EXHIBIT 10.33
________________________________________________________________________________
CORSAIR COMMUNICATIONS, INC.
LOAN AND SECURITY AGREEMENT
________________________________________________________________________________
TABLE OF CONTENTS
Page
----
1. DEFINITIONS AND CONSTRUCTION.......................................... 1
1.1 Definitions...................................................... 1
1.2 Accounting Terms................................................. 7
2. LOAN AND TERMS OF PAYMENT............................................. 7
2.1 Advances......................................................... 7
2.2 Overadvances..................................................... 8
2.3 Interest Rates, Payments, and Calculations....................... 8
2.4 Crediting Payments............................................... 9
2.5 Fees............................................................. 9
2.6 Additional Costs................................................. 9
2.7 Term............................................................. 10
3. CONDITIONS OF LOANS................................................... 10
3.1 Conditions Precedent to Initial Advance.......................... 10
3.2 Conditions Precedent to all Advances............................. 10
4. CREATION OF SECURITY INTEREST......................................... 11
4.1 Grant of Security Interest....................................... 11
4.2 Delivery of Additional Documentation Required.................... 11
4.3 Right to Inspect................................................. 11
5. REPRESENTATIONS AND WARRANTIES........................................ 11
5.1 Due Organization and Qualification............................... 11
5.2 Due Authorization; No Conflict................................... 11
5.3 No Prior Encumbrances............................................ 11
5.4 Bona Fide Eligible Accounts...................................... 11
5.5 Merchantable Inventory........................................... 12
5.6 Name; Location of Chief Executive Office......................... 12
5.7 Litigation....................................................... 12
5.8 No Material Adverse Change in
Financial Statements.......................................... 12
5.9 Solvency......................................................... 12
5.10 Regulatory Compliance............................................ 12
5.11 Environmental Condition.......................................... 12
5.12 Taxes............................................................ 13
5.13 Subsidiaries..................................................... 13
5.14 Government Consents.............................................. 13
5.15 Full Disclosure.................................................. 13
6. AFFIRMATIVE COVENANTS................................................. 13
6.1 Good Standing.................................................... 13
6.2 Government Compliance............................................ 13
6.3 Financial Statements, Reports, Certificates...................... 13
6.4 Inventory; Returns............................................... 14
6.5 Taxes............................................................ 14
6.6 Insurance........................................................ 14
6.7 Principal Depository............................................. 15
6.8 Quick Ratio...................................................... 15
i
6.9 Tangible Net Worth.............................................. 15
6.10 Profitability................................................... 15
6.11 Further Assurances.............................................. 15
7. NEGATIVE COVENANTS
7.1 Dispositions..................................................... 15
7.2 Change in Business............................................... 15
7.3 Mergers or Acquisitions.......................................... 15
7.4 Indebtedness..................................................... 15
7.5 Encumbrances..................................................... 15
7.6 Distributions.................................................... 16
7.7 Investments...................................................... 16
7.8 Transactions with Affiliates..................................... 16
7.9 Subordinated Debt................................................ 16
7.10 Inventory....................................................... 16
7.11 Compliance...................................................... 16
8. EVENTS OF DEFAULT..................................................... 16
8.1 Payment Default.................................................. 16
8.2 Covenant Default................................................. 16
8.3 Material Adverse Change.......................................... 17
8.4 Attachment....................................................... 17
8.5 Insolvency....................................................... 17
8.6 Other Agreements................................................. 17
8.7 Subordinated Debt................................................ 17
8.8 Judgments........................................................ 17
8.9 Misrepresentations............................................... 17
9. BANK'S RIGHTS AND REMEDIES............................................ 18
9.1 Rights and Remedies.............................................. 18
9.2 Power of Attorney................................................ 18
9.3 Accounts Collection.............................................. 19
9.4 Bank Expenses.................................................... 19
9.5 Bank's Liability for Collateral.................................. 19
9.6 Remedies Cumulative.............................................. 19
9.7 Demand; Protest.................................................. 19
10. NOTICES............................................................... 20
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER............................ 20
12. GENERAL PROVISIONS.................................................... 20
12.1 Successors and Assigns........................................... 20
12.2 Indemnification.................................................. 20
12.3 Time of Essence.................................................. 21
12.4 Severability of Provisions....................................... 21
12.5 Amendments in Writing, Integration............................... 21
12.6 Counterparts..................................................... 21
12.7 Survival......................................................... 21
12.8 Confidentiality.................................................. 21
ii
This LOAN AND SECURITY AGREEMENT is entered into as of August 30, 1996, by
and between SILICON VALLEY BANK ("Bank") and CORSAIR COMMUNICATIONS, INC.
("Borrower").
RECITALS
--------
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
---------
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
----------------------------
1.1 Definitions. As used in this Agreement, the following terms shall
-----------
have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means an Advance under the Revolving
Facility.
"Affiliate" means, with respect to any Person, any Person that owns
or controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
and Bank's reasonable attorneys' fees and expenses incurred in amending,
enforcing or defending the Loan Documents (including fees and expenses of
appeal), whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" has the meaning set forth in Section 2.1 hereof.
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which banks in the State of California are authorized or required to
close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
1
"Collateral" means the property described on Exhibit A attached
hereto.
"Committed Line" means Three Million Dollars ($3,000,000).
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Current Assets" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date, an amounts
that should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding Advances made
under this Agreement, including all Indebtedness that is payable upon demand or
within one year from the date of determination thereof unless such Indebtedness
is renewable or extendable at the option of Borrower or any Subsidiary to a date
more than one year from the date of determination, but excluding Subordinated
Debt.
"Daily Balance" means the amount of the Obligations owed at the end of
a given day.
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrower's business that comply with all of Borrower's representations
and warranties to Bank set forth in Section 5.4; provided, that standards of
--------
eligibility may be fixed and revised from time to time by Bank in Bank's
reasonable judgment and upon notification thereof to Borrower in accordance with
the provisions hereof. Unless otherwise agreed to by Bank, Eligible Accounts
shall not include the following:
(a) Accounts that the account debtor has failed to pay within ninety
(90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent (50%)
of whose Accounts the account debtor has failed to pay within ninety (90) days
of invoice date;
(c) Accounts with respect to which the account debtor is an officer,
employee, or agent of Borrower;
2
(d) Accounts with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, ▇▇▇▇ and hold, or other terms
by reason of which the payment by the account debtor may be conditional;
(e) Accounts with respect to which the account debtor is an Affiliate
of Borrower;
(f) Accounts with respect to which the account debtor is the United
States or any department, agency, or instrumentality of the United States;
(g) Accounts with respect to which Borrower is liable to the account
debtor for goods sold or services rendered by the account debtor to Borrower,
but only to the extent of any amounts owing to the account debtor against
amounts owed to Borrower;
(h) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed fifty
percent (50%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;
(i) Accounts with respect to which the account debtor does not have
its principal place of business in the United States, unless supported by
letters of credit or FCIA or other insurance on terms, and by financial
institutions, acceptable to Bank, or otherwise permitted by Bank;
(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its sole discretion, that there may be a basis for dispute (but only to the
extent of the amount subject to such dispute or claim), or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of business; and
(k) Accounts the collection of which Bank reasonably determines to be
doubtful.
"Eligible Inventory" means raw materials, work in process and finished
goods inventory approved from time to time by Bank, net of any reserves for
excess or obsolete inventory, and excluding field inventory.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in effect
from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or
3
informal moratoria, compositions, extension generally with its creditors, or
proceedings seeking reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in which Borrower
has any interest, including merchandise, raw materials, parts, supplies,
packaging and shipping materials, work in process and finished products intended
for sale or lease or to be furnished under a contract of service, of every kind
and description now or at any time hereafter owned by or in the custody or
possession, actual or constructive, of Borrower, including such inventory as is
temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above, and Borrower's Books relating to any of
the foregoing.
"Inventory Backlog" means Borrower's backlog, as reported in the
financial statements delivered pursuant to Section 6.3.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Maturity Date" means the date immediately preceding the first
anniversary of the date hereof.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper, and Borrower's Books relating
to any of the foregoing.
"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.
"Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
4
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness secured by Liens described in clause (c) of the
defined term "Permitted Liens" provided the principal amount of the indebtedness
does not exceed the lesser of the cost or the fair market value of such
Equipment;
(e) Indebtedness owing to GATX/MMC and Comdisco, Inc. pursuant to
those certain Loan and Security Agreements, each dated as of July 31, 1996;
(f) Indebtedness to trade creditors incurred in the ordinary course
of business;
(g) extensions, renewals and refinancings of the Indebtedness of the
Borrower or any of its Subsidiaries of the type referred to in clauses (b) and
(e) above, provided that the principal amount of such Indebtedness being
--------
extended, renewed or refinanced does not increase;
(h) Indebtedness consisting of guarantees resulting from endorsement
of negotiable instruments for collection by the Borrower or any such Subsidiary
in the ordinary course of business;
(i) Indebtedness of the Borrower to any of its Subsidiaries or of any
of its Subsidiaries to another Subsidiary in each case in the ordinary course of
business; and
(j) guarantees by the Borrower of any Indebtedness of its
Subsidiaries, and of any Subsidiary of Indebtedness of the Borrower or another
Subsidiary, to the extent such Indebtedness is permitted hereunder.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor's Corporation or ▇▇▇▇▇'▇ Investors Service, Inc., and (iii) certificates
of deposit maturing no more than one (1) year from the date of investment
therein issued by Bank.
(c) loans to employees, officers and directors for the purpose of
purchasing equity securities of Borrower not exceeding $10,000 in any year;
(d) travel advances and other employee loans and advances in the
ordinary course of business not to exceed $20,000 at any time outstanding;
(e) extensions of credit to customers, in each case in the ordinary
course of business;
(f) Investments accepted in connection with Transfers permitted by
Section 7.1.
5
"Permitted Liens" means the following:
(a) the Liens existing on the Closing Date in favor of GATX/MMC and
Comdisco, Inc. or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or being contested in good faith by appropriate
proceedings, provided the same have no priority over any of Bank's security
--------
interests;
(c) Liens (i) upon or in any equipment acquired or held by Borrower
or any of its Subsidiaries to secure the purchase price of such equipment or
indebtedness incurred solely for the purpose of financing the acquisition of
such equipment, or (ii) existing on such equipment at the time of its
acquisition, provided that the Lien is confined solely to the property so
--------
acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens securing the Indebtedness described in clause (e) of the
defined term "Permitted Indebtedness";
(e) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (d) above, provided that any extension, renewal or
---------
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase;
(f) Liens of materialmen, mechanics, warehousemen, carriers, or other
similar liens arising in the ordinary course of business and securing
obligations which are not delinquent;
(g) Liens in favor of customs and revenue authorities which secure
payment of customs duties in connection with the importation of goods;
(h) Liens which constitute rights of set-off of a customary nature or
banker's liens on amounts on deposit, whether arising by contract or by
operation of law, in connection with arrangements entered into with depository
institutions in the ordinary course of business, provided such Liens do not have
priority over the Liens granted hereunder; and
(i) any judgment, attachment or similar Lien in connection with any
event or circumstance described in Section 8.4 that is not an Event of Default
hereunder.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Quick Assets" means, at any date as of which the amount thereof shall
be determined, the consolidated cash, cash-equivalents, accounts receivable and
investments, with maturities not to exceed 90 days, of Borrower determined in
accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer, the
Chief Financial Officer, the Controller and Assistant Controller of Borrower.
6
"Revolving Facility" means the facility under which Borrower may
request Bank to issue cash advances, as specified in Section 2.1 hereof.
"Schedule" means the schedule of exceptions attached hereto, if any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (i) any
general partnership interest or (ii) more than 50% of the stock of which by the
terms thereof ordinary voting power to elect the Board of Directors, managers or
trustees of the entity shall, at the time as of which any determination is being
made, be owned by Borrower, either directly or through an Affiliate.
"Tangible Net Worth" means at any date as of which the amount thereof
shall be determined, the consolidated total assets of Borrower and its
Subsidiaries minus, without duplication, (i) the sum of any amounts attributable
-----
to (a) goodwill, (b) intangible items such as unamortized debt discount and
expense, patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) all reserves not already
deducted from assets, and (ii) Total Liabilities.
---
"Total Liabilities" means at any date as of which the amount thereof
shall be determined, all obligations that should, in accordance with GAAP be
classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness, but specifically excluding Subordinated
Debt.
1.2 Accounting Terms. All accounting terms not specifically defined
----------------
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
-------------------------
2.1 Advances. Subject to and upon the terms and conditions of this
--------
Agreement, Bank agrees to make Advances to Borrower in an aggregate amount not
to exceed the lesser of the Committed Line or the Borrowing Base. For purposes
of this Agreement, "Borrowing Base" shall mean an amount equal to (i) eighty
percent (80%) of Eligible Accounts plus (ii) the lesser of (a) twenty five
percent (25%) of Eligible Inventory or (b) Five Hundred Thousand Dollars
($500,000); provided that "Borrowing Base" shall mean an amount equal to (i)
eighty percent (80%) of Eligible Accounts plus the lesser of (a) twenty five
percent (25%) of Eligible Inventory or (b) One Million Dollars ($1,000,000) at
any time when the Inventory Backlog consists of more than one hundred (100)
radio frequency units. Subject to the terms and conditions of this Agreement,
amounts borrowed pursuant to this Section 2.1 may be repaid and reborrowed at
any time prior to the Maturity Date.
Whenever Borrower desires an Advance, Borrower will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m. California time, on
the Business Day that the Advance is to be made. Each such notification shall
be promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
---------
based upon instructions received from a Responsible Officer, or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank shall be entitled to
rely on any telephonic notice given by a person who Bank reasonably believes to
be a Responsible Officer, and Borrower shall indemnify and hold Bank
7
harmless for any damages or loss suffered by Bank as a result of such reliance.
Bank will credit the amount of Advances made under this Section 2.1 to
Borrower's deposit account.
The Revolving Facility shall terminate on the Maturity Date, at which
time all Advances under this Section 2.1 shall be immediately due and payable.
2.1.1 Letters of Credit.
-----------------
(a) Subject to the terms and conditions of this Agreement,
Bank agrees to issue or cause to be issued letters of credit for the account of
Borrower in an aggregate face amount not to exceed (i) the lesser of the
Committed Line or the Borrowing Base minus (ii) the then outstanding principal
balance of the Advances. Each such letter of credit shall have an expiry date no
later than the Revolving Maturity Date, provided that Borrower's letter of
credit reimbursement obligation shall be secured by cash on terms acceptable to
Bank at any time after the Maturity Date if the term of this Agreement is not
extended by Bank. All such letters of credit shall be, in form and substance,
acceptable to Bank in its sole discretion and shall be subject to the terms and
conditions of Bank's form of application and letter of credit agreement. All
amounts actually paid by Bank in respect of a Letter of Credit shall, when paid,
constitute an Advance under this Agreement.
(b) The obligation of Borrower to immediately reimburse Bank
for drawings made under Letters of Credit shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend and hold Bank harmless from any loss, cost,
expense or liability, including, without limitation, reasonable attorneys' fees,
arising out of or in connection with any letters of credit.
2.1.2 Letter of Credit Reimbursement; Reserve.
---------------------------------------
(a) Borrower may request that Bank issue a letter of-credit
payable in a currency other than United States Dollars. If a demand for payment
is made under any such letter of credit, Bank shall treat such demand as an
advance to Borrower of the equivalent of the amount thereof (plus cable charges)
in United States currency at the then prevailing rate of exchange in San
Francisco, California, for sales of that other currency for cable transfer to
the country of which it is the currency.
(b) Upon the issuance of any letter of credit payable in a
currency other than United States Dollars, Bank shall create a reserve under the
Committed Line for letters of credit against fluctuations in currency exchange
rates, in an amount equal to twenty percent (20%) of the face amount of such
letter of credit. The amount of such reserve may be amended by Bank from time to
time to account for fluctuations in the exchange rate. The availability of funds
under the Committed Line shall be reduced by the amount of such reserve for so
long as such letter of credit remains outstanding.
2.2 Overadvances. If, at any time or for any reason, the amount of
------------
Obligations owed by Borrower to Bank pursuant to Section 2.1 of this Agreement
is greater than the lesser of (i) the Committed Line or (ii) the Borrowing Base,
Borrower shall immediately pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
------------------------------------------
(a) Interest Rate. Except as set forth in Section 2.3(b), any
-------------
Advances shall bear interest, on the Daily Balance, at a rate equal to one half
(0.5) percentage point above the Prime Rate.
8
(b) Default Rate. All Obligations shall bear interest, from and after
------------
the occurrence of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on the last
--------
calendar day of each month during the term hereof. Bank shall, at its option,
charge such interest, all Bank Expenses, and all Periodic Payments against any
of Borrower's deposit accounts or against the Committed Line, in which case
those amounts shall thereafter accrue interest at the rate then applicable
hereunder. Any interest not paid when due shall be compounded by becoming a part
of the Obligations, and such interest shall thereafter accrue interest at the
rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time to
-----------
time hereafter, the applicable rate of interest hereunder shall be increased or
decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under
the Loan Documents shall be computed on the basis of a three hundred sixty (360)
day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence and continuance of an
------------------
Event of Default, Bank shall credit a wire transfer of funds, check or other
item of payment to such deposit account or Obligation as Borrower specifies.
After the occurrence and during the continuance of an Event of Default, the
receipt by Bank of any wire transfer of funds, check, or other item of payment
shall be immediately applied to conditionally reduce Obligations, but shall not
be considered a payment on account unless such payment is of immediately
available federal funds or unless and until such check or other item of payment
is honored when presented for payment. Notwithstanding anything to the contrary
contained herein, any wire transfer or payment received by Bank after 12:00 noon
California time shall be deemed to have been received by Bank as of the opening
of business on the immediately following Business Day. Whenever any payment to
Bank under the Loan Documents would otherwise be due (except by reason of
acceleration) on a date that is not a Business Day, such payment shall instead
be due on the next Business Day, and additional fees or interest, as the case
may be, shall accrue and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
----
(a) Facility Fee. A Facility Fee equal to Seven Thousand Dollars
------------
($7,000), which fee shall be due on the Closing Date and shall be fully earned
and nonrefundable;
(b) Financial Examination and Appraisal Fees. Bank's customary fees
----------------------------------------
and out-of-pocket expenses for Bank's audits of Borrower's Accounts, and for
each appraisal of Collateral and financial analysis and examination of Borrower
performed from time to time by Bank or its agents provided that, except during
the continuance of an Event of Default, the cost of such audit or audits shall
not exceed One Thousand Two Hundred Dollars ($1,200) per year;
(c) Bank Expenses. Upon the date hereof, all Bank Expenses incurred
-------------
through the Closing Date, including reasonable attorneys' fees and expenses not
to exceed One Thousand Five Hundred Dollars ($1,500), and, after the date
hereof, all Bank Expenses, including reasonable attorneys' fees and expenses, as
and when they become due.
2.6 Additional Costs. In case any change in any law, regulation, treaty
----------------
or official directive or the interpretation or application thereof by any court
or any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law), in each case
after the date of this Agreement:
9
(a) subjects Bank to any tax with respect to payments of principal or
interest or any other amounts payable hereunder by Borrower or otherwise with
respect to the transactions contemplated hereby (except for taxes on the overall
net income of Bank imposed by the United States of America or any political
subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.7 Term. This Agreement shall become effective on the Closing Date and,
----
subject to Section 12.7, shall continue in full force and effect for a term
ending on the Maturity Date. Notwithstanding the foregoing, Bank shall have the
right to terminate its obligation to make Advances under this Agreement
immediately upon the occurrence and during the continuance of an Event of
Default. Notwithstanding termination, Bank's Lien on the Collateral shall remain
in effect for so long as any Obligations are outstanding.
3. CONDITIONS OF LOANS
-------------------
3.1 Conditions Precedent to Initial Advance. The obligation of Bank to
---------------------------------------
make the initial Advance is subject to the condition precedent that Bank shall
have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) financing statement (Form UCC-1);
(d) an intercreditor agreement;
(e) insurance certificate;
(f) an audit of Borrower's Accounts;
(g) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof; and
(h) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of Bank to make
------------------------------------
each Advance, including the initial Advance, is further subject to the following
conditions:
10
(a) timely receipt by Bank of the Payment/Advance Form as provided in
Section 2.1; and
(b) the representations and warranties contained in Section 5 shall
be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Advance as though made at
and as of each such date, and no Event of Default shall have occurred and be
continuing, or would result from such Advance. The making of each Advance shall
be deemed to be a representation and warranty by Borrower on the date of such
Advance as to the accuracy of the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
-----------------------------
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
--------------------------
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule, such security interest constitutes a valid, first priority security
interest in the presently existing Collateral, and will constitute a valid,
first priority security interest in Collateral acquired after the date hereof.
4.2 Delivery of Additional Documentation Required. Borrower shall from
---------------------------------------------
time to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees, or
----------------
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary is a
----------------------------------
corporation duly existing and in good standing under the laws of its state of
incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified, except to the extent that failure to
so qualify would not have a Material Adverse Effect on the Borrower.
5.2 Due Authorization; No Conflict. The execution, delivery, and
------------------------------
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible title to
---------------------
the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
---------------------------
existing obligations. The property giving rise to such Eligible Accounts has
been delivered to the account
11
debtor or to the account debtor's agent for immediate shipment to and
unconditional acceptance by the account debtor. Borrower has not received notice
of actual or imminent Insolvency Proceeding of any account debtor that is
included in any Borrowing Base Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material respects of
----------------------
good and marketable quality, free from all material defects.
5.6 Name; Location of Chief Executive Office. Except as disclosed in the
----------------------------------------
Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof. The chief executive office of Borrower
is located at the address indicated in Section 10 hereof.
5.7 Litigation. Except as set forth in the Schedule, there are no
----------
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect or a material adverse effect on Borrower's interest or
Bank's security interest in the Collateral. Borrower does not have knowledge of
any such pending or threatened actions or proceedings.
5.8 No Material Adverse Change in Financial Statements. All consolidated
--------------------------------------------------
financial statements related to Borrower and any Subsidiary that have been
delivered by Borrower to Bank fairly present in all material respects Borrower's
consolidated financial condition as of the date thereof and Borrower's
consolidated results of operations for the period then ended. There has not been
a material adverse change in the consolidated financial condition of Borrower
since the date of the most recent of such financial statements submitted to
Bank.
5.9 Solvency. Borrower is solvent and able to pay its debts (including
--------
trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has met the
---------------------
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act, and Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, noncompliance with which or violation of
which could have a Material Adverse Effect.
5.11 Environmental Condition. None of Borrower's or any Subsidiary's
-----------------------
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency
12
concerning any action or omission by Borrower or any Subsidiary resulting in the
releasing, or otherwise disposing of hazardous waste or hazardous substances
into the environment.
5.12 Taxes. Borrower and each Subsidiary has filed or caused to be filed
-----
all tax returns required to be filed, and has paid, or has made adequate
provision for the payment of, all taxes reflected therein, except for taxes the
amount or validity of which Borrower is contesting in good faith by appropriate
proceedings and with respect to which Borrower has taken adequate reserves in
accordance with GAAP.
5.13 Subsidiaries. As of the date hereof Borrower does not own any
------------
stock, partnership interest or other equity securities of any Person, except for
Permitted Investments.
5.14 Government Consents. Borrower and each Subsidiary has obtained all
-------------------
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted,
except to the extent that failure to do so would not have a Material Adverse
Effect on the Borrower.
5.15 Full Disclosure. No representation, warranty or other statement
---------------
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
-------------
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
---------------------
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall deliver
-------------------------------------------
to Bank: (a) as soon as available, but in any event within thirty (30) days
after the end of each month, a company prepared consolidated balance sheet and
income statement covering Borrower's consolidated operations during such period,
certified by a Responsible Officer; (b) as soon as available, but in any event
within ninety (90) days after the end of Borrower's fiscal year, audited
consolidated financial statements of Borrower prepared in accordance with GAAP,
consistently applied, together with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably
acceptable to Bank; (c) within five (5) days upon becoming available, copies of
all statements, reports and notices sent or made available generally by Borrower
to its security holders or to any holders of Subordinated Debt and all reports
on Form 10-K and 10-Q filed with the Securities and Exchange Commission; (d)
promptly upon receipt of
13
notice thereof, a report of any legal actions pending or threatened against
Borrower or any Subsidiary that could result in damages or costs to Borrower or
any Subsidiary of One Hundred Thousand Dollars ($100,000) or more; and (e) such
budgets, sales projections, operating plans or other financial information as
Bank may reasonably request from time to time.
Within twenty (20) days after the last day of each month in which an
Advance is outstanding, Borrower shall deliver to Bank a Borrowing Base
Certificate signed by a Responsible Officer in substantially the form of Exhibit
-------
C hereto, together with aged listings of accounts receivable and accounts
-
payable and an RFU backlog report in form reasonably acceptable to Bank.
Borrower shall also deliver such Borrowing Base Certificate, aged listings and
backlog report as a condition to requesting an Advance in a month for which Bank
has not already received such documents.
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
---------
Bank shall have a right from time to time hereafter to audit
Borrower's Accounts at Borrower's expense, provided that such audits will be
conducted no more often than every six (6) months unless an Event of Default has
occurred and is continuing.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good and
------------------
marketable condition, free from all material defects. Returns and allowances,
if any, as between Borrower and its account debtors shall be on the same basis
and in accordance with the usual customary practices of Borrower, as they exist
at the time of the execution and delivery of this Agreement. Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to make,
-----
due and timely payment or deposit of all material federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof; and Borrower will make, and will cause each Subsidiary to make,
timely payment or deposit of all material tax payments and withholding taxes
required of it by applicable laws, including, but not limited to, those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Bank with proof satisfactory to
Bank indicating that Borrower or a Subsidiary has made such payments or
deposits; provided that Borrower or a Subsidiary need not make any payment if
the amount or validity of such payment is contested in good faith by appropriate
proceedings and is reserved against (to the extent required by GAAP) by
Borrower.
6.6 Insurance.
---------
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain
insurance relating to Borrower's ownership and use of the Collateral in amounts
and of a type that are customary to businesses similar to Borrower's.
Nothing herein shall be construed as requiring the Borrower to
maintain credit insurance with respect to its accounts receivable.
(b) All such policies of insurance shall be in such form, with such
companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as
14
an additional loss payee thereof and all liability insurance policies shall show
the Bank as an additional insured, and shall specify that the insurer must give
at least twenty (20) days notice to Bank before canceling its policy for any
reason. Upon Bank's request, Borrower shall deliver to Bank certified copies of
such policies of insurance and evidence of the payments of all premiums
therefor. All proceeds payable under any such policy shall, at the option of
Bank, be payable to Bank to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
--------------------
depository and operating accounts with Bank.
6.8 Quick Ratio. Borrower shall maintain, as of the last day of each
-----------
calendar month, a ratio of Quick Assets to Current Liabilities, excluding
deferred revenue, of at least 1.0 to 1.0.
6.9 Tangible Net Worth. Borrower shall maintain, as of the last day
------------------
of each calendar month, a Tangible Net Worth plus Subordinated Debt of not less
than (i) Three Million Dollars ($3,000,000) plus (ii) Fifty Percent (50%) of the
net proceeds received by Borrower from the sale of its equity securities after
the Closing Date.
6.10 Profitability. Borrower shall not incur a loss after taxes in any
-------------
calendar month in excess of One Million Five Hundred Thousand Dollars
($1,500,000).
6.11 Further Assurances. At any time and from time to time Borrower
------------------
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitment to make any Advances, Borrower will
not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
------------
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than: (i) Transfers of
Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; or (iii) Transfers of worn-out or obsolete Equipment.
7.2 Change in Business. Engage in any business, or permit any of its
------------------
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a material change in Borrower's ownership.
Borrower will not, without thirty (30) days prior written notification to Bank,
relocate its chief executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
-----------------------
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person, except for
mergers of Subsidiaries with each other or with Borrower, provided that Borrower
is the surviving Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
------------
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
15
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
------------
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other distribution
-------------
or payment on account of or in redemption, retirement or purchase of any capital
stock, except (i) repurchases from current or former employees, directors or
consultants of the Borrower under the terms of any stock option or stock
purchase plans or agreements up to a maximum of $100,000 in any one fiscal year,
and (ii) dividends payable solely in common stock.
7.7 Investments. Directly or indirectly acquire or own, or make any
-----------
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter into
----------------------------
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
-----------------
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman, or
---------
similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" controlled by an
----------
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose.
Fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur, fail to comply
with the Federal Fair Labor Standards Act or violate any law or regulation,
which violation could have a Material Adverse Effect or a material adverse
effect on the Collateral or the priority of Bank's Lien on the Collateral, or
permit any of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay the principal of, or
---------------
any interest on, any Advances when due and payable; or fails to pay any portion
of any other Obligations not constituting such principal or interest, including
without limitation Bank Expenses, within thirty (30) days of receipt by Borrower
of an invoice for such other Obligations;
8.2 Covenant Default. If Borrower fails to perform any obligation
----------------
under Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or fails or neglects to perform, keep, or observe any other material
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future
16
agreement between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within twenty (20) days after Borrower receives notice thereof
or any officer of Borrower becomes aware thereof; provided, however, that if the
default cannot by its nature be cured within the twenty (20) day period or
cannot after diligent attempts by Borrower be cured within such twenty (20) day
period, and such default is likely to be cured within a reasonable time, then
Borrower shall have an additional reasonable period (which shall not in any case
exceed thirty (30) days) to attempt to cure such default, and within such
reasonable time period the failure to have cured such default shall not be
deemed an Event of Default (provided that no Advances will be required to be
made during such cure period);
8.3 Material Adverse Change. If there occurs a material adverse
-----------------------
change in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Bank's security interests in the
Collateral;
8.4 Attachment. If any material portion of Borrower's assets is
----------
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a hen or encumbrance upon any material portion of Borrower's
assets, or if a notice of lien, levy, or assessment is filed of record with
respect to any of Borrower's assets by the United States Government, or any
department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
-----------
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within thirty (30) days
(provided that no Advances will be made prior to the dismissal of such
Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement to which
----------------
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
-----------------
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money
---------
the uninsured amount of which, individually or in the aggregate, is at least
Fifty Thousand Dollars ($50,000), shall be rendered against Borrower and shall
remain unsatisfied and unstayed for a period of thirty (30) days (provided that
no Advances will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or material
------------------
misstatement on or as of the date made exists now or hereafter in any warranty
or representation set forth herein or in any certificate delivered to Bank by
any Responsible Officer pursuant to this Agreement or to induce Bank to enter
into this Agreement or any other Loan Document.
17
9. BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 Rights and Remedies. Upon the occurrence and during the
-------------------
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in Section
8.5 all Obligations shall become immediately due and payable without any action
by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Without notice to or demand upon Borrower, make such payments
and do such acts as Bank considers necessary or reasonable to protect its
security interest in the Collateral. Borrower agrees to assemble the Collateral
if Bank so requires, and to make the Collateral available to Bank as Bank may
designate. Borrower authorizes Bank to enter the premises where the Collateral
is located, to take and maintain possession of the Collateral, or any part of
it, and to pay, purchase, contest, or compromise any encumbrance, charge, or
lien which in Bank's determination appears to be prior or superior to its
security interest and to pay all expenses incurred in connection therewith. With
respect to any of Borrower's owned premises, Borrower hereby grants Bank a
license to enter into possession of such premises and to occupy the same,
without charge, in order to exercise any of Bank's rights or remedies provided
herein, at law, in equity, or otherwise;
(e) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(g) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;
(h) Bank may credit bid and purchase at any public sale; and
(i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during
-----------------
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated
18
officers, or employees) as Borrower's true and lawful attorney to: (a) send
requests for verification of Accounts or notify account debtors of Bank's
security interest in the Accounts; (b) endorse Borrower's name on any checks or
other forms of payment or security that may come into Bank's possession; (c)
sign Borrower's name on any invoice or ▇▇▇▇ of lading relating to any Account,
drafts against account debtors, schedules and assignments of Accounts,
verifications of Accounts, and notices to account debtors; (d) make, settle, and
adjust all claims under and decisions with respect to Borrower's policies of
insurance; and (e) settle and adjust disputes and claims respecting the accounts
directly with account debtors, for amounts and upon terms which Bank determines
to be reasonable; provided Bank may exercise such power of attorney to sign the
name of Borrower on any of the documents described in Section 4.2 regardless of
whether an Event of Default has occurred. The appointment of Bank as Borrower's
attorney in fact, and each and every one of Bank's rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully repaid and performed and Bank's obligation to provide advances hereunder
is terminated.
9.3 Accounts Collection. At any time from the date of this Agreement,
-------------------
Bank may notify any Person owing funds to Borrower of Bank's security interest
in such funds and verify the amount of such Account. Borrower shall collect all
amounts owing to Borrower for Bank, receive in trust all payments as Bank's
trustee, and immediately deliver such payments to Bank in their original form as
received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish
-------------
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following:
(a) make payment of the same or any part thereof; (b) set up such reserves under
the Revolving Facility as Bank deems necessary to protect Bank from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies with
-------------------------------
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk
of loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
-------------------
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of
---------------
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
19
10. NOTICES
-------
Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: Corsair Communications, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chief Financial Officer
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
If to Bank: Silicon Valley Bank
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
------------------------------------------
This Agreement shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
▇▇▇▇▇, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
------------------
12.1 Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
-------- -------
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and hold
---------------
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower
20
whether under this Agreement, or otherwise (including without limitation
reasonable attorneys fees and expenses), except for losses caused by Bank's
gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance of
---------------
all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement
--------------------------
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be
----------------------------------
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made in
--------
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 Confidentiality. In handling any confidential information Bank
---------------
shall exercise the same degree of care that it exercises with respect to its own
proprietary information of the same types to maintain the confidentiality of any
non-public information thereby received or received pursuant to this Agreement
except that disclosure of such information may be made (i) to the subsidiaries
or affiliates of Bank in connection with their present or prospective business
relations with Borrower, (ii) to prospective transferees or purchasers of any
interest in the Loans, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have delivered a copy to
Borrower, (iii) as required by law, regulations, rule or order, subpoena,
judicial order or similar order, (iv) as may be required in connection with the
examination, audit or similar investigation of Bank and (v) as Bank may
determine in connection with the enforcement of any remedies hereunder.
Confidential information hereunder shall not include information that either:
(a) is in the public domain or in the knowledge or possession of Bank when
disclosed to Bank, or becomes part of the public domain after disclosure to Bank
through no fault of Bank; or (b) is disclosed to Bank by a third party, provided
Bank does not have actual knowledge that such third party is prohibited from
disclosing such information.
21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
CORSAIR COMMUNICATIONS, INC.
By: /s/ ▇▇▇▇▇▇ ▇. Silver
--------------------
Title: CFO
-----------------
SILICON VALLEY BANK
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------
Title: Vice President
-----------------
22
EXHIBIT A
---------
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
(a) All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
(e) All documents, cash, deposit accounts, securities, letters of credit,
certificates of deposit, instruments and chattel paper now owned or hereafter
acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work thereof,
whether published or unpublished, now owned or hereafter acquired; all trade
secret rights, including all rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; all mask work or similar rights available for
the protection of semiconductor chips, now owned or hereafter acquired; all
claims for damages by way of any past, present and future infringement of any of
the foregoing, and
(g) Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
23
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:_______________
FAX#: (▇▇▇) ▇▇▇-▇▇▇▇ TIME:_______________
--------------------------------------------------------------------------------
FROM:___________________________________________________________________________
CLIENT NAME (BORROWER)
REQUESTED BY:___________________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:___________________________________________________________
PHONE NUMBER:___________________________________________________________________
FROM ACCOUNT #______________________ TO ACCOUNT #____________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
--------------------------- ---------------------------
PRINCIPAL INCREASE (ADVANCE) $______________________________
PRINCIPAL PAYMENT (ONLY) $______________________________
INTEREST PAYMENT (ONLY) $______________________________
PRINCIPAL AND INTEREST (PAYMENT) $______________________________
OTHER INSTRUCTIONS:_____________________________________________________________
________________________________________________________________________________
All representations and warranties of Borrower stated in the Loan Agreement
are true, correct and complete in all material respects as of the date of the
telephone request for and Advance confirmed by this Borrowing Certificate;
provided, however, that those representations and warranties expressly
referreing to another date shall be true, correct and complete in all material
respects as of such date.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BANK USE ONLY
TELEPHONE REQUEST:
------------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is know to me.
________________________________ _________________________________
Authorized Requester Phone #
________________________________ _________________________________
Received By (Bank) Phone #
____________________________________________
Authorized Signature (Bank)
--------------------------------------------------------------------------------
24
EXHIBIT C
---------
BORROWING BASE CERTIFICATE
----------------------------------------------------------------------------------------------------------------------
Borrower: Corsair Communications, Inc. Lender: Silicon Valley Bank
Commitment Amount: $3,000,000
----------------------------------------------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as ______ $______________
2. Additions (please explain on reverse) $______________
3. TOTAL ACCOUNTS RECEIVALBE $______________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $__________________
5. Balance of 50% over 90 day accounts $__________________
6. Concentration Limits $__________________
7. Foreign Accounts $__________________
8. Governmental Accounts $__________________
9. Contra Accounts $__________________
10. Promotion or Demo Accounts $__________________
11. Intercompany/Employee Accounts $__________________
12. Other (please explain on reverse) $__________________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $__________________
14. Eligible Accounts (#3 minus #13) $__________________
15. LOAN VALUE OF ACCOUNTS (80% of #14) $__________________
INVENTORY
16. Eligible Inventory as of _______________ $__________________
17. LOAN VALUE OF INVENTORY (25% of of #16, up
to $500,000)* $__________________
BALANCES
18. Maximum Loan Amount $3,000,000
19. Total Funds Available [Lesser of #18 or (#15 plus #17)] $__________________
20. Present balance owing on Line of Credit $__________________
21. RESERVE POSITION (#20 minus #21) $__________________
* Up to $1,000,000 if RFU Inventory Backlog > 100 units.
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the repreesntations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS: -----------------------------------------------------
BANK USE ONLY
---- --- ----
Corsair Communications, Inc. Rec'd By:________________________________________
Auth. Signer
Date:____________________________________________
By:__________________________________ Verified:________________________________________
Authorized Signer Auth. Signer
Date:____________________________________________
_________________________________________________
-----------------------------------------------------
25
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: CORSAIR COMMUNICATIONS, INC.
The undersigned authorized officer of Corsair Communications, Inc. hereby
certifies on behalf of the foregoing company that in accordance with the terms
and conditions of the Loan and Security Agreement between Borrower and the Bank
(the "Agreement"), (i) Borrower is in complete compliance for the period ending
_______________ with all required covenants except as noted below and (ii) all
representations and warranties of Borrower stated in the Agreement are true and
correct in all material respects as of the date hereof. Attached herewith are
the required documents supporting the above certification. The Officer further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) and are consistently applied from one period to the
next except as explained in an accompanying letter or footnotes.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES"
COLUMN.
REPORTING COVENANT REQUIRED COMPLIES
------------------ -------- --------
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A/R & A/P Agings, Backlog Monthly within 20 days Yes No
report/1/
A/R Audit Initial and Semi-Annual Yes No
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
Maintain on a Monthly Basis: Yes No
Minimum Quick Ratio/2/ 1.0:1.0 _______:1.0 Yes No
Minimum Tangible Net $3,000,000/2/ $__________
Worth & Sub Debt
Profitability: Monthly Loss less than $1,500,000 $__________ Yes No
/1/ When Advances outstanding
/2/ Excludes deferred revenue
/3/ Plus 50% of equity
---------------------------------------------
COMMENTS REGARDING EXCEPTIONS: See Attached. BANK USE ONLY
Sincerely, Received by:_______________________
AUTHORIZED SIGNER
------------------------------- Date:______________________________
SIGNATURE
Verified:__________________________
------------------------------- AUTHORIZED SIGNER
TITLE
Date:______________________________
-------------------------------
DATE
Compliance Status: Yes No
---------------------------------------------
26
CORSAIR COMMUNICATIONS, INC.
SCHEDULE TO LOAN AND SECURITY AGREEMENT
1. "Permitted Indebtedness", clause (b): $1,000,000 Loan and Security
Agreement dated August 31, 1995 with Comdisco; and $1,000,000 and $500,000 lease
lines with Comdisco for purchasing capital equipment.
2. "Permitted Investments", clause (a): Two Promissory Notes, each dated
April 10, 1996, and each in the amount of $50,000, made by ▇▇▇▇▇▇ Silver in
favor of Borrower.
3. Litigation Disclosure: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇-▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇
(collectively, the "Plaintiffs") have filed a lawsuit in the superior court of
the state of California, county of San Francisco naming TRW, Inc., ESL
Incorporated and the Company as defendants. The claims contained in the
Plaintiffs' complaint related to their dismissal on or about the time at which
Corsair purchased the PhonePrint assets from ESL Incorporated. Only two of the
seven Plaintiffs were ever employed by Corsair, and Corsair is seeking
indemnification from TRW, Inc. with regard to this matter.
4. Disclosure re stored Inventory: Inventory is stored from time to time
with North American, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (a
division of North American Van Lines, Inc.).