Marvell Technology Group (MRVL)

Credit Agreement

On November 8, 2006, Marvell Technology Group Ltd. (the “Company”) entered into a credit agreement by and among the Company, the lenders party thereto, Credit Suisse, Cayman Islands Branch, as administrative agent, LaSalle Bank National Association, as syndication agent, and Keybank National Association and Commerzbank AG, as co-documentation agents (the “Credit Agreement”), pursuant to which the Company borrowed an aggregate amount of $400 million in the form of term loans (“Term Loans”).  The proceeds of the Term Loans, together with existing cash on hand, were used to finance the Company’s acquisition of certain assets and intellectual property of Intel Corporation (“Intel”) related to the Business described in Item 2.01 of this report, as well as related fees and expenses.

Amounts borrowed under the Credit Agreement bear interest, in the case of alternate base rate loans, at a rate equal to (i) the “alternate base rate,” which is the higher of (A) the rate of interest per annum announced from time to time by Credit Suisse as its prime rate in effect at it principal office in New York, New York and (B) 0.5% per annum above the Federal Funds Effective Rate (as defined in the Credit Agreement), plus (ii) a 1.00% margin. In the case of Eurodollar loans, amounts borrowed bear interest at a rate equal to the Adjusted LIBO Rate (as defined in the Credit Agreement) plus a 2.00% margin.  Such margins are subject to reduction or increase depending on the Company’s credit rating.

The amounts borrowed under the Credit Agreement are repayable in full on November 6, 2009.  The Company may prepay the Term Loans at any time without premium or penalty.  In addition, the Company must prepay the Term Loans in an amount equal to:  (i) 100% of the net cash proceeds from any asset disposition (as defined in the Credit Agreement) in excess of $20 million, subject to certain exceptions; (ii) 100% of the net cash proceeds from any casualty event (as defined in the Credit Agreement), subject to certain exceptions; (iii) 100% of the net cash proceeds from any debt incurred by or on behalf of the Company or any of the Company’s subsidiaries, subject to certain exceptions; and (iv) 25% of the excess cash flow (as defined in the Credit Agreement) for each fiscal year commencing with the fiscal year ending on January 26, 2008 if at the end of such fiscal year the Company’s ratio of total debt at such date to consolidated EBITDA for such fiscal year is equal to or greater than 1.0 to 1.0.

The Credit Agreement contains certain covenants that, subject to certain exceptions, limit, among other things, the Company’s ability and the ability of its subsidiaries from:

·              incurring additional indebtedness;

·              creating or permitting certain liens;

·              consolidating, merging, liquidating or dissolving;

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·                                          making any investments, loans, advances, guarantees or acquisition;

·                                          selling, transferring, leasing or otherwise disposing of assets;

·                                          entering into sale and leaseback transactions;

·                                          entering in hedging agreements;

·                                          making dividends or other distributions with respect to equity securities;

·                                          entering into transactions with affiliates;

·                                          permitting the Company’s Total Debt (as defined in the Credit Agreement) to Total Capitalization (as defined in the Credit Agreement) to exceed 0.3 to 1.0; and

·                                          permitting the ratio of the Company’s Consolidated EBITDA (as defined in the Credit Agreement) to Consolidated Fixed Charges (as defined in the Credit Agreement), in each case for any period of four consecutive fiscal quarters ending on the last day of any fiscal quarter to be less than 1.2 to 1.0.

The Credit Agreement also restricts the ability of the Company and its subsidiaries that are guarantors of its obligations under the Credit Agreement from engaging in certain transactions with other subsidiaries that are not guarantors.

Amounts outstanding under the Credit Agreement may become immediately due and payable upon the occurrence of specified events, including, among other things: failure to pay any obligations under the Credit Agreement that have become due; breach of any representation or warranty, or certain covenants; breach of any covenants in any of the related loan documents; any default in making any payment of principal or interest of any debt the outstanding amount of which exceeds $25 million or any event or condition that results in the acceleration of such debt; filings or proceedings in bankruptcy; judgments rendered against the Company or any subsidiary involving aggregate liability of $25 million or more; any lien created by the security documents ceasing to be in full force or effect; a change in control (as defined in the Credit Agreement); any subsidiary guarantee ceasing to be valid and binding; or any non-U.S. governmental restriction or action that impairs ability of the Company or its subsidiaries to perform their obligations under the loan documents.

Certain of the Company’s subsidiaries in Bermuda, Singapore and the United States, which account for 95% of its revenues and 90% of its assets on a consolidated basis, have guaranteed the obligations under the Credit Agreement.  These subsidiaries consist of Marvell International Limited, Marvell Asia Pte. Ltd., Marvell International Technology Limited, Marvell Technology, Inc. and Marvell Semiconductor, Inc. If, at any time, the revenues or assets accounted for by these subsidiary-guarantors is less than 95% of Marvell’s revenues or 90% of its assets, Marvell must have additional subsidiaries guarantee its obligations under the Credit Agreement until the 95% and 90% criteria are satisfied.

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If at any time after the earlier to occur of May 8, 2007 and the date on which the Company has received a credit rating from Moody’s and Standard & Poor’s (“S&P”),  (i) the corporate family rating of the Company is not at least Ba1 by Moody’s or the corporate rating of the Company is not at least BB+ by S&P, in each case with no negative outlook, or (ii) if the Company does not have a corporate family rating from Moody’s or a corporate rating from S&P, then the Company must promptly cause each of its U.S. subsidiaries to do each of the following:

·              guarantee the Term Loans;

·              enter into a security agreement with Credit Suisse, pursuant to which these subsidiaries would grant Credit Suisse a security interest in, among other things, and subject to certain exceptions, then owned and thereafter acquired:  (a) accounts receivable, (b) bank accounts and securities accounts, (c) equipment, and (d) inventory; and

·              deliver a mortgage with respect to real property owned by the U.S. subsidiaries.

A copy of the Credit Agreement is attached hereto as Exhibit 10.1 and incorporated herein by reference.  The foregoing description of the Credit Agreement is qualified in its entirety by reference to the full text of the Credit Agreement.