor hereby
agrees that until the indefeasible payment and satisfaction in full in cash of
all Guaranteed Obligations and the expiration and termination of the Commitment
of Lender under this Agreement it shall not exercise any right or remedy arising
by reason of any performance by it of its guarantee in Section 7.01, whether by
subrogation or otherwise, against Borrower or any other Guarantor of any of the
Guaranteed Obligations or any security for any of the Guaranteed Obligations.
The payment of any amounts due with respect to any Indebtedness of Borrower or
any other Guarantor now or hereafter owing to any Guarantor or Borrower by
reason of any payment by such Guarantor under the Guarantee in this Article VII
is hereby subordinated to the prior indefeasible payment in full in cash of the
Guaranteed Obligations. In addition, any Indebtedness of the Borrower or any
Subsidiary now or hereafter held by any Guarantor is hereby subordinated in
right of payment in full in cash to the Guaranteed Obligations. Each Guarantor
agrees that it will not demand, sue for or otherwise attempt to collect any such
Indebtedness of Borrower or any Subsidiary to such Guarantor until the
Obligations shall have been indefeasibly paid in full in cash. If,
notwithstanding the preceding sentence, any Guarantor shall, prior to the
indefeasible payment in full in cash of the Guaranteed Obligations, collect,
enforce or receive any amounts in respect of such indebtedness, such amounts
shall be collected, enforced and received by such Guarantor as trustee for
Lender and be paid over to Lender on account of the Guaranteed Obligations
without affecting in any manner the liability of such Guarantor under the other
provisions of the guaranty contained herein. Each Subsidiary of Borrower which
(x) is not a Guarantor and (y) holds outstanding Indebtedness of another
Subsidiary of Borrower shall execute an agreement, in form and substance
reasonably satisfactory to Lender, subordinating such indebtedness to the prior
indefeasible payment in full in cash of the Guaranteed Obligations. Solely for
the purposes of this Section 7.04, the term "Indebtedness" shall not include
intercompany advances and amounts for goods or services sold or rendered in the
ordinary course of business, consistent with past practices, owed by any
Subsidiary to any Guarantor.

       SECTION 7.05.       REMEDIES. The Guarantors jointly and severally
(except to the extent otherwise limited in accordance with applicable
Requirements of Law as described in Annex I attached hereto) agree that, as
between the Guarantors and the Lenders, the obligations of Borrower under this
Agreement and the Notes, if any, may be declared to be forthwith due and

                                       42



payable as provided in Article VIII (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Article
VIII) for purposes of Section 7.01, notwithstanding any stay, injunction or
other prohibition preventing such declaration (or such obligations from becoming
automatically due and payable) as against Borrower and that, in the event of
such declaration (or such obligations being deemed to have become automatically
due and payable), such obligations (whether or not due and payable by Borrower)
shall forthwith become due and payable by the Guarantors for purposes of Section
7.01.

       SECTION 7.06.       INSTRUMENT FOR THE PAYMENT OF MONEY. Each Guarantor
hereby acknowledges that the guarantee in this Article VII constitutes an
instrument for the payment of money, and consents and agrees that Lender, at its
sole option, in the event of a dispute by such Guarantor in the payment of any
moneys due hereunder, shall have the right to bring a motion-action under New
York CPLR Section 3213 to the extent permitted thereunder.

       SECTION 7.07.       GENERAL LIMITATION ON GUARANTEE OBLIGATIONS. In any
action or proceeding involving any state corporate law, or any state, federal or
foreign bankruptcy, insolvency, reorganization or other law affecting the rights
of creditors generally, if the obligations of any Guarantor under Section 7.01
would otherwise be held or determined to be void, voidable, invalid or
unenforceable, or subordinated to the claims of any other creditors, on account
of the amount of its liability under Section 7.01, then, notwithstanding any
other provision to the contrary, the amount of such liability shall, without any
further action by such Guarantor, any Loan Party or any other person, be
automatically limited and reduced to the highest amount that is valid and
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.

       SECTION 7.08.       CONTINUING GUARANTEE. The Guarantees in this Article
VII are continuing guarantees of payment, and shall apply to all Guaranteed
Obligations whenever arising.

       SECTION 7.09.       RELEASE OF GUARANTORS. If at any time after the
Closing Date and in connection with the Guarantee of any Loan Party in this
Article VII (i) subject to the requirements of Section 5.10(c), in the case of a
Foreign Subsidiary, Lender (after consultation with Borrower) determines that in
the case of any existing Guarantor, it would not be commercially reasonable for
such Guarantor to remain a Guarantor (taking into account the expense (including
taxes), the ability of Borrower or such Guarantor to obtain any necessary
approvals or consents required to be obtained under applicable law (but have not
been previously obtained) in connection therewith, and the effectiveness and
enforceability thereof under applicable law) or (ii) such Guarantee becomes
illegal under applicable law and such Loan Party delivers to Lender a legal
opinion from its counsel to such effect, and no reasonable alternative structure
can be devised having substantially the same effect as the issuance of a
Guarantee that would not be illegal under applicable law, then, in case of each
of the immediately preceding clauses (i) and (ii), Lender shall (at the expense
of Borrower) take all action necessary to release its security interest in that
portion of the Security Agreement Collateral owned by such Guarantor (provided,
however, that any Equity Interests of such Guarantor subject to the Lien of the
Lender shall not be released from the Security Agreement Collateral), and such
Guarantor shall be

                                       43



released from its obligations in respect of the Guarantees in this Article VII
(such Guarantor being hereinafter referred to as a "RELEASED GUARANTOR," so long
as it continues to be a Non-Guarantor Subsidiary), which release from such
Guarantees, in the case of an event described in the immediately preceding
clause (i), shall become effective as of the closing of the last day of the
taxable year that immediately precedes the date that Lender makes a
determination described in such clause (i).

                                  ARTICLE VIII

                                EVENTS OF DEFAULT

       In case of the happening of any of the following events ("EVENTS OF
DEFAULT"):

                  (a)      default shall be made in the payment of any principal
         of any Loan when and as the same shall become due and payable, whether
         at the due date thereof or by acceleration thereof or otherwise;

                  (b)      default shall be made in the payment of any interest
         on any Loan (other than any amount added to principal of Loans pursuant
         to Section 2.05(d)) or any other amount (other than an amount referred
         to in paragraph (a) above) due under any Loan Document, when and as the
         same shall become due and payable, and such default shall continue
         unremedied for a period of five Business Days;

                  (c)      any representation or warranty made or deemed made in
         or in connection with any Loan Document or the borrowings hereunder, or
         any representation, warranty, statement or information contained in any
         report, certificate, financial statement or other instrument furnished
         in connection with or pursuant to any Loan Document, shall prove to
         have been false or misleading in any material respect when so made,
         deemed made or furnished;

                  (d)      default shall be made in the due observance or
         performance by any Company of any covenant, condition or agreement
         contained in Section 5.01, 5.03 or 5.07 or in Article VI;

                  (e)      default shall be made in the due observance or
         performance by any Company of any covenant, condition or agreement
         contained in any Loan Document (other than those specified in paragraph
         (a), (b) or (d) above), and such default shall continue unremedied or
         shall not be waived for a period of 30 days after the earlier of (i) an
         officer of such Company becoming aware of such default or (ii) receipt
         by Borrower and such Company of notice from Lender of such default;

                  (f)      any Company (other than any Immaterial Subsidiary)
         shall (i) fail to pay any principal or interest, regardless of amount,
         due in respect of any Indebtedness (other than the Obligations) when
         and as the same shall become due

                                       44



         and payable (after all applicable grace periods have expired); or (ii)
         fail to observe or perform any other term, covenant, condition or
         agreement contained in any agreement or instrument evidencing or
         governing any such Indebtedness if the effect of any failure referred
         to in this clause (ii) is to cause, or to permit the holder or holders
         of such Indebtedness or a trustee on its or their behalf (with or
         without the giving of notice, the lapse of time or both) to cause, such
         Indebtedness to become due prior to its stated maturity; provided that,
         it shall not constitute an Event of Default pursuant to this paragraph
         (f) unless the aggregate amount of all such Indebtedness referred to in
         clauses (i) and (ii) exceeds $1.0 million at any one time;

                  (g)      an involuntary proceeding shall be commenced or an
         involuntary petition shall be filed in a court of competent
         jurisdiction seeking (i) relief in respect of any Company (other than
         any Immaterial Subsidiary), or of a substantial part of the property or
         assets of any Company (other than any Immaterial Subsidiary), under the
         Bankruptcy Code, or any other federal, state or foreign bankruptcy,
         insolvency, receivership or similar law; (ii) the appointment of a
         receiver, trustee, custodian, sequestrator, conservator or similar
         official for any Company (other than any Immaterial Subsidiary) or for
         a substantial part of the property or assets of any Company; or (iii)
         the winding-up or liquidation of any Company (other than any Immaterial
         Subsidiary); and such proceeding or petition shall continue undismissed
         for 60 days or an order or decree approving or ordering any of the
         foregoing shall be entered;

                  (h)      any Company (other than any Immaterial Subsidiary)
         shall (i) voluntarily commence any proceeding or file any petition
         seeking relief under the Bankruptcy Code, or any other federal, state
         or foreign bankruptcy, insolvency, receivership or similar law; (ii)
         consent to the institution of, or fail to contest in a timely and
         appropriate manner, any proceeding or the filing of any petition
         described in paragraph (g) above; (iii) apply for or consent to the
         appointment of a receiver, trustee, custodian, sequestrator,
         conservator or similar official for any Company (other than any
         Immaterial Subsidiary) or for a substantial part of the property or
         assets of any Company (other than any Immaterial Subsidiary); (iv) file
         an answer admitting the material allegations of a petition filed
         against it in any such proceeding; (v) make a general assignment for
         the benefit of creditors; (vi) become unable, admit in writing its
         inability or fail generally to pay its debts as they become due; (vii)
         take any action for the purpose of effecting any of the foregoing; or
         (viii) wind up or liquidate;

                  (i)      one or more judgments for the payment of money in an
         aggregate amount in excess of $1.0 million shall be rendered against
         any Company or any combination thereof and the same shall remain
         undischarged for a period of 30 consecutive days during which execution
         shall not be effectively stayed, or any action shall be legally taken
         by a judgment creditor to levy upon assets or properties of any Company
         to enforce any such judgment;

                                       45



                  (j)      an ERISA Event occurs, an event of noncompliance with
         respect to any Foreign Plan occurs or, if the present value of the
         accrued benefit liabilities (whether or not vested) under any Foreign
         Plan that is funded, determined as of the end of the most recently
         ended fiscal year of the respective Loan Party on the basis of
         actuarial assumptions proper under applicable foreign law, exceeds the
         current value of the assets of such Foreign Plan by more than $1.0
         million, that in the opinion of Lender, when taken together with all
         other such ERISA Events, noncompliance and underfunding, could
         reasonably be expected to result in liability to any Company or its
         ERISA Affiliates in an aggregate amount exceeding $1.0 million;

                  (k)      any security interest and Lien purported to be
         created by any Security Document shall cease to be in full force and
         effect, or shall cease to give Lender, for its benefit, the Liens,
         rights, powers and privileges purported to be created and granted under
         such Security Documents (including a perfected first priority security
         interest in and Lien on all of the Collateral thereunder (except as
         otherwise expressly provided in such Security Documents)) in favor of
         Lender, or shall be asserted by Borrower or any other Loan Party not to
         be a valid, perfected, first priority (except as otherwise expressly
         provided in this Agreement or such Security Document) security interest
         in or Lien on the Collateral covered thereby;

                  (l)      the Guarantees or any Security Document shall cease
         to be in full force and effect, except to the extent expressly
         permitted to be released hereunder in accordance with Section 7.09;

                  (m)      any Loan Document or any material provisions thereof
         shall at any time and for any reason be declared by a court of
         competent jurisdiction to be null and void, or a proceeding shall be
         commenced by any Loan Party or any other person, or by any Governmental
         Authority, seeking to establish the invalidity or unenforceability
         thereof (exclusive of questions of interpretation of any provision
         thereof), or any Loan Party shall repudiate or deny that it has any
         liability or obligation for the payment of principal or interest or
         other obligations purported to be created under any Loan Document;

                  (n)      there shall have occurred a Change of Control; or

                  (o)      the Distribution shall not have occurred on the
         Closing Date in accordance with the terms and conditions of the
         Distribution Agreement;

then, and in every such event (other than an event described in paragraph (g) or
(h) above), and at any time thereafter during the continuance of such event,
Lender may by notice to Borrower, take either or both of the following actions,
at the same or different times: (i) terminate forthwith the Commitment in whole
or in part; and (ii) declare the Loans then outstanding to be forthwith due and
payable in whole or in part, whereupon the principal of the Loans so declared to
be due and payable, together with accrued interest thereon and all other
liabilities of Borrower accrued hereunder and under any other Loan Document,
shall become forthwith due and payable, without

                                       46



presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by Borrower and the Guarantors, anything contained
herein or in any other Loan Document to the contrary notwithstanding. In any
event described in paragraph (g) or (h) above, the Commitment shall
automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and all other liabilities of Borrower
accrued hereunder and under any other Loan Document, shall automatically become
due and payable, without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived by Borrower and the Guarantors,
anything contained herein or in any other Loan Document to the contrary
notwithstanding.

                                   ARTICLE IX

                                  MISCELLANEOUS

       SECTION 9.01.       Notices. Notices and other communications provided
for herein shall be in writing and shall be delivered by hand or overnight
courier service, mailed by certified or registered mail or sent by telecopy, as
follows:

                  (a)      if to any Loan Party, to Borrower at:

                                    Mindspeed Technologies, Inc.
                                    4000 MacArthur Boulevard
                                    Newport Beach, California 92660-3095
                                    Attention: Simon Biddiscombe
                                    Phone: (949) 579-3000
                                    Telecopy No.: (949) 579-5289;

                                    With a courtesy copy to:

                                    Chadbourne & Parke LLP
                                    30 Rockefeller Plaza
                                    New York, New York 10112
                                    Attention: Peter R. Kolyer, Esq.
                                    Phone: (212) 408-5100
                                    Telecopy No.: (212) 541-5369

                                       47



                  (b)      if to Conexant, to it at:

                                    Conexant Systems, Inc.
                                    4311 Jamboree Road
                                    Newport Beach, California 92660-3095
                                    Attention: Dennis E. O'Reilly, Esq.,
                                               Senior Vice President,
                                               General Counsel and Secretary
                                    Phone: (949) 483-4600
                                    Telecopy No.: (949) 483-6388;

                                    With a courtesy copy to:

                                    Chadbourne & Parke LLP
                                    30 Rockefeller Plaza
                                    New York, New York 10112
                                    Attention: Peter R. Kolyer, Esq.
                                    Phone: (212) 408-5100
                                    Telecopy No.: (212) 541-5369

                  (c)      if to a Lender other than Conexant, to it at its
         address (or telecopy number) set forth in the Assignment and Acceptance
         pursuant to which such Lender shall have become a party hereto.

All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or by certified or registered mail, in each case delivered, sent or
mailed (properly addressed) to such party as provided in this Section 9.01 or in
accordance with the latest unrevoked direction from such party given in
accordance with this Section 9.01, and failure to deliver courtesy copies of
notices and other communications shall in no event affect the validity or
effectiveness of such notices and other communications.

       SECTION 9.02.       WAIVERS; AMENDMENT.

                  (a)      No failure or delay by Lender in exercising any right
         or power hereunder or under any other Loan Document shall operate as a
         waiver thereof, nor shall any single or partial exercise of any such
         right or power, or any abandonment or discontinuance of steps to
         enforce such a right or power, preclude any other or further exercise
         thereof or the exercise of any other right or power. The rights and
         remedies of Lender hereunder and under the other Loan Documents are
         cumulative and are not exclusive of any rights or remedies that they
         would otherwise have. No waiver of any provision of any Loan Document
         or consent to any departure by any Loan Party therefrom shall in any
         event be effective unless the same shall be permitted by Section
         9.02(b), and then such waiver or consent shall be effective only in the
         specific instance and for the purpose for which given. Without limiting
         the

                                       48



         generality of the foregoing, the making of a Loan shall not be
         construed as a waiver of any Default, regardless of whether Lender may
         have had notice or knowledge of such Default at the time.

                  (b)      Neither this Agreement nor any other Loan Document
         nor any provision hereof or thereof may be waived, amended or modified
         except, in the case of this Agreement, pursuant to an agreement or
         agreements in writing entered into by Borrower and Lender or, in the
         case of any other Loan Document, pursuant to an agreement or agreements
         in writing entered into by Lender and the Loan Party or Loan Parties
         that are parties thereto.

       SECTION 9.03.       EXPENSES; INDEMNITY.

                  (a)      Borrower agrees to pay all reasonable out-of-pocket
         expenses (including reasonable legal fees and expenses of counsel,
         expenses incurred in connection with due diligence and travel, courier,
         reproduction, printing and delivery expenses) incurred by Lender in
         connection with the preparation, execution and delivery, administration
         of this Agreement and the other Loan Documents or in connection with
         any amendments, modifications, enforcement costs or waivers of the
         provisions hereof or thereof (whether or not the transactions hereby or
         thereby contemplated shall be consummated), or incurred by Lender, in
         connection with the enforcement or protection of its rights in
         connection with this Agreement and the other Loan Documents or in
         connection with the Loans made hereunder, including the reasonable
         fees, charges and disbursements of Chadbourne & Parke LLP, special
         counsel for Lender (and one local counsel in each foreign jurisdiction
         where Lender deems such local counsel advisable and any additional
         counsel to Lender required in the event of a conflict of interest),
         and, in connection with any such enforcement or protection, the fees,
         charges and disbursements of any consultants and advisors in connection
         with any out of court workout or in any bankruptcy case.

                  (b)      Except to the extent otherwise limited in accordance
         with applicable Requirements of Law as described in Annex I attached
         hereto, the Loan Parties agree, jointly and severally, to indemnify
         Lender, each Affiliate of Lender, and each of their respective
         directors, officers, trustees, employees and agents (each such person
         being called an "INDEMNITEE") against, and to hold each Indemnitee
         harmless from, all reasonable out-of-pocket costs and any and all
         losses, claims, damages, liabilities and related expenses, including
         reasonable counsel fees, charges and disbursements, incurred by or
         asserted against any Indemnitee arising out of, in any way connected
         with, or as a result of (i) any actual or proposed use of the proceeds
         of the Loans; or (ii) any claim, litigation, investigation or
         proceeding relating to any of the foregoing, whether or not any
         Indemnitee is a party thereto; or (iii) any Transaction Document;
         provided that, such indemnity shall not, as to any Indemnitee, be
         available to the extent that such losses, claims, damages, liabilities
         or related expenses are determined by a court of competent jurisdiction
         by final and nonappealable judgment

                                       49



         to have resulted from the bad faith, gross negligence or willful
         misconduct of such Indemnitee.

                  (c)      The provisions of this Section 9.03 shall remain
         operative and in full force and effect regardless of the expiration of
         the term of this Agreement, the consummation of the Transactions
         contemplated hereby, the repayment of any of the Loans, the expiration
         of the Commitment, the invalidity or unenforceability of any term or
         provision of this Agreement or any other Loan Document, or any
         investigation made by or on behalf of Lender. All amounts due under
         this Section 9.03 shall be payable on written demand therefor
         accompanied by reasonable documentation with respect to any
         reimbursement, indemnification or other amount requested.

       SECTION 9.04.       SUCCESSORS AND ASSIGNS.

                  (a)      The provisions of this Agreement shall be binding
         upon and inure to the benefit of the parties hereto and their
         respective successors and assigns permitted hereby, except that no Loan
         Party may assign or otherwise transfer any of its rights or obligations
         hereunder without the prior written consent of Lender (and any
         attempted assignment or transfer by any Loan Party without such consent
         shall be null and void). Nothing in this Agreement, express or implied,
         shall be construed to confer upon any person (other than the parties
         hereto, their respective successors and assigns permitted hereby and,
         to the extent expressly contemplated hereby, the Indemnitees) any legal
         or equitable right, remedy or claim under or by reason of this
         Agreement.

                  (b)      Lender may assign to one or more assignees all or a
         portion of its rights and obligations under this Agreement (including
         all or a portion of its Commitment and the Loans at the time owing to
         it); provided that, (i) except in the case of an assignment to an
         Affiliate of a Lender, Borrower must give its prior written consent to
         such assignment (which consent shall not be unreasonably withheld or
         delayed); (ii) except in the case of an assignment of the entire
         remaining amount of the assigning Lender's Commitment or Loans, the
         amount of the Commitment or Loans of the assigning Lender subject to
         each such assignment (determined as of the date the Assignment and
         Acceptance with respect to such assignment is delivered to the
         Borrower) shall be in a principal amount that is an integral multiple
         of $500,000 and not less than $1.0 million, unless Borrower otherwise
         consents; (iii) each partial assignment shall be made as an assignment
         of a proportionate part of all the assigning Lender's rights and
         obligations under this Agreement; and (iv) the parties to each
         assignment shall execute and deliver to Borrower an Assignment and
         Acceptance; provided further that, any consent of Borrower otherwise
         required under this Section 9.04(b) shall not be required if a Default
         or an Event of Default under Article VIII has occurred and is
         continuing. Subject to acceptance, from and after the effective date
         specified in each Assignment and Acceptance, the assignee thereunder
         shall be a party hereto and, to the extent of the interest assigned by
         such Assignment and Acceptance, have the rights and

                                       50



         obligations of Lender under this Agreement (provided that, any
         liability of Borrower to such assignee under Section 2.09 shall be
         limited to the amount, if any, that would have been payable thereunder
         by Borrower in the absence of such assignment), and the assigning
         Lender thereunder shall, to the extent of the interest assigned by such
         Assignment and Acceptance, be released from its obligations under this
         Agreement (and, in the case of an Assignment and Acceptance covering
         all of the assigning Lender's rights and obligations under this
         Agreement, such Lender shall cease to be a party hereto but shall
         continue to be entitled to the benefits of Sections 2.09 and 9.03).

                  (c)      Upon its receipt of a duly completed Assignment and
         Acceptance executed by an assigning Lender and an assignee, the
         assignee's completed Administrative Questionnaire, and any written
         consent to such assignment required by Section 9.04(b), such Assignment
         and Acceptance shall become effective for all purposes.

                  (d)      Lender may at any time pledge or assign a security
         interest in all or any portion of its rights under this Agreement to
         secure its obligations, including any pledge or assignment to secure
         obligations to a Federal Reserve Bank, and the other provisions of this
         Section 9.04 shall not apply to any such pledge or assignment of a
         security interest; provided that, no such pledge or assignment of a
         security interest shall release Lender from any of its obligations
         hereunder or substitute any such pledgee or assignee for Lender as a
         party hereto.

       SECTION 9.05.       SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made by the Loan Parties in the Loan Documents
and in the certificates or other instruments delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the other parties hereto and shall survive the
execution and delivery of the Loan Documents and the making of any Loans,
regardless of any investigation made by any such other party or on its behalf
and notwithstanding that Lender may have had notice or knowledge of any Default
or incorrect representation or warranty at the time any credit is extended
hereunder, and shall continue in full force and effect as long as the principal
of or any accrued interest on any Loan or any fee or any other amount payable
under this Agreement is outstanding and unpaid and so long as the Commitments
have not expired or terminated. The provisions of Sections 2.09 and 9.03 shall
survive and remain in full force and effect regardless of the consummation of
the transactions contemplated hereby, the repayment of the Loans, the expiration
or termination of the Commitments or the termination of this Agreement or any
provision hereof.

       SECTION 9.06.       COUNTERPARTS; INTEGRATION; EFFECTIVENESS. This
Agreement may be executed in counterparts (and by different parties hereto on
different counterparts), each of which shall constitute an original, but all of
which when taken together shall constitute a single contract. This Agreement and
the other Loan Documents constitute the entire contract among the parties
relating to the subject matter hereof and supersede any and all previous
agreements and understandings, oral or written, relating to the subject matter
hereof. Except as provided in

                                       51



Article IV, this Agreement shall become effective when it shall have been
executed by the parties hereto, and thereafter shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
assigns. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement.

       SECTION 9.07.       SEVERABILITY. Any provision of this Agreement held to
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

       SECTION 9.08.       RIGHT OF SET-OFF. If an Event of Default shall have
occurred and be continuing, Lender and each of its Affiliates are hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final (other than deposits in trust accounts)) at any
time held and other obligations at any time owing by Lender or Affiliate to or
for the credit or the account of any Loan Party against any of and all the
obligations of any Loan Party now or hereafter existing under this Agreement
held by Lender, irrespective of whether or not Lender shall have made any demand
under this Agreement and although such obligations may be unmatured. The rights
of Lender under this Section 9.08 are in addition to other rights and remedies
(including other rights of set-off) that Lender may have.

       SECTION 9.09.       GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
PROCESS.

                  (a)      THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH
         AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK (INCLUDING SECTIONS
         5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW
         YORK).

                  (b)      Each Loan Party hereby irrevocably and
         unconditionally submits, for itself and its property, to the
         nonexclusive jurisdiction of the Supreme Court of the State of New York
         sitting in New York County and of the United States District Court of
         the Southern District of New York, and any appellate court from any
         thereof, in any action or proceeding arising out of or relating to any
         Loan Document, or for recognition or enforcement of any judgment, and
         each of the parties hereto hereby irrevocably and unconditionally
         agrees that all claims in respect of any such action or proceeding may
         be heard and determined in such New York State or, to the extent
         permitted by law, in such federal court. Each of the parties hereto
         agrees that a final judgment in any such action or proceeding shall be
         conclusive and may be enforced in other jurisdictions by suit on the
         judgment or in any other manner provided by law. Nothing in this
         Agreement or any other Loan Document shall affect any right that any
         Lender may otherwise have to bring any action or proceeding relating to
         this Agreement or any other Loan Document against any Loan Party or its
         properties in the courts of any jurisdiction.

                                       52



                  (c)      Each Loan Party hereby irrevocably and
         unconditionally waives, to the fullest extent it may legally and
         effectively do so, any objection that it may now or hereafter have to
         the laying of venue of any suit, action or proceeding arising out of or
         relating to this Agreement or any other Loan Document in any court
         referred to in Section 9.09(b). Each of the parties hereto hereby
         irrevocably waives, to the fullest extent permitted by law, the defense
         of an inconvenient forum to the maintenance of such action or
         proceeding in any such court.

                  (d)      Each party to this Agreement irrevocably consents to
         service of process in the manner provided for notices in Section 9.01.
         Nothing in this Agreement or any other Loan Document will affect the
         right of any party to this Agreement to serve process in any other
         manner permitted by law.

       SECTION 9.10.       WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH
PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 9.10.

       SECTION 9.11.       CONFIDENTIALITY. Lender agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its Affiliates' directors, officers, employees and
agents, including accountants, legal counsel and other advisors (it being
understood that the persons to whom such disclosure is made will be informed of
the confidential nature of such Information and instructed to keep such
Information confidential pursuant to the terms hereof); (b) to the extent
requested by any regulatory authority; (c) to the extent required by applicable
laws or regulations or by any subpoena or similar legal process; (d) to any
other party to this Agreement; (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or any other Loan Document or the enforcement of rights hereunder or thereunder;
(f) subject to an agreement containing provisions substantially the same as
those of this Section 9.11, to any assignee of, or any prospective assignee of,
any of its rights or obligations under this Agreement; (g) with the consent of
Borrower; or (h) to the extent such Information (i) is publicly available at the
time of disclosure or becomes publicly available other than as a result of a
breach of this Section 9.11, or (ii) becomes available to Lender on a
nonconfidential basis from a source other than Borrower or any Subsidiary. For
the purposes of this Section 9.11, "INFORMATION" shall mean all information
received from Borrower or any Subsidiary on a confidential basis relating to
Borrower or any

                                       53



Subsidiary or its business, other than any such information that is available to
any Lender on a nonconfidential basis prior to disclosure by Borrower or any
Subsidiary. Any person required to maintain the confidentiality of Information
as provided in this Section 9.11 shall be considered to have complied with its
obligation to do so if such person has exercised the same degree of care to
maintain the confidentiality of such Information as such person would accord to
its own confidential information.

                            [signature pages follow]

                                       54



       IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.

                                    MINDSPEED TECHNOLOGIES, INC.,
                                    as Borrower

                                    By: /s/ Simon Biddiscombe
                                        ----------------------------------------
                                        Name: Simon Biddiscombe
                                        Title: Senior Vice President, Chief
                                               Financial Officer and Treasurer



                                    APPLIED TELECOM, INC., as a Guarantor

                                    By: /s/ Balakrishnan S. Iyer
                                        ----------------------------------------
                                        Name: Balakrishnan S. Iyer
                                        Title: Vice President



                                    HOTRAIL, INC., as a Guarantor

                                    By: /s/ Balakrishnan S. Iyer
                                        -----------------------------------
                                        Name: Balakrishnan S. Iyer
                                        Title: President



                                    CONEXANT SPINCO TECHNOLOGIES, LLC, as a
                                    Guarantor

                                    By: Steven W. Sprecher
                                        ----------------------------------------
                                        Name: Steven W. Sprecher
                                        Title: Manager



                                    MAKER COMMUNICATIONS, INC., as a Guarantor

                                    By: /s/ Jasmina Theodore Boulanger
                                        ----------------------------------------
                                        Name: Jasmina Theodore Boulanger
                                        Title: Assistant Secretary



                                    BROOKTREE CORPORATION, as a Guarantor

                                    By: /s/ Balakrishnan S. Iyer
                                        --------------------------------------
                                        Name: Balakrishnan S. Iyer
                                        Title: Vice President



                                    CONEXANT SYSTEMS, INC., as Lender

                                    By: /s/ Kerry K. Petry
                                        ----------------------------------------
                                        Name: Kerry K. Petry
                                        Title: Vice President and Treasurer



                                                                       EXHIBIT A

                                  DEFINED TERMS
                              RULES OF CONSTRUCTION

1.01.    DEFINED TERMS.

         "AFFILIATE" means, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
Controls, is Controlled by or is under common Control with the person specified;
provided, however, that, for purposes of Section 6.06, the term "AFFILIATE"
shall also include any person, other than Conexant, that directly or indirectly
owns more than 10% of any class of Equity Interests of the person specified or
that is an officer or director of the person specified.

         "AGREEMENT" means this Agreement, as amended, restated, supplemented or
otherwise modified from time to time.

         "AGREEMENT AND ESTOPPEL CERTIFICATE" means any Agreement and Estoppel
Certificate between a Loan Party, as tenant, and the applicable holder of the
fee interest, as landlord, substantially in the form of Exhibit E-1.

         "ASSET SALE" means (a) any conveyance, sale, lease, sublease,
assignment, transfer, license or other disposition (including by way of merger
or consolidation and including any sale and leaseback transaction) of any
property (including stock of any Subsidiary by the holder thereof) by Borrower
or any of its Subsidiaries to any person other than a Loan Party (other than
sales and other dispositions of inventory, and licensing of Intellectual
Property in the ordinary course of business consistent with past practices) and
(b) any issuance or sale by any Subsidiary of its Equity Interests to any person
other than a Loan Party.

         "ASSIGNMENT AND ACCEPTANCE" means an assignment and acceptance entered
into by Lender and its assignee, in the form of Exhibit B, or such other form as
shall be approved by Borrower.

         "ATTRIBUTABLE INDEBTEDNESS" means, when used with respect to any sale
and leaseback transaction, as at the time of determination, the present value
(discounted at a rate equivalent to Borrower's then-current weighted-average
cost of funds for borrowed money as at the time of determination, compounded on
a semi-annual basis) of the total obligations of the lessee for rental payments
during the remaining term of the lease included in any such sale and leaseback
transaction.

         "AVAILABILITY PERIOD" means the period from and including the Closing
Date (subject to the last sentence in Section 5.12 and the satisfaction of all
the conditions to Loans in Article IV) to the first to occur of (x) the Final
Maturity Date, (y) any termination of the Commitment pursuant to Section 2.06 or
Article VIII hereof and (z) the date the Borrower enters into any binding
commitment for a Consent Acquisition which either (i) is not approved by Lender
as provided in the definition of "Consent Acquisition" or (ii) is effected
pursuant to the waiver contained in the proviso clause in paragraph (3) of the
definition of "Consent Acquisition".

                                       A-1



         "BANKRUPTCY CODE" means Title 11 of the United States Code entitled
"Bankruptcy," as now and hereafter in effect, or any successor statute.

         "BOARD" means the Board of Governors of the Federal Reserve System of
the United States of America.

         "BORROWER" has the meaning assigned to such term in the preamble
hereto.

         "BORROWER COMMON STOCK" means the common stock $0.01 par value per
share of Borrower, together with the associated preferred share purchase rights.

         "BORROWING REQUEST" means a request for a Loan by Borrower in
accordance with the terms of Section 2.03 and substantially in the form of
Exhibit C, or such other form as shall be approved by Lender, appropriately
completed in conformity with this Agreement and signed by the Chief Executive
Officer or Chief Financial Officer of Borrower.

         "BUSINESS DAY" means any day other than a Saturday, Sunday or day on
which banks in California or Michigan are authorized or required by law to
close.

         "BUSINESS UNIT" means, with respect to Borrower or any Subsidiary, (i)
any "segment," as defined by GAAP, reflected in Borrower's financial statements
included in filings made under the Exchange Act and (ii) any business unit,
product line or product, or any combination thereof, that, consistent with past
practice under Borrower's internal controls and procedures for accounting
matters, separately reports Revenue for purposes of preparing Borrower's
financial statements under GAAP.

         "CAPITAL EXPENDITURES" means, with respect to any person, for any
period, the aggregate of all expenditures of such person and its Consolidated
Subsidiaries for the acquisition of fixed or capital assets which should be
capitalized under GAAP on a consolidated balance sheet of such person and its
Consolidated Subsidiaries.

         "CAPITAL LEASE OBLIGATIONS" of any person means the obligations of such
person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.

         "CASH BALANCE" means the sum, as of the last Business Day of a fiscal
month, of all cash and all Permitted Investments, as shown on the Borrower's
balance sheet for such fiscal month, and for this purpose, all amounts of cash
and Permitted Investments held by Borrower and its Subsidiaries shall be
included in the Cash Balance, without regard to any characterization or
treatment of such amounts (whether as cash and cash equivalents, short-term
investments, or other assets) on Borrower's balance sheet or under GAAP.

         "CASUALTY EVENT" means, with respect to any property (including Real
Property) of any person, any loss of title with respect to such property or any
loss of or damage to or destruction

                                       A-2



of, or any condemnation or other taking (including by any Governmental
Authority) of, such property for which such person or any of its subsidiaries
receives insurance proceeds or proceeds of a condemnation award or other
compensation. "CASUALTY EVENT" includes any taking of all or any part of any
Real Property of any person or any part thereof, in or by condemnation or other
eminent domain proceedings pursuant to any law, or by reason of the temporary
requisition of the use or occupancy of all or any part of any Real Property of
any person or any part thereof by any Governmental Authority, civil or military.

         "CHANGE OF CONTROL" shall have the meaning assigned to such term in the
By-Laws of the Borrower as in effect on the Closing Date, without giving effect
to any amendment thereof after the Closing Date.

         "CHARGES" has the meaning assigned to such term in Section 2.05(f).

         "CLOSING DATE" means June 27, 2003.

         "COLLATERAL" means all of the Security Agreement Collateral, any
Mortgaged Real Property and all other property of whatever kind and nature
pledged as collateral under any Security Document.

         "COLLATERAL ASSIGNMENT OF LEASE" means a Collateral Assignment of Lease
in form and substance reasonably satisfactory to Lender.

         "COMMITMENT" means Lender's commitment to make Loans hereunder in the
amount set forth on Annex II, or in the Assignment and Acceptance pursuant to
which such Lender assumed its Commitment, as applicable, as the same may be (a)
reduced from time to time pursuant to Section 2.06 and (b) reduced or increased
from time to time pursuant to assignments pursuant to Section 9.04. The initial
aggregate amount of Lender's Commitment is $50.0 million.

         "COMPANIES" means Borrower and its Subsidiaries; and "COMPANY" means
any one of them.

         "COMPANY FACILITY LEASE" has the meaning assigned to such term in
Section 3.05(b).

         "COMPANY LEASE" means any Company Facility Lease and any Company
Property Lease, individually and collectively.

         "COMPANY PROPERTY LEASE" has the meaning assigned to such term in
Section 3.05(b).

         "CONSENT ACQUISITION" means any Investment, merger, consolidation, or
purchase of property, in one or a series of transactions, which has been
approved in writing by the Lender, which approval shall not be unreasonably
withheld or delayed if all the following conditions are satisfied:

         (1) after giving effect to the acquisition, (x) there is no Change of
Control and (y) either:

                                       A-3



             (i) Borrower Controls each other person that is a party to the
             transaction, or

              (ii) in the case of a merger or consolidation to which the
              Borrower is a party, the management of the surviving or resulting
              corporation consists of (A) in the case of directors, at least a
              majority of persons who were directors of Borrower prior to the
              merger or consolidation, and (B) in the case of officers, at least
              the chief executive officer and chief financial officer and a
              majority of the other executive officers (as defined in Rule 405
              under the Securities Act) who held such positions (or
              substantially similar positions) with Borrower prior to the merger
              or consolidation, or

             (iii) all property or assets acquired in connection with the
             acquisition are owned by Borrower or a Subsidiary Guarantor.

         (2) Borrower has delivered to Lender, not less than thirty days prior
to the time Borrower proposes to enter into any binding commitment for any such
acquisition, pro forma financial statements which (x) have been prepared in
accordance with GAAP applied on a basis consistent with Borrower's past practice
in respect of pro forma financial statements; (y) give effect to the acquisition
as of the date of the most recent quarterly financial statements delivered to
Lender under this Agreement, and (z) include:

             (i) pro forma consolidated balance sheets and consolidated
             statements of income and cash flows for such fiscal quarter, the
             current fiscal year to date and as at the end of the immediately
             preceding fiscal year of Borrower;

             (ii) a forecast, for each of the four fiscal quarters following
             such fiscal quarter of the pro forma consolidated balance sheets
             and consolidated and consolidating (at least for (1) any person
             acquired in the acquisition and (2) the Borrower and those persons
             that were Subsidiaries prior to the acquisition) statements of
             income and cash flows for such periods and showing in reasonable
             detail any adjustments or eliminations made in preparing the
             consolidated statements; and

             (iii) a reasonably detailed statement of the assumptions and
             critical accounting estimates used to prepare the financial
             statements referred to in clauses (i) and (ii), all in such detail
             as Lender may reasonably request.

         (3) the financial statements referred to in clause (2) above show that,
on a pro forma basis:

         (x) the Net Cash Position (as hereinafter defined) after giving effect
to the acquisition is not less than the Net Cash Position (as hereinafter
defined) immediately prior to the acquisition, where Net Cash Position means an
amount equal to:

             (i) the sum of cash and cash equivalents of Borrower and its
             consolidated Subsidiaries, plus, for purposes of determining the
             Net Cash Position after giving effect to the acquisition, all cash
             and cash equivalents of each person acquired and its

                                       A-4



             consolidated Subsidiaries, as such amounts would be shown on a pro
             forma balance sheet prepared in accordance with GAAP (except as
             expressly provided herein), consistent with the past practices of
             the Borrower, immediately after giving effect to the acquisition,
             minus

             (ii) the sum of all Indebtedness of the Borrower and its
             consolidated Subsidiaries, plus, for purposes of determining the
             Net Cash Position after giving effect to the acquisition, all
             Indebtedness of each person acquired and its consolidated
             Subsidiaries, as such amounts would be shown on a pro forma balance
             sheet prepared in accordance with GAAP (except as expressly
             provided herein), consistent with the past practices of the
             Borrower, immediately after giving effect to the acquisition; and

             (iii) in each case where the Net Cash Position is to be determined
             after giving effect to the acquisition, such determination will be
             made on a pro forma basis that, without duplication, treats:

                   (A) all monetary payment obligations incurred or required to
                   be paid in connection with the acquisition (including any
                   payments of amounts included in the definition of Purchase
                   Price (as defined below in clause (d) of the definition of
                   "Permitted Acquisition," but substituting the phrase "person
                   or property acquired" for the term "Acquired Business" in
                   that definition), any dividends or other distributions to be
                   made to shareholders or other persons, any sales,
                   documentary, transfer, income, gain or other taxes of any
                   kind, and any fees, costs or expenses of any kind associated
                   with the acquisition, in each case to the extent payable in
                   cash or cash equivalents) of the Borrower and its
                   subsidiaries and each person acquired, whether paid or
                   accrued, and without regard to the time when any such amount
                   becomes due and payable or any contingency associated with
                   any such payment obligation, as a reduction of the amount of
                   cash and cash equivalents, on a dollar for dollar basis,
                   effective immediately after giving effect to the acquisition;
                   and

                   (B) all Indebtedness incurred, assumed, guaranteed or
                   required to be paid in connection with the acquisition by the
                   Borrower, any Subsidiary of the Borrower and each person
                   acquired in connection with the acquisition, other than any
                   Indebtedness actually paid or discharged in connection with
                   the acquisition, as Indebtedness outstanding effective
                   immediately after giving effect to the acquisition; and

             (iv) in each case where the Net Cash Position is to be determined
             immediately prior to giving effect to the acquisition, such
             determination will be made on a pro forma basis that excludes from
             the computations all amounts referred to in clause (iii) above;
             and

         (y) no later than the fourth fiscal quarter following the acquisition,
the sum of (A) the operating profit before amortization of goodwill of each
person acquired, plus (B) the amount of

                                       A-5



any identified cost savings to Borrower as a direct result of acquiring such
person, is positive; provided, however, that the requirements in clause (x) and
(y) shall be waived if the Borrower shall deliver to Lender not less than thirty
days prior to the time Borrower proposes to enter into any binding commitment
for any such acquisition:

             (i) an irrevocable notice of prepayment of all outstanding Loans
             and termination of the entire Commitment to become effective,
             automatically and without further notice or action of any kind by
             Borrower, Lender or any other person, 180 days following the date
             of any such acquisition; and

             (ii) a reasonably detailed business plan (including the assumptions
             and estimates made in preparing such business plan) that shows,
             with reasonable certainty, that Borrower will be able to prepay all
             outstanding Loans and terminate the entire Commitment 180 days
             following the date of any such acquisition, which plan must be
             satisfactory to Lender in its discretion.

         (4) the acquisition does not result in any Loan Party, incurring,
creating, assuming, permitting to exist or otherwise having any liability for,
directly or indirectly, any Liens (other than Permitted Liens).

         (5) the acquisition does not result in any Default or Event of Default.

         (6) the acquisition does not have a Material Adverse Effect.

         (7) upon the consummation of any acquisition that results in a person
becoming a Subsidiary of a Loan Party, immediately following such acquisition:

                  (i) such Subsidiary is a Domestic Subsidiary; and

                  (ii) 100% of the Equity Interest of any such new Subsidiary
             is pledged and delivered to Lender for its benefit under the
             applicable Security Agreement; and

                    (iii) such Subsidiary becomes a party to the applicable
              Security Documents and becomes a Subsidiary Guarantor hereunder
              and executes a Joinder Agreement and other applicable Loan
              Documents all in accordance with Section 5.10(b).

         (8) upon the consummation of any acquisition that results in any Loan
Party acquiring any assets that are not then subject to a perfected first
priority security interest or Lien of the Lender under the Security Documents,
immediately following such acquisition, the Loan Parties shall execute and
deliver to Lender such agreements and other instruments, record such Mortgages
and financing statements or other documents and take such other actions as may
be required so that Lender has a perfected, first priority security interest in
or Lien on all such acquired assets, subject to no Liens other than Permitted
Liens.

         (9) upon the consummation of any merger or consolidation of any Loan
Party with another person in which the Loan Party is not the surviving or
resulting corporation, or the

                                       A-6



Lender otherwise does not have a perfected, first priority security interest or
Lien under the Security Documents covering all the assets of such surviving or
resulting corporation, immediately following such acquisition, each surviving or
resulting corporation shall execute and deliver to Lender a Joinder Agreement
and other applicable Loan Documents and such agreements and other instruments as
Lender may reasonably request, record such Mortgages and financing statements or
other documents and take such other actions as may be required so that Lender
has a perfected, first priority security interest in or Lien on all such
acquired assets, subject to no Liens other than Permitted Liens.

         (10) the Purchase Price (as defined below in clause (d) of the
definition of "Permitted Acquisition," but excluding for this purpose any
amounts referred to in clause (2) of that definition, and substituting the
phrase "person or property acquired" for the term "Acquired Business" in that
definition) paid for the acquisition of such person or property (x) is solely of
Borrower Common Stock and (y) is greater than $25,000,000.

         "CONSOLIDATED COMPANIES" means Borrower and its Consolidated
Subsidiaries.

         "CONSOLIDATED SUBSIDIARIES" means, as to any person, all subsidiaries
of such person that are consolidated with such person for financial reporting
purposes in accordance with GAAP.

         "CONSOLIDATED TANGIBLE NET WORTH" means, at any time:

                  (a)      the total assets of Borrower and its Subsidiaries
             which would be shown as assets on a consolidated balance sheet of
             Borrower and its Subsidiaries as of such time prepared in
             accordance with GAAP, after eliminating all amounts properly
             attributable to minority interests, if any, in the stock and
             surplus of Subsidiaries, minus

                  (b)      the total liabilities of Borrower and its
             Subsidiaries which would be shown as liabilities on a consolidated
             balance sheet of Borrower and its Subsidiaries as of such time
             prepared in accordance with GAAP, minus

                  (c)      the net book value of all assets, after deducting any
             reserves applicable thereto, which would be treated as intangible
             under GAAP, including, without limitation, good will, trademarks,
             trade names, service marks, brand names, copyrights, patents and
             unamortized debt discount and expense, organizational expenses and
             the excess of the equity in any Subsidiary over the cost of the
             investment in such Subsidiary.

         "CONTESTED COLLATERAL LIEN CONDITIONS" means, with respect to any
Permitted Lien of the type described in Sections 6.02(a), (b) and (e), the
following conditions:

                  (a)      any proceeding instituted contesting such Lien shall
             conclusively operate to stay the sale or forfeiture of any portion
             of the Collateral on account of such Lien;

                                       A-7



                  (b)      at the option and upon request of Lender, the
             appropriate Loan Party shall maintain cash reserves in an amount
             sufficient to pay and discharge such Lien and Lender's reasonable
             estimate of all interest and penalties related thereto; and

                  (c)      such Lien shall in all respects be subject and
             subordinate in priority to the Lien and security interest created
             and evidenced by the Security Documents, except if and to the
             extent that the law or regulation creating, permitting or
             authorizing such Lien provides that such Lien is or must be
             superior to the Lien and security interest created and evidenced by
             the Security Documents.

         "CONTINGENT OBLIGATION" means, as to any person, any obligation of such
person guaranteeing or intended to guarantee any Indebtedness, leases, dividends
or other obligations ("PRIMARY OBLIGATIONS") of any other person (the "PRIMARY
OBLIGOR") in any manner, whether directly or indirectly, including any
obligation of such person, whether or not contingent, (a) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor; (b) to advance or supply funds (i) for the purchase or payment of any
such primary obligation or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor; (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation; or (d)
otherwise to assure or hold harmless the holder of such primary obligation
against loss in respect thereof; provided, however, that the term "CONTINGENT
OBLIGATION" shall not include (w) endorsements of instruments for deposit or
collection in the ordinary course of business consistent with past practices,
(x) any product warranties issued on products by Borrower or any of its
Subsidiaries in the ordinary course of business consistent with past practices,
(y) any obligation to buy back products in the ordinary course of business
consistent with past practices made pursuant to the buyback policy of Borrower
and its Subsidiaries or pursuant to applicable Requirements of Law, and (z) any
operating lease guarantees (other than in respect of Synthetic Lease
Obligations) executed by Borrower in the ordinary course of business consistent
with past practices. The amount of any Contingent Obligation shall be deemed to
be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Contingent Obligation is made (or, if less,
the maximum amount of such primary obligation for which such person may be
liable pursuant to the terms of the instrument evidencing such Contingent
Obligation) or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof (assuming such person is required to
perform thereunder) as determined by such person in good faith.

         "CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a person, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "CONTROLLING" and "CONTROLLED" have meanings correlative thereto.

         "CONTROL AGREEMENT" has the meaning assigned to such term in the U.S.
Security Agreement.

                                       A-8



         "DEFAULT" means any event or condition that is, or upon notice or lapse
of time or both would constitute, an Event of Default.

         "DISCONTINUED REVENUE" means, with respect to any Business Unit sold or
proposed to be sold in a Permitted Business Disposition, the Revenue of such
Business Unit for the twelve consecutive fiscal month period preceding the date
a binding commitment is made for the sale of such Business Unit.

         "DISTRIBUTION" means the distribution by Conexant to its shareholders
of shares of Borrower Common Stock as provided in the Form 10.

         "DISTRIBUTION AGREEMENT" means the distribution agreement between
Conexant and Borrower, dated June 27, 2003.

         "DISTRIBUTION DATE" means the date of the Distribution.

         "DIVIDEND" with respect to any person means that such person has
declared or paid a dividend or returned any equity capital to its stockholders
or authorized or made any other distribution, payment or delivery of property
(other than common stock of such person) or cash to its stockholders as such, or
redeemed, retired, purchased or otherwise acquired, directly or indirectly, for
consideration any shares of any class of its capital stock outstanding on or
after the Closing Date (or any options or warrants issued by such person with
respect to its capital stock), or set aside any funds for any of the foregoing
purposes, or shall have permitted any of its subsidiaries to purchase or
otherwise acquire for a consideration any shares of any class of the capital
stock of such person outstanding on or after the Closing Date (or any options or
warrants issued by such person with respect to its capital stock). Without
limiting the foregoing, "DIVIDEND" with respect to any person also includes all
payments made or required to be made by such person with respect to any stock
appreciation rights, plans, equity incentive or achievement plans or any similar
plans or setting aside of any funds for the foregoing purposes.

         "DOLLARS" or "$" means the lawful money of the United States of
America.

         "DOMESTIC SUBSIDIARY" means any Subsidiary organized under the laws of
the United States of America, any state thereof or the District of Columbia.

         "DOMESTICATED FOREIGN SUBSIDIARY" means a Foreign Subsidiary which has
become domesticated into the United States of America.

         "EQUITY INTEREST" means, with respect to any person, any and all
shares, interests, participations or other equivalents, including membership
interests (however designated, whether voting or non-voting), of capital of such
person, including, if such person is a partnership, partnership interests
(whether general or limited) and any other interest (other than an interest
constituting Indebtedness) or participation that confers on a person the right
to receive a share of the profits and losses of, or distributions of assets of,
such partnership, whether outstanding on or issued after the date hereof.

                                       A-9



         "ERISA" means the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time.

         "ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that, together with Borrower, is treated as a single employer
under Section 414(b), (c), (m) or (o) of the Tax Code.

         "ERISA EVENT" means (a) any "reportable event," as defined in Section
4043 of ERISA or the regulations issued thereunder, with respect to a Plan
(other than an event for which the 30-day notice period is waived by
regulation); (b) the existence with respect to any Plan of an "accumulated
funding deficiency" (as defined in Section 412 of the Tax Code or Section 302 of
ERISA), whether or not waived, the failure to make by its due date a required
installment under Section 412(m) of the Tax Code with respect to any Plan or the
failure to make any required contribution to a Multiemployer Plan; (c) the
filing pursuant to Section 412(d) of the Tax Code or Section 303(d) of ERISA of
an application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by any Company or any of its ERISA Affiliates of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by any Company or any of its ERISA Affiliates from the PBGC or a
plan administrator of any notice relating to the intention to terminate any Plan
or Plans or to appoint a trustee to administer any Plan, or the occurrence of
any event or condition that could reasonably be expected to constitute grounds
under ERISA for the termination of, or the appointment of a trustee to
administer, any Plan; (f) the incurrence by any Company or any of its ERISA
Affiliates of any liability with respect to the withdrawal from any Plan or
Multiemployer Plan; (g) the receipt by any Company or its ERISA Affiliates of
any notice, concerning the imposition of Withdrawal Liability or a determination
that a Multiemployer Plan is, or is expected to be, insolvent or in
reorganization, within the meaning of Title IV of ERISA; (h) the making of any
amendment to any Plan that could result in the imposition of a lien or the
posting of a bond or other security; (i) the occurrence of a nonexempt
prohibited transaction (within the meaning of Section 4975 of the Tax Code or
Section 406 of ERISA) that could result in a Material Adverse Effect; (j) the
imposition of a Lien pursuant to Section 401(a)(29) or 412(n) of the Tax Code or
pursuant to ERISA with respect to any Plan; and (k) the assertion of a material
claim (other than routine claims for benefits) against any Plan or the assets
thereof, or against any Company or any ERISA Affiliates in connection with any
Plan.

         "EVENT OF DEFAULT" has the meaning assigned to such term in Article
VIII.

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

         "EXCLUDED TAXES" means, with respect to any payment to Lender made by
or on account of any obligation of Borrower hereunder, federal, state or local
income or franchise taxes imposed on (or measured by) Lender's net income by the
United States of America or by any other jurisdiction in which Lender is
organized.

         "EXPOSURE" means, with respect to Lender at any time, the aggregate
principal amount at such time of all outstanding Loans of Lender excluding from
principal, for purposes of this

                                      A-10



definition, any amount of interest which has been capitalized and become
principal as provided in Section 2.05(d).

         "FAIR MARKET VALUE" means on the day of valuation, for (a) any Equity
Interest, with respect to each share, interest, participation or other
equivalent (i) the last reported sale price regular way or, in case no such sale
takes place on such day, the average of the closing bid and asked prices regular
way, in either case as reported on the principal national securities exchange on
which the share, interest, participation or other equivalent is listed or
admitted for trading or (ii) if the share, interest, participation or other
equivalent is not listed or admitted for trading on any national securities
exchange, the last reported sale price or, in case no such sale takes place on
such day, the average of the highest reported bid and the lowest reported asked
quotation for the share, interest, participation or other equivalent, in either
case as quoted on the NASDAQ National Market System or the NASDAQ Small Cap
Market or (iii) if the share, interest, participation or other equivalent is not
listed or admitted for trading on any national securities exchange or quoted on
the NASDAQ National Market System or the NASDAQ Small Cap Market, the last
reported sale price or, in case no such sale takes place on such day, the
average of the highest reported bid and the lowest reported asked quotation for
the share, interest, participation or other equivalent, in either case as
reported on NASDAQ or a similar service if NASDAQ is no longer reporting such
information; and (b) any asset other than an Equity Interest and any Equity
Interest for which prices can not be obtained in accordance with clause (a)
above, the fair market value thereof as determined in good faith by an
independent auditor mutually agreed to by the Borrower and Lender.

         "FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the weighted average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for the day for such transactions received by the Lender from three
federal funds brokers of recognized standing selected by it.

         "FINAL MATURITY DATE" means June 29, 2007.

         "FINANCIAL OFFICER" of any person means the chief financial officer,
principal accounting officer, treasurer or controller of such person.

         "FOREIGN PLAN" means any employee benefit plan, program, policy,
arrangement or agreement that would be an "employee pension benefit plan" under
Section 3(2) of ERISA if such plan, program, policy, arrangement or agreement
was not maintained outside the United States primarily for the benefit of
persons substantially all of whom are nonresident aliens with respect to which
any Company could incur liability.

         "FOREIGN SECURITY AGREEMENTS" means each security, pledge or similar
agreement necessary or desirable to evidence the grant of a security interest or
pledge of assets of any Subsidiary Guarantor that is a Foreign Subsidiary and
that is required hereunder, in each case in

                                      A-11



form and substance satisfactory to Lender and as such agreement may thereafter
be amended, supplemented or otherwise modified from time to time.

         "FOREIGN SUBSIDIARY" means a Subsidiary that is organized under the
laws of a jurisdiction other than the United States or any state thereof or the
District of Columbia.

         "FORM 10" means the registration statement on Form 10 filed by Borrower
with the Securities and Exchange Commission as effective June , 2003, as
amended.

         "GAAP" means generally accepted accounting principles in the United
States.

         "GOVERNMENTAL AUTHORITY" means any federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.

         "GUARANTEED OBLIGATIONS" has the meaning assigned to such term in
Section 7.01.

         "GUARANTEES" means the guarantees issued pursuant to Article VII (or
pursuant to any other form of guarantee required by applicable Requirements of
Law and in form and substance reasonably satisfactory to Lender) by Borrower and
the Subsidiary Guarantors.

         "GUARANTORS" has the meaning assigned to such term in the preamble
hereof.

         "HEDGING AGREEMENT" means any interest rate derivative contract,
foreign currency exchange agreement, commodity price protection agreement or
other interest or currency exchange rate or commodity price hedging arrangement.

         "IMMATERIAL SUBSIDIARY" means a Subsidiary that has less than $1.0
million in assets (based on the amounts thereof reflected on such Subsidiary's
most recent balance sheet prepared in accordance with GAAP) and generates less
than $1.0 million of net revenues during any fiscal year (based on the amount
thereof reflected on such Subsidiary's most recent income statement prepared in
accordance with GAAP) or, in the case of a Subsidiary without prior operating
history, is reasonably projected by Borrower to generate less than $1.0 million
of net revenues during its first full year of operation. All Immaterial
Subsidiaries in existence on the Closing Date are identified on Schedule
1.01(a).

         "INDEBTEDNESS" of any person means, without duplication, (a) all
obligations of such person for borrowed money; (b) all obligations of such
person evidenced by bonds, debentures, notes or similar instruments; (c) all
obligations of such person upon which interest charges are customarily paid or
accrued; (d) all obligations of such person under conditional sale or other
title retention agreements relating to property purchased by such person; (e)
all obligations of such person issued or assumed as the deferred purchase price
of property or services (excluding trade accounts payable incurred in the
ordinary course of business on normal trade terms and not overdue by more than
90 days or, if overdue for more than 90 days, as to which a dispute exists and
adequate reserves in conformity with GAAP have been established); (f) all
Indebtedness of others secured by (or for which the holder of such Indebtedness
has an existing right, contingent or otherwise, to be secured by) any Lien on
property owned or acquired by such person, whether

                                      A-12



or not the obligations secured thereby have been assumed; (g) all Capital Lease
Obligations, Purchase Money Obligations and Synthetic Lease Obligations of such
person; (h) all obligations of such person in respect of Hedging Agreements;
provided that, the amount of Indebtedness of the type referred to in this clause
(h) of any person shall be zero unless and until such Indebtedness shall be
terminated, in which case the amount of such Indebtedness shall be the then
termination payment due thereunder by such person; (i) all obligations of such
person as an account party in respect of letters of credit, letters of guaranty
and bankers' acceptances; (j) all Attributable Indebtedness of such person; and
(k) all Contingent Obligations of such person in respect of Indebtedness or
obligations of others of the kinds referred to in clauses (a) through (j) above.
The Indebtedness of any person shall include the Indebtedness of any other
entity (including any partnership in which such person is a general partner) to
the extent such person is liable therefor as a result of such person's ownership
interest in or other relationship with such entity, except to the extent that
the terms of such Indebtedness provide that such person is not liable therefor.

         "INDEMNIFIED TAXES" means Taxes other than Excluded Taxes.

         "INDEMNITEE" has the meaning assigned to such term in Section 9.03(b).

         "INFORMATION" has the meaning assigned to such term in Section 9.11.

         "INTELLECTUAL PROPERTY" has the meaning assigned to such term in the
U.S. Security Agreement.

         "INTERCOMPANY NOTE" means a promissory note, substantially in the form
of Exhibit G, evidencing Indebtedness payable by a payor Company to a payee Loan
Party.

         "INTEREST PAYMENT DATE" means with respect to any Loan, the last
Business Day of each March, June, September and December to occur during the
period that such Loan is outstanding and the Final Maturity Date.

         "INVESTMENTS" has the meaning assigned to such term in Section 6.03.

         "JOINDER AGREEMENT" means a joinder agreement substantially in the form
of Exhibit H.

         "LANDLORD LIEN WAIVER AND ACCESS AGREEMENT" means the Landlord Lien
Waiver and Access Agreement, substantially in the form of Exhibit E-2 or
otherwise in form and substance reasonably satisfactory to Lender.

         "LEASES" means any and all leases, subleases, tenancies, options,
concession agreements, rental agreements, occupancy agreements, franchise
agreements, access agreements and any other agreements (including all
amendments, extensions, replacements, renewals, modifications and/or guarantees
thereof), whether or not of record and whether now in existence or hereafter
entered into, affecting the use or occupancy of all or any portion of any Real
Property.

                                      A-13



         "LENDER" means Lender and any other person that has become a party
hereto pursuant to an Assignment and Acceptance.

         "LIEN" means, with respect to any property, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, claim, charge, assignment, hypothecation,
security interest or encumbrance of any kind, any other type of preferential
arrangement in respect of such property or any filing of any financing statement
under the UCC or any other similar notice of Lien under any similar notice or
recording statute of any Governmental Authority, including any easement,
right-of-way or other encumbrance on title to Real Property, in each of the
foregoing cases whether voluntary or imposed by law, and any agreement to give
any of the foregoing; (b) the interest of a vendor or a lessor under any
conditional sale agreement, capital lease or title retention agreement (or any
financing lease having substantially the same economic effect as any of the
foregoing) relating to such property; and (c) in the case of securities, any
transfer restriction (other than restrictions on transfer arising solely by
virtue of registration, qualification or similar requirements under the
securities laws of any jurisdiction), purchase option, call or similar right of
a third party with respect to such securities.

         "LOAN" means a Loan made by Lender to Borrower pursuant to Section
2.01.

         "LOAN DOCUMENTS" means this Agreement, each Guarantee, the Notes (if
any), the Warrant, the Registration Rights Agreement and the Security Documents.

         "LOAN PARTIES" means Borrower and the Subsidiary Guarantors.

         "MACARTHUR SUBLEASE" means the sublease between Lender and Borrower of
the Real Property located at 4000 MacArthur Boulevard, Newport Beach,
California.

         "MATERIAL ADVERSE EFFECT" means (a) a material adverse effect on the
business, property, results of operations, prospects or condition (financial or
otherwise), of Borrower and its Subsidiaries, taken as a whole; (b) material
impairment of the ability of the Loan Parties to perform any of their
obligations under any Loan Document; (c) material impairment of the rights of or
benefits or remedies available to the Lender under any Loan Document; or (d) a
material adverse effect on the Collateral or the Liens in favor of Lender on the
Collateral or the priority of such Liens.

         "MATERIAL ITEM" shall mean any property that is Collateral except for
any particular property that (x) is not material to the business, operations or
condition (financial or other) of any Loan Party and (y) has a book value of
less than $100,000, as shown on the most recent balance sheet of any Loan Party
prepared in accordance with GAAP.

         "MAXIMUM RATE" has the meaning assigned to such term in Section
2.05(f).

         "MONTHLY CASH BALANCE REPORT" has the meaning assigned to such term in
Section 5.01(d).

                                      A-14



         "MORTGAGE" means an agreement, including a mortgage, deed of trust or
any other document, creating and evidencing a Lien on a Real Property, which
shall be in form and substance reasonably satisfactory to Lender, with such
schedules and including such provisions as shall be necessary to conform such
document to applicable or local law or as shall be customary under local law, as
the same may at any time be amended in accordance with the terms thereof and
hereof.

         "MORTGAGED REAL PROPERTY" means any Real Property that shall be subject
to a Mortgage delivered after the Closing Date pursuant to Section 5.10(d).

         "MULTIEMPLOYER PLAN" means a multiemployer plan within the meaning of
Section 4001(a)(3) of ERISA (a) to which any Company or any ERISA Affiliate is
then making or accruing an obligation to make contributions, (b) to which any
Company or any ERISA Affiliate has within the preceding five plan years made
contributions, or (c) with respect to which any Company or any ERISA Affiliate
could incur liability.

         "NASDAQ" shall mean the Automatic Quotation System of the National
Association of Securities Dealers, Inc.

         "NEW WHOLLY OWNED SUBSIDIARY" has the meaning assigned to such term in
Section 5.10(b).

         "NON-GUARANTOR SUBSIDIARY" means (a) all of the Companies listed on
Schedule 3.06(a) (as in effect on the Closing Date), (b) each Subsidiary that
has been and remains released from its Guarantee in accordance with Section 7.09
hereof, and (c) each New Wholly Owned Subsidiary that is not required to become
a Guarantor hereunder in accordance with Section 5.10.

         "NOTES" means any notes evidencing the Loans issued pursuant to this
Agreement, if any, substantially in the form of Exhibit J.

         "OBLIGATIONS" means (a) obligations of each Loan Party from time to
time arising under or in respect of the due and punctual payment of (i) the
principal of and premium, if any, and interest (including interest accruing
during the pendency of any bankruptcy, insolvency, receivership or other similar
proceeding, regardless of whether allowed or allowable in such proceeding) on
the Loans, when and as due, whether at maturity, by acceleration, upon one or
more dates set for prepayment or otherwise, and (ii) all other monetary
obligations, including fees, costs, expenses and indemnities, whether primary,
secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any bankruptcy, insolvency,
receivership or other similar proceeding, regardless of whether allowed or
allowable in such proceeding), of each Loan Party under this Agreement and the
other Loan Documents; and (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of each Loan Party under or pursuant to
this Agreement and the other Loan Documents.

         "OTHER TAXES" means any and all present or future stamp or documentary
taxes or any other excise or property taxes, charges or similar levies arising
from any payment made under any

                                      A-15



Loan Document or from the execution, delivery or enforcement of, or otherwise
with respect to, any Loan Document.

         "PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.

         "PERFECTION CERTIFICATE" means a certificate in the form of Exhibit I-1
or any other form approved by Lender, as the same shall be supplemented from
time to time by a Perfection Certificate Supplement.

         "PERFECTION CERTIFICATE SUPPLEMENT" means a certificate supplement in
the form of Exhibit I-2 or any other form approved by Lender.

         "PERMITTED ACQUISITION" means any Investment, merger, consolidation, or
purchase of property, in one or a series of transactions, that satisfies all of
the following conditions:

                  (a)      results in a Loan Party owning either (x) all of the
             outstanding Equity Interests of another person that was not a
             Subsidiary of Borrower prior to such transaction or (y) all or
             substantially all of the business, operations and assets of another
             person that was not a Subsidiary of Borrower prior to such
             transaction (the "ACQUIRED BUSINESS");

                  (b)      does not result in any Loan Party, incurring,
             creating, assuming, guaranteeing, permitting to exist or otherwise
             having any liability for, directly or indirectly, any Indebtedness
             or any Liens (other than Permitted Liens);

                  (c)      does not result in any Default or Event of Default;

                  (d)      The Purchase Price (as defined below) for all
             Acquired Businesses acquired in any fiscal year of the Borrower
             does not exceed, for any fiscal year, $25,000,000 multiplied by the
             Pro Rata Percentage for such fiscal year, reduced dollar for dollar
             by the amount of any Capital Expenditures made or committed to be
             made by Borrower or any other Loan Party in such fiscal year
             accounted for in accordance with GAAP, and for purposes of this
             definition, the Purchase Price for any Acquired Business shall be
             allocated to the fiscal year in which a binding commitment is made
             to acquire the Acquired Business, without regard to when (1) the
             acquisition of the Acquired Business is consummated or (2) the
             Purchase Price is actually paid, and without regard to when or how
             such Purchase Price may be accounted for in accordance with GAAP;

             For purposes of this definition, PURCHASE PRICE shall mean the Fair
             Market Value of the property (whether cash, cash equivalents,
             Equity Interests, or other property) used, directly or indirectly,
             to pay (1) the purchase price, merger consideration, tender offer
             or exchange offer consideration, license or cross-license fees or
             other consideration (including any (x) contingent consideration,

                                      A-16



             valued for this purpose assuming the maximum amount of contingent
             consideration will be paid, and (y) any compensation, bonus or
             other payment made to any shareholder, director, officer or
             employee of the Acquired Business other than ordinary course of
             business compensation for services to be performed following the
             acquisition of the Acquired Business) for the acquisition of the
             Acquired Business, and (2) all out-of-pocket costs and expenses
             incurred in connection with the acquisition of the Acquired
             Business (including any investment banker, finder or broker fee or
             commission and any accounting, legal or other professional
             expenses), without regard to whether such costs and expenses would
             be accounted for as purchase price in accordance with GAAP.
             Notwithstanding anything to the contrary contained in clause
             (d)(ii) of this definition, to the extent that the Permitted
             Acquisitions made by Borrower and its Consolidated Subsidiaries in
             any fiscal year are less than the amount permitted to be made in
             such period (without giving effect to any additional amount
             available as a result of this sentence), the amount of such
             difference may be carried forward and used to make Permitted
             Acquisitions in the next succeeding fiscal year of Borrower but
             only to such next succeeding fiscal year.

                  (e)      does not have a Material Adverse Effect;

                  (f)      upon the consummation of any acquisition that results
             in a person becoming a Subsidiary of a Loan Party, immediately
             following such acquisition:

                           (i) 100% of the Equity Interest of any such new
             Subsidiary is pledged and delivered to Lender for its benefit under
             the applicable Security Agreement; and

                           (ii) such Subsidiary becomes a party to the
             applicable Security Documents and becomes a Subsidiary Guarantor
             hereunder and executes a Joinder Agreement and other applicable
             Loan Documents all in accordance with Section 5.10(b);

                  (g)      upon the consummation of any acquisition that results
             in any Loan Party acquiring any assets that are not then subject to
             a perfected first priority security interest or Lien of the Lender
             under the Security Documents, immediately following such
             acquisition, the Loan Parties shall execute and deliver to Lender
             such agreements and other instruments, record such Mortgages and
             financing statements or other documents and take such other actions
             as may be required so that Lender has a perfected, first priority
             security interest in or Lien on all such acquired assets, subject
             to no Liens other than Permitted Liens.

         "PERMITTED BUSINESS DISPOSITION" means any Asset Sale that satisfies
all of the following conditions:

                                      A-17



                  (a)      the Equity Interest or other property sold is a
             Business Unit;

                  (b)      the Business Unit is sold for cash or cash
             equivalents;

                  (c)      the Asset Sale increases Borrower's Consolidated
             Tangible Net Worth;

                  (d)      the Asset Sale does not result in any Default or
             Event of Default; and

                  (e)      the aggregate amount of Discontinued Revenue for such
             Business Unit and for all other Business Units for which binding
             commitments for Asset Sales have been made after the Closing Date,
             is less than 25% of Borrower's consolidated Revenue for the 12
             consecutive fiscal months immediately preceding the month in which
             any binding commitment is or may be made for such Asset Sale.

         "PERMITTED INVESTMENT" means any investment that Borrower is permitted
to make for the investment of surplus cash under Borrower's investment policy
statement as in effect on the Closing Date.

         "PERMITTED LIENS" has the meaning assigned to such term in Section
6.02.

         "PERMITTED REFINANCING" means any (i) issuance by the Borrower or any
Subsidiary of the Borrower of securities (whether constituting debt or equity
securities or securities exchangeable, exercisable or convertible for debt or
equity securities) or (ii) incurrence of Indebtedness by the Borrower or any
Subsidiary of the Borrower or (iii) obtaining by the Borrower or any Subsidiary
of the Borrower of any credit facility, line of credit, loan or financing
agreement or other credit arrangement providing, among other things, for
borrowings or other extensions of credit to finance working capital
requirements, inventory or equipment purchases or for other general corporate
purposes (other than arrangements referred to in clause (g) of the definition of
Indebtedness), whether or not such facility includes a binding commitment to
make loans or otherwise extend credit, in each case that satisfies all the
following conditions:

                  (a) Borrower reduces the Commitment in accordance with Section
             2.06(b), effective not later than immediately prior to any such
             issuance of securities or incurrence of Indebtedness or obtaining
             other credit arrangements, by an amount equal to (1) in the case of
             any issuance of securities or incurrence of Indebtedness, an
             amount, without duplication, equal to the net cash proceeds to the
             Borrower or its Subsidiaries, after (x) payment of all discounts,
             commissions, fees, expenses, taxes and other liabilities incurred
             in connection with the issuance of such securities or incurrence of
             Indebtedness and (y) funding any reserve, special deposit, sinking
             fund, prepayment, security deposit or other similar requirement,
             and (2) in the case of obtaining other credit arrangements, an
             amount equal to the total credit commitments thereunder, if any,
             and otherwise

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             the maximum aggregate principal amount of Indebtedness that may be
             outstanding at any one time thereunder in each case assuming all
             conditions to any extension of credit, if any, are satisfied; and

                  (b) Borrower repays or prepays outstanding Loans in accordance
             with Section 2.07(b), not later than simultaneously with any such
             issuance of securities or incurrence of Indebtedness or obtaining
             other credit arrangements, to the extent the Exposure would exceed
             the amount of the Commitment after giving effect to the reduction
             required by clause (a) above.

         "PERSON" means any natural person, corporation, business trust, joint
venture, association, company, limited liability company, partnership or
government, or any agency or political subdivision thereof.

         "PLAN" means any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Tax Code or Section 307 of ERISA, and in respect of which any Company
or its ERISA Affiliate is (or, if such plan were terminated, would under Section
4069 of ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA
or with respect to which any Company could incur liability.

         "PLEDGED EQUITY INTERESTS" has the meaning set forth in the Security
Agreements.

         "PLEDGED FOREIGN STOCK" shall mean the shares of capital stock of each
direct or indirect Foreign Subsidiary of Borrower owned by Borrower or any
Subsidiary of Borrower, including any and all certificates and other instruments
now or hereafter evidencing any such capital stock.

         "PLEDGED INTERCOMPANY DEBT" has the meaning set forth in the Security
Agreements.

         "PRO RATA PERCENTAGE" shall mean for (i) each of the fiscal years
ending in 2004, 2005 and 2006, 1.0, (ii) for the fiscal year ending in 2003,
0.25 and (iii) for the fiscal year ending in 2007, 0.75.

         "PROPERTY" means any right, title or interest in or to property or
assets of any kind whatsoever, whether real, personal or mixed and whether
tangible or intangible and including Equity Interests or other ownership
interests of any person and whether now in existence or owned or hereafter
entered into or acquired.

         "PURCHASE MONEY OBLIGATION" means, for any person, the obligations of
such person in respect of Indebtedness incurred for the purpose of financing all
or any part of the purchase price of any property (including Equity Interests of
any person) or the cost of installation, construction or improvement of any
property or assets and any refinancing thereof; provided, however, that such
Indebtedness is incurred within 90 days after such acquisition of such property
by such person.

         "REAL PROPERTY" means, collectively, all right, title and interest
(including any leasehold estate) in and to any and all parcels of or interests
in real property owned, leased or operated by

                                      A-19



any person, whether by lease, license or other means, together with, in each
case, all easements, hereditaments and appurtenances relating thereto, all
improvements and appurtenant fixtures and equipment, all general intangibles and
contract rights and other property and rights incidental to the ownership, lease
or operation thereof.

         "REGISTRATION RIGHTS AGREEMENT" means the registration rights
agreement, dated June 27, 2003, entered into between Lender and Borrower in
connection with the issuance of the Warrant.

         "REGULATION T" means Regulation T of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

         "REGULATION U" means Regulation U of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

         "REGULATION X" means Regulation X of the Board as from time to time in
effect and all official rulings and interpretations thereunder or thereof.

         "RELEASED GUARANTOR" has the meaning assigned to such term in Section
7.09.

         "REQUIREMENTS OF LAW" means, collectively, any and all requirements of
any Governmental Authority including any and all laws, ordinances, rules,
regulations or similar statutes or case law and all final orders, judgments,
decrees, injunctions, rulings or awards of any court of competent jurisdiction.

         "RESPONSIBLE OFFICER" of any corporation means any executive officer or
Financial Officer of such corporation and any other officer or similar official
thereof responsible for the administration of the obligations of such
corporation in respect of this Agreement.

         "REVENUE" means, for any person in respect of any period, the revenue
of such person for such period determined in accordance with GAAP as applied by
Borrower.

         "SECTION 5.10(b) LISTED SUBSIDIARIES" has the meaning assigned to such
term in Section 5.10(b).

         "SECURED PARTIES" has the meaning assigned to such term in the Security
Documents.

         "SECURITIES ACT" means the Securities Act of 1933, as amended.

         "SECURITY AGREEMENTS" means, collectively, the U.S. Security Agreement
and each Foreign Security Agreement.

         "SECURITY AGREEMENT COLLATERAL" has the meaning set forth in any
Security Agreement delivered on the Closing Date or thereafter pursuant to the
terms of this Agreement.

                                      A-20



         "SECURITY DOCUMENTS" means the Security Agreements, the Mortgages, the
Control Agreements, the Perfection Certificate, the Collateral Assignments of
Lease and each other security document or pledge agreement required by
applicable local law to grant a valid, perfected security interest in any
property acquired or developed, and all UCC or other financing statements or
instruments of perfection required by this Agreement, any Security Agreement,
Mortgage or Collateral Assignment of Lease to be filed with respect to the
security interests in property and fixtures created pursuant to any Security
Agreement, Mortgage or Collateral Assignment of Lease and any other document or
instrument utilized to pledge as collateral for the Obligations any property of
whatever kind or nature.

         "SUBSIDIARY" means, with respect to any person (the "PARENT") at any
date, any corporation, limited liability company, partnership, association or
other entity the accounts of which would be consolidated with those of the
parent in the parent's consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, as well as any
other corporation, limited liability company, partnership, association or other
entity (a) of which securities or other ownership interests representing more
than 50% of the ordinary voting power or, in the case of a partnership, more
than 50% of the general partnership interests are, as of such date, owned,
controlled or held, or (b) that is, as of such date, otherwise Controlled, by
the parent or one or more Subsidiaries of the parent or by the parent and one or
more subsidiaries of the parent.

         "SUBSIDIARY GUARANTOR" means each Subsidiary listed on Schedule
1.01(b), each other Subsidiary that is or becomes a party to this Agreement
pursuant to Section 5.10 (but excluding any Released Guarantor that remains
released from its Guarantee in accordance with Section 7.09 hereof and including
each Foreign Subsidiary that enters into any other Guarantee required by
applicable Requirements of Law).

         "SYNTHETIC LEASE OBLIGATION" means the monetary obligation of a person
under (a) a so-called synthetic, off-balance sheet or tax retention lease, or
(b) an agreement for the use or possession of property creating obligations that
do not appear on the balance sheet of such person but which, upon the insolvency
or bankruptcy of such person, would be characterized as the indebtedness of such
person (without regard to accounting treatment).

         "TAX CODE" means the Internal Revenue Code of 1986, as amended.

         "TAXES" mean any and all present or future taxes, duties, levies, fees,
assessments, imposts, deductions, charges or withholdings, whether computed on a
separate, consolidated, unitary, combined or other basis and any and all
liabilities (including interest, fines, penalties or additions to tax) with
respect to the foregoing.

         "TAX REFUND" has the meaning assigned to such term in Section 2.09(f).

         "TAX RETURN" means all returns, statements, filings, attachments and
other documents or certifications required to be filed in respect of Taxes or
any amendments thereof or thereto.

                                      A-21



         "TAX SHARING AGREEMENT" means the tax sharing agreement dated as of
June 27, 2003, among the Borrower and its Subsidiaries, as in effect on the
Closing Date and without giving effect to any subsequent amendment, waiver or
supplement thereof.

         "TITLE COMPANY" means any title insurance company as shall be retained
by Borrower and reasonably acceptable to Lender.

         "TITLE POLICY" has the meaning assigned to such term in Section
5.10(d).

         "TRANSACTION DOCUMENTS" means any and all documents entered into or
delivered in connection with the Transactions, including the Distribution
Agreement, the Tax Sharing Agreement and the Loan Documents.

         "TRANSACTIONS" means, collectively, the transactions to occur pursuant
to the Transaction Documents, including (a) the consummation of the
Distribution; (b) the execution and delivery of the Loan Documents; (c) any
borrowings pursuant to this Agreement; (d) the guarantees and grant of security
interests provided in the Loan Documents; (e) the issue of the Warrant; and (f)
the payment of all fees and expenses to be paid on or prior to the Closing Date
and owing in connection with the foregoing.

         "UCC" has the meaning set forth in the U.S. Security Agreement.

         "U.S. SECURITY AGREEMENT" means a Security Agreement substantially in
the form of Exhibit F among the Loan Parties for the benefit of the Secured
Parties, as the same may be amended in accordance with the terms thereof and
hereof, or such other agreements reasonably acceptable to Lender as shall be
necessary to comply with applicable Requirements of Law and effective to grant
to Lender a perfected, first-priority security interest in the Security
Agreement Collateral covered thereby.

         "VOTING STOCK" means any class or classes of capital stock of Borrower
pursuant to which the holders thereof have the general voting power under
ordinary circumstances to elect at least a majority of the Board of Directors of
Borrower.

         "WARRANT" means the warrant to acquire up to 8,333,334 shares of
Borrower's Common Stock to be issued to Lender.

         "WHOLLY OWNED FOREIGN SUBSIDIARY" means any Wholly Owned Subsidiary
that is a Foreign Subsidiary.

         "WHOLLY OWNED SUBSIDIARY" means, as to any person, (a) any corporation
100% of whose capital stock (other than directors' qualifying shares) is at the
time owned by such person and/or one or more Wholly Owned Subsidiaries of such
person and (b) any partnership, association, joint venture, limited liability
company or other entity in which such person and/or one or more Wholly Owned
Subsidiaries of such person have a 100% equity interest at such time.

                                      A-22



         "WITHDRAWAL LIABILITY" means liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as such
terms are defined in Part I of Subtitle E of Title IV of ERISA.

1.02.    TERMS GENERALLY. The definitions of terms herein shall apply equally to
the singular and plural forms of the terms defined. Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms. The words "include," "includes" and "including" shall be deemed to
be modified by the phrase "without limitation." The word "will" shall be
construed to have the same meaning and effect as the word "shall." Unless the
context requires otherwise (a) any definition of or reference to any agreement,
instrument of other document herein shall be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified in accordance with the provisions hereof and
thereof; (b) any reference herein to any person shall be construed to include
such person's successors and permitted assigns; (c) the words "herein," "hereof"
and "hereunder," and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision of this
Agreement; (d) all references herein to Articles, Sections, Exhibits and
Schedules shall be construed to refer to articles and sections of, and exhibits
and schedules to, this Agreement; and (e) the words "asset" and "property" shall
be construed to have the same meaning and effect and to refer to any and all
tangible and intangible assets and properties, including cash, securities,
accounts and contract rights. All references to the knowledge of any Company or
to facts known by any Company shall mean actual knowledge of any Responsible
Officer of any Loan Party or any of its Subsidiaries.

1.03.    ACCOUNTING TERMS; GAAP. Except as otherwise expressly provided herein,
all accounting terms not otherwise defined herein shall have the meanings
assigned to them in conformity with GAAP, as in effect from time to time.
Financial statements and other information required to be delivered by Borrower
to Lenders pursuant to Sections 5.01(a), (b) and (c) shall be prepared in
accordance with GAAP as in effect at the time of such preparation.

1.04.    HEADINGS. Article and section headings and the table of contents used
herein are for convenience of reference only, are not part of this Agreement and
shall not affect the construction of, or be taken into consideration in
interpreting, this Agreement.

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