CREDIT AGREEMENT AND RELATED INSTRUMENTS

Credit Agreement

We are a party to a senior secured credit facility with Royal Bank of Canada ("RBC") which consists of a term loan facility and a $50.0 million revolving credit facility. As of September 28, 2014, we had $698.0 million in term loan borrowings and no revolving borrowings.

During the quarter ended March 30, 2014, we entered into Amendment No. 5 to our Amended and Restated Credit Agreement dated as of October 13, 2011 (as amended, the "Credit Agreement") with RBC as administrative agent and collateral agent, the other agents party thereto and the lenders referred to therein. The amendment provided for (i) new pricing term for certain of our term loans, (ii) certain modifications to the excess cash flow prepayment and restricted payment provisions, and (iii) an increase in the amount of incremental credit facilities that Microsemi can request to an aggregate amount not to exceed $300.0 million plus certain amounts based on the Company’s leverage ratio. In connection with the amendment, RBC replaced Morgan Stanley Senior Funding, Inc. ("MSSF") as administrative agent and Morgan Stanley & Co. LLC as collateral agent under the Credit Agreement. We accounted for the amendment as a debt modification with respect to amounts that remained in the syndicate and a debt extinguishment with respect to the $89.5 million that exited the syndicate. Accordingly, during the quarter ended March 30, 2014, we recorded debt extinguishment expense of $0.7 million. The amendment did not impact the net principal balance outstanding as amounts that exited the syndicate were replaced.

During the quarter ended December 29, 2013, we entered into a commitment letter with MSSF pursuant to which MSSF committed to provide a $150.0 million incremental term loan under our term loan facility, which MSSF subsequently syndicated during the quarter. The incremental term loan was made available to (i) finance the acquisition of Symmetricom, (ii) repay any existing indebtedness of Symmetricom following the consummation of the merger, and (iii) pay fees and expenses related to the merger. The covenants under the incremental term loan are consistent with those in our existing Credit Agreement. As described above, RBC is the current administrative and collateral agent.

The fair value of our term loans was approximately $693.0 million at September 28, 2014 and $674.3 million at September 29, 2013. We classify this valuation as a Level 2 fair value measurement.

Under our Credit Agreement, we may borrow under a "Base Rate" which approximates the prime rate plus an applicable margin or "Eurodollar Rate" which approximates LIBOR plus an applicable margin. Eurodollar Rate loans are also subject to a Eurodollar Floor. At September 28, 2014, the principal amounts outstanding were Eurodollar Rate loans and interest rate information as of September 28, 2014 were as follows (dollar amounts in thousands):



	Principal Outstanding		Base Rate		Base Rate Margin		Eurodollar Rate Margin		Eurodollar Floor		Applicable Rate
Revolving and swingline loans	$	—	3.25	%	3.25	%	4.25	%	—	%	—	%
Term loan	$	646,375	3.25	%	1.50	%	2.50	%	0.75	%	3.25	%
Incremental term loan	$	51,651	3.25	%	1.75	%	2.75	%	0.75	%	3.50	%

Our term loan facility matures in February 2020 and as of September 28, 2014, there are no scheduled principal repayments until the maturity date. The Credit Agreement stipulates an annual principal payment of a percentage of Excess Cash Flow ("ECF"). The ECF percentage will be 50% if the Consolidated Leverage Ratio (as defined in the Credit Agreement) as of the last day of the fiscal year is equal to or greater than 3.00 to 1.00 and 0% otherwise.

We currently pay an undrawn commitment fee of 0.375% on the unused portion of the revolving facility. If any letters of credit are issued, then we expect to pay a fronting fee equal to 0.25% per annum of the aggregate face amount of each letter of credit and a participation fee on all outstanding letters of credit at a per annum rate equal to the margin then in effect with respect to Eurodollar Rate-based loans on the face amount of such letter of credit.

Our Credit Agreement includes financial covenants requiring a maximum leverage ratio and minimum fixed charge coverage ratio that are applicable only when revolving loans or swingline loans are outstanding at the end of a fiscal quarter and also contains other customary affirmative and negative covenants and events of default. We were in compliance with our covenants as of September 28, 2014.

Interest Rate Swap Agreement

In connection with our Credit Agreement in 2011, we entered into interest rate swap agreements for the purpose of minimizing the variability of cash flows in the interest rate payments of our variable rate borrowings. The cash flows received under the interest rate swap agreements are expected to offset the change in cash flows associated with LIBOR rate borrowings between the effective and maturity dates of the swaps. Our outstanding swap agreement has a notional amount of $24.0 million, a fixed rate of 2.21% and expires in January 2015. We classify our interest rate swap balance as a Level 2 fair value measurement. We determined the fair value of our interest rate swap agreements based on mid-market valuations reported to us by the counterparty to the swap agreements. As of September 29, 2013, we had recorded a current liability of $0.3 million and a long-term liability of $0.4 million. We reflect the change in fair value of the swaps through other income (expense), net and recorded income of $0.6 million in 2014 and income of $1.3 million in 2013.