CORSAIR COMMUNICATIONS INC, S-1/A, 1997-07-08

CORSAIR COMMUNICATIONS INC
S-1/A, 1997-07-08
RADIO & TV BROADCASTING & COMMUNICATIONS EQUIPMENT

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 8, 1997

REGISTRATION NO. 333-28519

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 1

TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CORSAIR COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 3663 77-0390406
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction of Classification Code Number) Identification Number)
incorporation or
organization)

3408 HILLVIEW AVENUE
PALO ALTO, CALIFORNIA 94304
(415) 842-3300
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

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MARY ANN BYRNES
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CORSAIR COMMUNICATIONS, INC.
3408 HILLVIEW AVENUE
PALO ALTO, CALIFORNIA 94304
(415) 842-3300
(Name, address, including zip code, and telephone number, including area code,
of agent for service)

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COPIES TO:

JOHN A. DENNISTON, ESQ. NEIL J. WOLFF, ESQ.
MICHAEL S. KAGNOFF, ESQ. CHRISTOPHER F. BOYD, ESQ.
THOMAS E. HORNISH, ESQ. YOICHIRO TAKU, ESQ.
BROBECK, PHLEGER & HARRISON LLP WILSON SONSINI GOODRICH & ROSATI
550 West "C" Street, Suite 1300 Professional Corporation
San Diego, California 92101 650 Page Mill Road
(619) 234-1966 Palo Alto, California 94304
(415) 493-9300

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APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] _________

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] ________

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

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

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.

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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

SUBJECT TO COMPLETION, DATED JULY 8, 1997

[LOGO OF CORSAIR COMMUNICATIONS]
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2,250,000 SHARES
COMMON STOCK
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All of the 2,250,000 shares of Common Stock, par value $.001 per share
("Common Stock"), are being sold by Corsair Communications, Inc. ("Corsair"
or the "Company"). Prior to this offering (the "Offering"), there has been no
public market for the Common Stock. It is currently estimated that the
initial public offering price will be between $12.00 and $14.00 per share.
See "Underwriting" for a discussion of the factors considered in determining
the initial public offering price. The Company has applied to have the Common
Stock approved for listing on the Nasdaq National Market under the symbol
"CAIR."

FOR INFORMATION CONCERNING CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "RISK FACTORS" COMMENCING ON PAGE 5.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT(1) COMPANY(2)
<S> <C> <C> <C>
Per Share $ $ $
Total(3) $ $ $
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."

(2) Before deducting expenses estimated at $900,000, payable by the Company.

(3) The Company has granted the Underwriters a 30-day option to purchase up
to 337,500 additional shares of Common Stock solely to cover over-
allotments, if any. If such option is exercised in full, the total Price
to Public, Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."

The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by them, and subject to
approval of certain legal matters by counsel and certain other conditions.
The Underwriters reserve the right to withdraw, cancel or modify such offer
and to reject orders in whole or in part. Delivery of the shares of Common
Stock offered hereby to the Underwriters is expected to be made in New York,
New York on or about , 1997.

DEUTSCHE MORGAN GRENFELL

HAMBRECHT & QUIST

WESSELS, ARNOLD & HENDERSON

The date of this Prospectus is , 1997.
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[INSIDE FRONT COVER]

Background: Green

Main inner box background: Tan

Upper box background: Blue

Text in upper box: Corsair's strategy is to deliver tomorrow's
wireless solutions.
Text in upper left box
(slightly lower): Corsair's PhonePrint System:

Text below in bullet format: Platform hardware deployed in cell sites.
Powerful, flexible distributed architecture.
Real-time roaming network.

Graphics below bullets: Multiple cellular telephone sites in various
cities depicted by antennas next to a small
building linked together through a real-time
network depicted by a blue cloud.

Text below depicted cell sites: Los Angeles
New York
Mexico City

Text in blue cloud: Real-Time Network

Text in middle left box: Corsair's Multiproduct Platform Strategy:

Text below in bullet format: Developing products for customer retention
and wireless phone location.

Continuing expansion into new U.S. and
international markets.

Leveraging relationships with the leading
wireless providers.

Graphics below bullets: Five 3-D boxes. One green box on left and
three orange boxes on right with arrows to
center blue box.

Text in left 3-D box: Fraud Prevention Application
(PhonePrint(R) RF Fingerprinting)

Text in center 3-D box: CORSAIR Multiproduct Platform

Text in right upper 3-D box: Customer Retention Application*
(Identify Out-of-Spec Phones)

Text in right center 3-D box: Location Application*
(Wireless E9-1-1 and other Commercial
Services)

Text in right lower 3-D box: Other Applications*

Text in lower left corner: CORSAIR COMMUNICATIONS (with logo)

Text in lower right corner: *Future application

PhonePrint(R) is a registered trademark and Corsair (TM) is a trademark of the
Company. All other trademarks or service marks appearing in this Prospectus are
the property of their respective holders.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."

Except as otherwise noted, all information in this Prospectus, including
share and per share information, (i) assumes no exercise of the Underwriters'
over-allotment option, (ii) reflects a two-for-three reverse stock split of
the outstanding Common Stock effective prior to the closing of this Offering,
(iii) reflects the conversion of every three outstanding shares of the
Company's Preferred Stock into two shares of Common Stock upon the closing of
this Offering, and (iv) reflects an increase in the number of authorized
shares of Common Stock from 20,000,000 to 75,000,000 and a decrease in the
number of authorized shares of Preferred Stock from 14,548,963 to 10,000,000
effective immediately prior to the closing of this Offering.
<PAGE>

PROSPECTUS SUMMARY

The following summary should be read in conjunction with, and is qualified in
its entirety by, the more detailed information and financial statements and
notes thereto appearing elsewhere in this Prospectus.

THE COMPANY

Corsair Communications, Inc. provides an open architecture hardware and
software system that can serve as a platform for the delivery of multiple
products and services to the wireless telecommunications industry. The genesis
for the platform is PhonePrint, a system that has proven highly effective in
reducing cloning fraud. The PhonePrint system has prevented over 100 million
fraudulent call attempts and some customers have reported up to a 90% reduction
in cloning fraud losses after deploying PhonePrint. In addition to providing
cloning fraud prevention, the Company's platform is designed to support a broad
range of products and services for the wireless telecommunications industry,
including churn reduction and phone location products. The Company believes
that new products can be integrated with its open, scaleable platform, which
can provide a number of benefits to wireless telecommunications carriers,
including accelerated development and deployment, reduced costs, efficient use
of cell site space and improved customer service.

The Company sells and markets its products to wireless telecommunications
carriers domestically and internationally. The Company's customers include AT&T
Wireless Services, Bell Atlantic NYNEX Mobile, BellSouth Cellular Corp.,
Comcast Cellular Communications, Inc., GTE Mobilnet Service Corp., Los Angeles
Cellular Telephone Company, Pilipino Telephone Corporation (Piltel), RadioMovil
DIPSA, S.A. de C.V. (Telcel) and Southwestern Bell Mobile Systems, Inc.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered..................... 2,250,000 shares
Common Stock outstanding after the
offering................................ 13,011,992 shares(1)
Use of proceeds.......................... Working capital, general corporate
purposes and potentially to repay
certain indebtedness and for
acquisitions. See "Use of Proceeds."
Proposed Nasdaq National Market symbol... CAIR
</TABLE>

SUMMARY FINANCIAL DATA
(In thousands)

<TABLE>
<CAPTION>
JUNE 30, 1997
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ACTUAL AS ADJUSTED(2)
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<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents, and short-term investments...... $20,286 $46,589
Working capital......................................... 17,519 43,822
Total assets............................................ 38,594 64,897
Total stockholders' equity.............................. 17,210 43,513
</TABLE>
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(1) Based on shares outstanding as of June 30, 1997. Does not include 896,067
shares of Common Stock issuable upon exercise of options and warrants
outstanding as of June 30, 1997.
(2) Adjusted to reflect the sale by the Company of 2,250,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $13.00
per share and after deducting the estimated underwriting discount and
offering expenses, and the receipt of the net proceeds therefrom. See "Use
of Proceeds" and "Capitalization."

3
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THE COMPANY

Cloning occurs when a thief uses a scanning device to steal the mobile
identification number and electronic serial number transmitted over the air
during a wireless call, and then reprograms other phones with the stolen
numbers. The reprogrammed phones, or "clones," are then used to make
fraudulent calls on the wireless carriers' networks. Fraud in the United
States ("U.S.") alone cost wireless telecommunications carriers in excess of
$1 billion in 1996 and cloning fraud accounted for a majority of this fraud
according to the Yankee Group. It is widely believed that cloning fraud also
poses a significant problem for carriers worldwide.

The PhonePrint system uses proprietary radio frequency ("RF") signal
analysis technology, originally developed for use by the military, to identify
attempted fraudulent calls and prevent cloners from gaining access to a
carrier's analog network. The system measures specific characteristics of each
phone's unique RF waveform to develop a description, or "RF fingerprint," that
is a reliable tool to distinguish between a clone and a legitimate phone. Just
as no two human fingerprints are the same, subtle manufacturing, component and
design variances mean that no two wireless phones will generate the same
waveform. As a result, the RF fingerprint cannot be emulated by another
wireless phone.

The scaleable design of the PhonePrint system allows carriers to deploy the
system initially in areas where fraud is most prevalent and to further deploy
the system over time in other parts of their networks. In addition, by
purchasing subscriptions to the Company's PhonePrint Roaming Network, carriers
can share RF fingerprints in real-time between PhonePrint systems in different
markets to protect against roaming fraud.

The Corsair platform has been designed as a distributed, open architecture
system into which products for wireless telecommunications carriers can be
integrated. The Company believes that its platform will provide significant
cost advantages for new products, as compared to stand-alone products offered
by others, because of the ability to leverage common designs and components.
The Company is currently developing two additional products that can be
integrated into the existing platform. The first product is intended to reduce
subscriber turnover or "churn" by reporting on the performance of subscriber
phones and is currently expected to be introduced in 1998. The second product,
currently targeted to be introduced in 1999, is intended to enable carriers to
meet a Federal Communications Commission mandate that requires all U.S.
wireless telecommunications carriers to be able to identify the location of
emergency 911 callers on wireless networks by October 2001.

The Company has installed PhonePrint in over 40 U.S. markets, as well as in
Mexico and the Philippines. The Company's customers include AT&T Wireless
Services, Bell Atlantic NYNEX Mobile, BellSouth Cellular Corp., Comcast
Cellular Communications, Inc., GTE Mobilnet Service Corp., Los Angeles
Cellular Telephone Company, Pilipino Telephone Corporation (Piltel),
RadioMovil DIPSA, S.A. de C.V. (Telcel) and Southwestern Bell Mobile Systems,
Inc.

The Company was incorporated in Delaware in December 1994. Unless the
context indicates otherwise, the "Company" or "Corsair" refer to Corsair
Communications, Inc. The Company's headquarters are located at 3408 Hillview
Avenue, Palo Alto, California 94304, and its telephone number is (415) 842-
3300.

4
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RISK FACTORS

An investment in the shares of Common Stock offered hereby involves a high
degree of risk. The following factors, in addition to the other information
contained in this Prospectus, should be carefully considered in evaluating the
Company and its business before purchasing shares of Common Stock offered
hereby. This Prospectus contains forward-looking statements that involve risks
and uncertainties. The Company's actual results may differ materially from the
results discussed in such forward-looking statements. Factors that might cause
such a difference include, but are not limited to, those discussed below and in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" as well as those discussed elsewhere in this
Prospectus.

LIMITED OPERATING HISTORY; LACK OF PROFITABILITY. The Company was
incorporated in December 1994 and first shipped its PhonePrint system in March
1995. Accordingly, the Company has only a limited operating history upon which
to base an evaluation of its business and prospects. The Company has incurred
net losses in each quarter since its incorporation, resulting in an accumulated
deficit of $31.7 million as of June 30, 1997. There can be no assurance that
the Company's existing revenue levels can be sustained, and past and existing
revenue levels should not be considered indicative of future results or growth.
Moreover, there can be no assurance that the Company will achieve or sustain
profitability on a quarterly or annual basis. Operating results for future
periods are subject to numerous uncertainties specified elsewhere in this
Prospectus. The Company's prospects must be considered in light of the risks
encountered by companies with limited operating histories, particularly
companies in new and rapidly evolving markets such as the markets in which the
Company now competes and may in the future compete. The Company's future
operating results will depend upon, among other factors: the demand for
PhonePrint; the Company's ability to introduce successful new products and
product enhancements, including products that are sold to both analog network
carriers and emerging digital network carriers such as Personal Communications
Services ("PCS") and Enhanced Specialized Mobile Radio ("ESMR") carriers; the
level of product and price competition; the ability of the Company to expand
its international sales; the Company's success in expanding distribution
channels; the Company's success in attracting and retaining motivated and
qualified personnel; and the ability of the Company to avoid patent and other
intellectual property litigation. If the Company is not successful in
addressing such risks, as well as the others set forth in this Prospectus, the
Company's business, operating results and financial condition will be
materially adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

DEPENDENCE ON PHONEPRINT; DEPENDENCE ON ANALOG NETWORKS. To date, all of the
Company's revenues have been attributable to PhonePrint, the Company's cloning
fraud prevention system, and the Company anticipates that PhonePrint will
continue to account for substantially all of the Company's revenues at least
through the end of 1998. As a result, the Company's future operating results
will depend on the demand for and market acceptance of PhonePrint. A relatively
small number of analog network carriers are the potential customers for
PhonePrint. A majority of the analog carriers in the largest U.S. markets have
already begun to implement cloning fraud solutions, and the Company anticipates
that the growth rate of demand for cloning fraud solutions in the U.S. will
slow and demand may potentially decline over the next few years. If not offset
by growth in international markets, this trend would have a material adverse
effect on PhonePrint sales. Over time, this trend could also occur in
international markets. As analog network carriers adopt cloning fraud solutions
for their existing networks, the future commercial success of PhonePrint will
depend in part on the further expansion of analog networks by those carriers.
If analog networks do not continue to expand, expand slowly or expand in a
manner that does not create significant new demand for cloning

5
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fraud solutions, then the future demand for PhonePrint would be materially
adversely affected. There can be no assurance that the market for cloning fraud
solutions will grow as analog network carriers adopt solutions to their cloning
fraud problems, or that current or future levels of revenues attributable to
PhonePrint will be maintained or will not decline. Any reduction in the demand
for PhonePrint would have a material adverse effect on the Company's business,
operating results and financial condition.

All of the Company's customers to date have been carriers that operate analog
networks. Wireless services operating in digital mode, including PCS and ESMR
in the U.S. and Global System for Mobile Communications ("GSM") in many foreign
countries (including many European countries), use or may use authentication
processes that automatically establish the validity of a phone each time it
attempts to access the wireless telecommunications network. The Company is not
aware of any information that suggests that cloners have been able to break the
authentication encryption technologies. Unless the encryption technologies that
form the basis for authentication are broken by cloners, the Company does not
believe that operators of digital networks will purchase third-party radio
frequency ("RF") fingerprinting solutions for cloning fraud such as PhonePrint.
In addition, authentication processes for analog networks are also currently
available. The Company is also very dependent on the continued widespread use
of analog networks. While there are currently over 40 million analog phones in
existence in the U.S., industry experts project that the number of analog
phones will decline in the future. Any reduction in demand by analog network
carriers for cloning fraud solutions would, or any reduction in the use of
analog phones could, have a material adverse effect on the Company's business,
operating results and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business--The
PhonePrint System" and "--Product Development."

DEPENDENCE ON NEW PRODUCT INTRODUCTIONS AND PRODUCT ENHANCEMENTS. The
Company's future success depends on the timely introduction and acceptance of
new products and product enhancements that the Company is developing. However,
there can be no assurance that any new products or product enhancements the
Company attempts to develop will be developed successfully or on schedule, or
if developed, that they will achieve market acceptance. In the case of products
that can locate wireless phones, the U.S. Federal Communications Commission
("FCC") has mandated that wireless telecommunications carriers be able to
identify the location of emergency 911 callers by October 2001. The Company has
a significant product development effort underway addressing the need of U.S.
wireless telecommunications carriers resulting from the FCC mandate. There can
be no assurance that the FCC mandate will not be abolished or altered in a
fashion that reduces or eliminates any potential demand for products addressing
phone location. There can be no assurance that any wireless telecommunications
carriers will purchase any phone location products before the effective date of
the FCC mandate, October 2001. Any failure by the Company to introduce
commercially successful new products or product enhancements or any significant
delay in the introduction of such new products or product enhancements would
have a material adverse effect on the Company's business, operating results and
financial condition.

The process of developing new products and product enhancements for use in
the wireless telecommunications industry is extremely complex and is expected
to become more complex and expensive in the future as new platforms and
technologies emerge. In particular, the Company is aware of significant
technical challenges with respect to the phone location product it is currently
attempting to develop. In the past, the Company has experienced delays in the
introduction of certain product enhancements, and there can be no assurance
that new products or product enhancements will be introduced on schedule or at
all. Any new products or product enhancements may also contain defects when
first introduced or when new versions are

6
<PAGE>

released. There can be no assurance that, despite testing by the Company,
defects will not be found in new products or product enhancements after
commencement of commercial shipments, resulting in loss of or delay in market
acceptance. Any loss of or delay in market acceptance would have a material
adverse effect on the Company's business, operating results and financial
condition. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business--Product Development."

FLUCTUATIONS IN QUARTERLY FINANCIAL RESULTS; LENGTHY SALES CYCLE. The Company
has experienced significant fluctuations in revenues and operating results from
quarter to quarter due to a combination of factors and expects significant
fluctuations to continue in future periods. Factors that are likely to cause
the Company's revenues and operating results to vary significantly from quarter
to quarter include, among others: the level and timing of revenues associated
with PhonePrint; the timing of the introduction or acceptance of new products
and services and product enhancements offered by the Company and its
competitors; changes in governmental regulations or mandates affecting the
wireless telecommunications industry; technological changes or developments in
the wireless telecommunications industry; dependence on a single product; the
size, product mix and timing of significant orders; the timing of system
revenue; competition and pricing in the markets in which the Company competes;
possible recalls; lengthy sales cycles; production or quality problems; the
timing of development expenditures; further expansion of sales and marketing
operations; changes in material costs; disruptions in sources of supply;
capital spending; the timing of payments by customers; and changes in general
economic conditions. These and other factors could cause the Company to
recognize relatively large amounts of revenue over a very short period of time,
followed by a period during which relatively little revenue is recognized.
Because of the relatively fixed nature of most of the Company's costs,
including personnel and facilities costs, any unanticipated shortfall in
revenues in any quarter would have a material adverse impact on the Company's
operating results in that quarter and would likely result in substantial
adverse fluctuations in the price of the Company's Common Stock. Accordingly,
the Company expects that from time to time its future operating results will be
below the expectations of market analysts and investors, which would likely
have a material adverse effect on the prevailing market price of the Common
Stock. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

A carrier's decision to deploy PhonePrint typically involves a significant
commitment of capital by the carrier and approval by its senior management.
Consequently, the timing of purchases are subject to uncertainties and delays
frequently associated with significant capital expenditures, and the Company is
not able to accurately forecast future sales of PhonePrint. In addition,
purchases of PhonePrint involve testing, integration, implementation and
support requirements. For these and other reasons, the sales cycle associated
with the purchase of PhonePrint typically ranges from three to 18 months and is
subject to a number of risks over which the Company has little control,
including the carrier's budgetary and capital spending constraints and internal
decision-making processes. In addition, a carrier's purchase decision may be
delayed as a result of announcements by the Company or competitors of new
products or product enhancements or by regulatory developments. The Company
expects that there will be a lengthy sales cycle with respect to new products,
if any, that the Company may offer in the future. Because of this lengthy sales
cycle and the relatively large size of a typical order and because the Company
does not recognize revenue until cell site equipment is activated or other
contractual acceptance criteria are met, if revenues forecasted from a specific
customer for a particular quarter are not realized in that quarter, the
Company's operating results for that quarter could be materially and adversely
affected. See "Business--Sales, Marketing, Distribution and Customer Support."

7
<PAGE>

HIGHLY COMPETITIVE INDUSTRY. The market for PhonePrint is new and intensely
and increasingly competitive. The Company believes that the primary competitive
factors in the cloning fraud prevention market in which it currently competes
include product effectiveness and quality, price, service and support
capability and compatibility with cloning fraud prevention systems used by the
carrier in other geographic markets and by the carrier's roaming partners.
There has been a tendency for carriers that purchase cloning fraud prevention
systems to purchase products from the company that supplies cloning fraud
prevention systems to other carriers with whom the purchasing carrier has a
roaming arrangement. As a result, the Company expects it will be significantly
more difficult to sell PhonePrint to a carrier if the carrier's roaming
partners use cloning fraud prevention systems supplied by a competitor.
Furthermore, once a competitor has made a sale of RF-based cloning fraud
prevention systems to a carrier, the Company expects that it is unlikely that
the Company would be able to sell PhonePrint to that carrier.

The Company's principal competitor for RF-based cloning fraud prevention
systems is Cellular Technical Services Company, Inc. ("CTS"). CTS has
agreements pursuant to which it has installed or will install its RF-based
cloning fraud prevention system in many major U.S. markets. PhonePrint also
competes with a number of alternative technologies, including profilers,
personal identification numbers and authentication. The Company is aware of
numerous companies, including GTE Telecommunications Services, Inc., Authentix
Network, Inc., Signal Science, Inc. (a subsidiary of The Allen Group) and Coral
Systems, Inc., that currently are or are expected to offer products in the
cloning fraud prevention area. In addition, carriers may themselves develop
technologies that limit the demand for PhonePrint. There can be no assurance
that any such company or any other competitor will not introduce a new product
at a lower price or with greater functionality than PhonePrint. Furthermore,
the demand for PhonePrint would be materially adversely affected if wireless
telecommunications carriers implement authentication technology applicable to
analog phones as their sole cloning fraud solution in major markets, if U.S.
wireless telecommunications carriers adopt a uniform digital standard that
reduces the need for digital phones to operate in analog mode while roaming, or
if analog phone makers change product designs and/or improve manufacturing
standards to a point where the difference from phone to phone in the radio
waveform becomes so small that it is difficult for PhonePrint to identify a
clone. There can be no assurance that any currently available alternative
technology or any new technology will not render the Company's products
obsolete or significantly reduce the market share afforded to RF-based cloning
fraud prevention systems like PhonePrint. The Cellular Telephone Industry
Association is currently supervising a study conducted by a third party to
determine whether PhonePrint and the cloning fraud prevention system marketed
by CTS are able to operate with each other. The Company is not able to predict
the effect of this study on competition. An increase in competition could
result in price reductions or the loss of market share by the Company and could
have a material adverse effect on the Company's business, operating results and
financial condition.

8
<PAGE>

is aware of a number of companies that have either announced an intention to
develop or are capable of developing products that would compete with the
products the Company is developing, and the Company anticipates the entrance of
new competitors in the wireless telecommunications carrier service industry in
the future. The Company's ability to sell new products, if any, may be hampered
by relationships that competitors have with carriers based upon the prior sale
of other products to carriers.

The Company believes that its ability to compete in the future depends in
part on a number of competitive factors outside its control, including the
ability to hire and retain employees, the development by others of products and
services that are competitive with the Company's products and services, the
price at which others offer comparable products and services and the extent of
its competitors' responsiveness to customer needs. Many of the Company's
competitors and potential competitors have significantly greater financial,
marketing, technical and other competitive resources than the Company. As a
result, the Company's competitors may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements or may be able to
devote greater resources to the promotion and sale of their products and
services. To remain competitive in the market for products and services sold to
wireless telecommunications carriers, the Company will need to continue to
invest substantial resources in engineering, research and development and sales
and marketing. There can be no assurance that the Company will have sufficient
resources to make such investments or that the Company will be able to make the
technological advances necessary to remain competitive. Accordingly, there can
be no assurance that the Company will be able to compete successfully with
respect to new products, if any, it offers in the future. See "Business--
Competition."

RISKS ASSOCIATED WITH INTERNATIONAL EXPANSION. To date, the Company has
conducted a limited number of deployments of PhonePrint systems
internationally. The Company intends to devote significant marketing and sales
efforts over the next several years to increase its sales to international
customers. This expansion of sales efforts outside of the U.S. will require
significant management attention and financial resources. There can be no
assurance that the Company will be successful in achieving significant sales of
PhonePrint in international markets. The Company does not expect to sell
PhonePrint in the many international markets that rely primarily on digital
wireless networks, including many European countries. There may not be demand
in foreign countries with respect to new products, if any, that the Company may
offer in the future. For example, the Company is currently developing a product
addressing the U.S. FCC mandate that wireless telecommunications carriers be
able to identify the location of emergency 911 callers by October 2001. The
Company is not aware of any corresponding regulatory requirement in any foreign
country.

The Company's international sales may be denominated in foreign or U.S.
currencies. The Company does not currently engage in foreign currency hedging
transactions. As a result, a decrease in the value of foreign currencies
relative to the U.S. dollar could result in losses from transactions
denominated in foreign currencies. With respect to the Company's international
sales that are U.S. dollar-denominated, such a decrease could make the
Company's systems less price-competitive. Additional risks inherent in the
Company's international business activities include changes in regulatory
requirements, the costs and risks of localizing systems in foreign countries,
tariffs and other trade barriers, political and economic instability, reduced
protection for intellectual property rights in certain countries, difficulties
in staffing and managing foreign operations, difficulties in managing
distributors, potentially adverse tax consequences, foreign currency exchange
fluctuations, the burden of complying with a wide variety of complex foreign
laws and treaties and the possibility of difficulty in accounts receivable
collections. The Company anticipates that product service and support will be
more complicated and expensive with respect to products sold in international
markets. The Company

9
<PAGE>

may need to adapt its products to conform to different technical standards
that may exist in foreign countries. Future customer purchase agreements may
be governed by foreign laws, which may differ significantly from U.S. laws.
Therefore, the Company may be limited in its ability to enforce its rights
under such agreements and to collect damages, if awarded. There can be no
assurance that any of these factors will not have a material adverse effect on
the Company's business, operating results and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Sales, Marketing, Distribution and Customer
Support."

CUSTOMER CONCENTRATION. To date, a very significant portion of the Company's
revenues in any particular period has been attributable to a limited number of
customers, comprised entirely of wireless telecommunications carriers that
operate analog networks. AT&T Wireless Services, Comcast Cellular
Communications, Inc., Los Angeles Cellular Telephone Company and Southwestern
Bell Mobile Systems, Inc., each accounted for greater than 10% of the
Company's total revenues in 1996, and collectively accounted for over 70% of
the Company's total revenues in 1996. AirTouch Communications, Inc. and AT&T
Wireless Services accounted for virtually all of the Company's total revenues
in 1995. A relatively small number of analog network carriers are the
potential customers for PhonePrint. The Company believes that the number of
potential customers for future products, if any, will be relatively small. Any
failure by the Company to capture a significant share of those customers could
have a material adverse effect on the Company's business, operating results
and financial condition. The Company expects that a relatively small number of
customers will continue to represent a significant percentage of its total
revenues for each quarter for the foreseeable future, although the companies
that comprise the largest customers in any given quarter may change from
quarter to quarter. The terms of the Company's agreements with its customers
are generally for periods of between two and five years. Although these
agreements typically contain annual software license fees and various service
and support fees, there are no minimum payment obligations or obligations to
make future purchases of hardware or to license additional software.
Therefore, there can be no assurance that any of the Company's current
customers will generate significant revenues in future periods. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business--Sales, Marketing, Distribution and Customer
Support."

UNCERTAINTY REGARDING PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY;
RISKS OF FUTURE LITIGATION. The Company relies on a combination of patent,
trade secret, copyright and trademark protection and nondisclosure agreements
to protect its proprietary rights. As of June 30, 1997, the Company had one
issued U.S. patent, six pending U.S. patent applications, one issued foreign
patent and ten pending foreign patent applications. The Company's success will
depend in large part on the ability of the Company to obtain patent
protection, defend patents once obtained, license third party proprietary
rights, maintain trade secrets and operate without infringing upon the patents
and proprietary rights of others. The patent positions of companies in the
wireless telecommunications industry, including the Company, are generally
uncertain and involve complex legal and factual questions. There can be no
assurance that patents will issue from any patent applications owned or
licensed to the Company or that, if patents do issue, the claims allowed would
be sufficiently broad to protect the Company's technology. In addition, there
can be no assurance that any issued patents owned by or licensed to the
Company will not be challenged, invalidated or circumvented, or that the
rights granted thereunder will provide competitive advantages to the Company.

10
<PAGE>

additional proprietary rights relating to products used or proposed to be used
by the Company. The Company is aware of patents granted to third parties that
relate to the potential products the Company is currently developing. The
Company will need to either design those potential products in a manner that
does not infringe the third-party patents or obtain licenses from the third
parties, and there can be no assurance that the Company will be able to do so.
There can be no assurance that the Company is aware of all patents or patent
applications that may materially affect the Company's ability to make, use or
sell any current or future products. U.S. patent applications are confidential
while pending in the U.S. Patent and Trademark Office, and patent applications
filed in foreign countries are often first published six months or more after
filing. There can also be no assurance that third parties will not assert
infringement claims against the Company in the future or that any such
assertions will not result in costly litigation or require the Company to
obtain a license to intellectual property rights of such parties. There can be
no assurance that any such licenses would be available on terms acceptable to
the Company, if at all. Furthermore, parties making such claims may be able to
obtain injunctive or other equitable relief that could effectively block the
Company's ability to make, use, sell or otherwise practice its intellectual
property (whether or not patented or described in pending patent applications),
or to further develop or commercialize its products in the U.S. and abroad and
could result in the award of substantial damages. Defense of any lawsuit or
failure to obtain any such license could have a material adverse effect on the
Company's business, operating results or financial condition.

The Company also relies on unpatented trade secrets to protect its
proprietary technology, and no assurance can be given that others will not
independently develop or otherwise acquire the same or substantially equivalent
technologies or otherwise gain access to the Company's proprietary technology
or disclose such technology or that the Company can ultimately protect its
rights to such unpatented proprietary technology. No assurance can be given
that third parties will not obtain patent rights to such unpatented trade
secrets, which patent rights could be used to assert infringement claims
against the Company. The Company also relies on confidentiality agreements with
its employees, vendors, consultants and customers to protect its proprietary
technology. There can be no assurance that these agreements will not be
breached, that the Company would have adequate remedies for any breach or that
the Company's trade secrets will not otherwise become known to or be
independently developed by competitors. Failure to obtain or maintain patent
and trade secret protection, for any reason, could have a material adverse
effect on the Company's business, operating results and financial condition.
See "Business--Patents and Proprietary Rights."

DEPENDENCE ON THIRD-PARTY PRODUCTS AND SERVICES; SOLE OR LIMITED SOURCES OF
SUPPLY. The Company relies to a substantial extent on outside vendors to
manufacture many of the components and subassemblies used in PhonePrint, some
of which are obtained from a single supplier or a limited group of suppliers.
The Company's reliance on outside vendors generally, and a sole or a limited
group of suppliers in particular, involves several risks, including a potential
inability to obtain an adequate supply of required components and reduced
control over quality, pricing and timing of delivery of components. In the
past, the Company has experienced delays in receiving materials from vendors,
sometimes resulting in delays in the assembly of products by the Company. Such
delays, or other significant vendor or supply quality issues, may occur in the
future, which could result in a material adverse effect on the Company's
business, operating results or financial condition. The manufacture of certain
of these components and subassemblies is specialized and requires long lead
times, and there can be no assurance that delays or shortages caused by vendors
will not reoccur. Any inability to obtain adequate deliveries, or any other
circumstance that would require the Company to seek alternative sources of
supply or to manufacture such components internally could delay shipment of the
Company's products, increase its cost of goods sold and have a material

11
<PAGE>

adverse effect on the Company's business, operating results and financial
condition. In addition, from time to time, the Company must also rely upon
third parties to develop and introduce components and products to enable the
Company, in turn, to develop new products and product enhancements on a timely
and cost-effective basis. There can be no assurance that the Company will be
able to obtain access in a timely manner to third-party products and
development services necessary to enable the Company to develop and introduce
new and enhanced products, that the Company will obtain third-party products
and development services on commercially reasonable terms or that the Company
will be able to replace third-party products in the event such products become
unavailable, obsolete or incompatible with future versions of the Company's
products. The absence of, or any significant delay in, the replacement of
third-party products could have a material adverse effect on the Company's
business, operating results and financial condition.

DEPENDENCE ON PERSONNEL. The success of the Company is dependent, in part, on
its ability to attract and retain highly qualified personnel. The Company's
future business and operating results depend upon the continued contributions
of its senior management and other employees, many of whom would be difficult
to replace and certain of whom perform important functions for the Company
beyond those functions suggested by their respective job titles or
descriptions. Competition for such personnel is intense and the inability to
attract and retain additional senior management and other employees or the loss
of one or more members of the Company's senior management team or current
employees, particularly to competitors, could materially adversely affect the
Company's business, operating results or financial condition. There can be no
assurance that the Company will be successful in hiring or retaining requisite
personnel. None of the Company's employees has entered into employment
agreements with the Company, and the Company does not have any key-person life
insurance covering the lives of any members of its senior management team. See
"Management."

MANAGEMENT OF GROWTH. The Company is at an early stage of development and has
rapidly and significantly expanded its operations. The number of employees grew
from 36 on January 1, 1995 to 132 on June 30, 1997. Such growth has placed,
and, if sustained, will continue to place, significant demands on the Company's
management, information systems, operations and resources. The strain
experienced to date has chiefly been in hiring, integrating and effectively
managing sufficient numbers of qualified personnel to support the expansion of
the Company's business. The Company's ability to manage any future growth,
should it occur, will continue to depend upon the successful expansion of its
sales, marketing, research and development, customer support and administrative
infrastructure and the ongoing implementation and improvement of a variety of
internal management systems, procedures and controls. There can be no assurance
that the Company will be able to attract, manage and retain additional
personnel to support any future growth, if any, or will not experience
significant problems with respect to any infrastructure expansion or the
attempted implementation of systems, procedures and controls. Any failure in
one or more of these areas could have a material adverse effect on the
Company's business, results of operations and financial condition. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES. While most of the Company's
operations are not directly regulated, the Company's existing and potential
customers are subject to a variety of U.S. and foreign governmental
regulations. Such regulations may adversely affect the wireless
telecommunications industry, limit the number of potential customers for the
Company's products or impede the Company's ability to offer competitive
products and services to the wireless telecommunications industry or otherwise
have a material adverse effect on the Company's business, financial condition
and results of operations.

12
<PAGE>

Recently enacted legislation, including the Telecommunications Act of 1996,
deregulating the telecommunications industry may cause changes in the wireless
telecommunications industry, including the entrance of new competitors and
industry consolidation, which could in turn increase pricing pressures on the
Company, decrease demand for the Company's products, increase the Company's
cost of doing business or otherwise have a material adverse effect on the
Company's business, operating results and financial condition. If the recent
trend toward privatization and deregulation of the wireless telecommunications
industry outside of the U.S. were to discontinue, or if currently deregulated
international markets were to reinstate comprehensive government regulation of
wireless telecommunications services, the Company's business, operating
results and financial condition could be materially and adversely affected.

DEPENDENCE ON GROWTH OF WIRELESS TELECOMMUNICATIONS INDUSTRY. The Company's
future financial performance will depend in part on the number of carriers
seeking third-party solutions to the problem of cloning fraud and other
problems that the Company's new products, if any, will attempt to address,
including phone location and churn reduction. Although the wireless
telecommunications industry has experienced significant growth in recent
years, there can be no assurance that such growth will continue at similar
rates, or that, if the industry does grow, there will be continued demand for
the Company's cloning fraud prevention or other products. Any decline in
demand for wireless telecommunications products and services in general would
have a material adverse effect on the Company's business, operating results
and financial condition. See "Business--Product Development."

RISK OF SYSTEM FAILURE. The continued, uninterrupted operation of the
PhonePrint system depends on protecting it from damage from fire, earthquake,
power loss, communications failure, unauthorized entry or other events. Any
damage to or failure of a component or combination of components that causes a
significant reduction in the performance of a PhonePrint system could have a
material adverse effect on the Company's business, operating results and
financial condition. The Company currently does not have liability insurance
to protect against these risks and there can be no assurance that such
insurance will be available to the Company on commercially reasonable terms,
or at all. In addition, if any carrier using PhonePrint encounters material
performance problems, the Company's reputation and its business, operating
results and financial condition could be materially adversely affected.

DEPENDENCE ON DISTRIBUTORS. PhonePrint is currently marketed primarily
through the Company's direct sales efforts. The Company has entered into
distribution agreements with respect to PhonePrint with Motorola, Inc. and
Aurora Wireless Technologies, Ltd. ("Aurora"). To date, the Company has not
recognized any revenues under the agreement with Motorola, Inc. Aurora has
placed a PhonePrint system with a carrier in the Philippines, but consistent
with the Company's accounting practices, the Company will not recognize any
revenue from this installation until it meets specific acceptance criteria.
The Company seeks to pursue distribution agreements with other companies, and
the Company believes that its dependence on distributors will increase in the
future, both with respect to PhonePrint and to new products, if any, that the
Company may offer in the future. There are no minimum purchase obligations
applicable to any existing distributor and the Company does not expect to have
any guarantees of continuing orders from any distributor. There can be no
assurance that any existing or future distributors will not become competitors
of the Company with respect to PhonePrint or any future product. Any failure
by the Company's existing and future distributors to generate significant
revenues could have a material adverse effect on the Company's business,
operating results and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business--
Sales, Marketing, Distribution and Customer Support."

13
<PAGE>

FUTURE CAPITAL REQUIREMENTS. The Company's future capital requirements will
depend upon many factors, including the commercial success of PhonePrint, the
timing and success of new product introductions, if any, the progress of the
Company's research and development efforts, the Company's results of
operations, the status of competitive products and the potential acquisition
of businesses, technologies or assets. The Company believes that the
combination of the net proceeds of this Offering, existing sources of
liquidity and internally generated cash, if any, will be sufficient to meet
the Company's projected cash needs for at least the next 12 months. There can
be no assurance, however, that the Company will not require additional
financing prior to such date to fund its operations. In addition, the Company
may require additional financing after such date to fund its operations. There
can be no assurance that any additional financing will be available to the
Company on acceptable terms, or at all, when required by the Company. If
additional funds are raised by issuing equity securities, further dilution to
the existing stockholders will result. If adequate funds are not available,
the Company may be required to delay, scale back or eliminate one or more of
its development or manufacturing programs or obtain funds through arrangements
with third parties that may require the Company to relinquish rights to
certain of its technologies or potential products or other assets that the
Company would not otherwise relinquish. Accordingly, the inability to obtain
such financing could have a material adverse effect on the Company's business,
operating results and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

POTENTIAL ACQUISITIONS. The Company expects in the future to pursue
acquisitions of businesses, products or technologies that complement the
Company's business. Future acquisitions may result in the potentially dilutive
issuance of equity securities, the use of cash resources, the incurrence of
additional debt, the write-off of in-process research and development or
software acquisition and development costs and the amortization of expenses
related to goodwill and other intangible assets, any of which could have a
material adverse effect on the Company's business, operating results and
financial condition. Future acquisitions would involve numerous additional
risks, including difficulties in the assimilation of the operations, services,
products and personnel of an acquired business, the diversion of management's
attention from other business concerns, entering markets in which the Company
has little or no direct prior experience and the potential loss of key
employees of an acquired business. In addition, there can be no assurance that
the Company would be successful in completing any acquisition. The Company
currently has no agreements or understandings with regard to any acquisition.

CONCENTRATION OF STOCK OWNERSHIP; CONTROL BY MANAGEMENT AND EXISTING
STOCKHOLDERS. Upon completion of this Offering, the Company's directors and
executive officers, and their respective affiliates will beneficially own
approximately 43.6% of the outstanding Common Stock (approximately 42.6% if
the Underwriters' over-allotment option is exercised in full). As a result,
these stockholders will be able to exercise significant influence over all
matters requiring stockholder approval, including the election of directors
and approval of significant corporate transactions. Such concentration of
ownership may also have the effect of delaying or preventing a change in
control of the Company that may be favored by other stockholders. See
"Management" and "Principal Stockholders."

BENEFITS OF THE OFFERING TO EXISTING STOCKHOLDERS. The existing stockholders
of the Company will recognize significant benefits from this Offering. These
benefits include the creation of a public market for the Company's Common
Stock, which will afford existing stockholders the ability to liquidate their
investments, subject in certain cases to volume limitations and other
limitations and restrictions upon the sale of the Common Stock. See "Shares
Eligible For Future Sale." None of the Company's stockholders are selling
shares in this Offering. The shares of

14
<PAGE>

Common Stock owned by the Company's existing stockholders were purchased at
prices ranging from $0.30 to $11.25 per share, with an aggregate consideration
paid of approximately $48,500,000. Based on an assumed initial public offering
price of $13.00, the aggregate value of the shares owned by the Company's
existing stockholders is approximately $139,900,000, an increase of
approximately $91,400,000 over the aggregate consideration paid by the
Company's existing stockholders. Accordingly, after this Offering, these
stockholders will have substantial unrealized gains on their shares. See
"Dilution," "Principal Stockholders" and "Certain Transactions."

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS. Sales of a substantial
number of shares of Common Stock in the public market following this Offering
could adversely affect the market price of the Common Stock. The 2,250,000
shares sold in this Offering will be freely tradeable without restriction or
further registration under the Securities Act, except that any shares
purchased by "affiliates" of the Company ("Affiliates"), as that term is
defined in Rule 144 under the Securities Act of 1933, as amended (the
"Securities Act") may generally be sold only in compliance with certain of the
limitations of Rule 144 described below. The remaining approximately
10,560,000 shares of Common Stock are deemed "Restricted Shares" under Rule
144. Subject to the lock-up restrictions described below, (i) approximately
334,000 Restricted Shares will be eligible for sale in the public market
immediately after this Offering pursuant to Rule 144(k) under the Securities
Act, and (ii) approximately 7,737,000 additional Restricted Shares will be
eligible for sale in the public market in accordance with Rule 144 or Rule 701
under the Securities Act beginning 90 days after the date of this Prospectus.
The holders of approximately 10,756,000 Restricted Shares have agreed not to
sell or otherwise dispose of any of their shares for a period of 180 days
after the date of this Prospectus without Deutsche Morgan Grenfell Inc.'s
prior written consent. Deutsche Morgan Grenfell Inc. may, in its sole
discretion, and at any time without notice, release all or any portion of the
Restricted Shares subject to lock-up agreements. Upon expiration of the lock-
up agreements 180 days after the date of this Prospectus, approximately
10,496,000 shares of Common Stock will be available for sale in the public
market; the remaining approximately 266,000 shares will become eligible for
sale under Rule 144 at various dates thereafter as the holding period
provisions of Rule 144 are satisfied. In addition, the Company intends to
register on the effective date of this Offering a total of approximately
1,338,000 shares of Common Stock subject to outstanding options or reserved
for issuance under the Company's 1997 Stock Incentive Plan and 167,000 shares
of Common Stock reserved for issuance under its 1997 Employee Stock Purchase
Plan. Any sales of such Common Stock may have an adverse effect on the
Company's ability to raise needed capital through an offering of its equity,
convertible debt or other securities and may materially adversely affect the
prevailing market price of the Common Stock. See "Shares Eligible for Future
Sale" and "Description of Capital Stock--Registration Rights."

NO PRIOR MARKET FOR COMMON STOCK. Prior to this Offering, there has been no
public market for the Company's Common Stock, and there can be no assurance
that an active trading market will develop or be sustained after this Offering
or that investors will be able to sell the Common Stock should they desire to
do so. The initial public offering price will be determined by negotiations
between the Company and the representatives of the Underwriters and may bear
no relationship to the price at which the Common Stock will trade upon
completion of this Offering. See "Underwriting" for a discussion of the
factors considered in determining the initial public offering price.

VOLATILITY OF STOCK PRICE. The market price of the Common Stock is likely to
be highly volatile and could be subject to wide fluctuations in response to
numerous factors, including, but not limited to, revenues attributable to
PhonePrint, new products or new contracts by the Company or its competitors,
actual or anticipated variations in the Company's operating results, the level
of operating expenses, changes in financial estimates by securities analysts,
potential

15
<PAGE>

acquisitions, regulatory announcements, developments with respect to patents or
proprietary rights, conditions and trends in the wireless telecommunications
and other industries, adoption of new accounting standards affecting the
industry and general market conditions. As a result, the Company expects that
from time to time its future operating results will be below the expectations
of market analysts and investors, which would likely have a material adverse
effect on the prevailing market price of the Common Stock. The realization of
any of the risks described in these "Risk Factors" could have a dramatic and
adverse impact on the market price of the Common Stock.

Further, the stock market has experienced extreme price and volume
fluctuations that have particularly affected the market prices of equity
securities of many companies in the telecommunications industry and that often
have been unrelated or disproportionate to the operating performance of such
companies. These market fluctuations, as well as general economic, political
and market conditions such as recessions or international currency
fluctuations, may adversely affect the market price of the Common Stock. In the
past, following periods of volatility in the market price of the securities of
companies in the telecommunications industry, securities class action
litigation has often been instituted against those companies. Such litigation,
if instituted against the Company, could result in substantial costs and a
diversion of management attention and resources, which would have a material
adverse effect on the Company.

ANTITAKEOVER EFFECTS OF CHARTER, BYLAWS AND DELAWARE LAW. The Company's
Restated Certificate of Incorporation authorizes the Company's Board of
Directors (the "Board") to issue shares of undesignated Preferred Stock without
stockholder approval on such terms as the Board may determine. The rights of
the holders of Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any such Preferred Stock that may be issued in
the future. Moreover, the issuance of Preferred Stock may make it more
difficult for a third party to acquire, or may discourage a third party from
acquiring, a majority of the voting stock of the Company. The Company's
Restated Bylaws provide that the Company's Board will be classified into three
classes of directors beginning at the 1998 annual meeting of stockholders. With
a classified Board, one class of directors is elected each year with each class
serving a three-year term. These and other provisions of the Restated
Certificate of Incorporation and the Restated Bylaws, as well as certain
provisions of Delaware law, could delay or impede the removal of incumbent
directors and could make more difficult a merger, tender offer or proxy contest
involving the Company, even if such events could be beneficial to the interest
of the stockholders. Such provisions could limit the price that certain
investors might be willing to pay in the future for the Common Stock. See
"Description of Capital Stock--Preferred Stock" and "Description of Capital
Stock--Possible Antitakeover Effects of Certain Charter Provisions."

IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of Common Stock in this
Offering will suffer immediate and substantial dilution of $9.66 per share in
the net tangible book value of the Common Stock from the initial public
offering price. To the extent that outstanding options and warrants to purchase
the Company's Common Stock are exercised, there will be further dilution. See
"Dilution."

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<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,250,000 shares of
Common Stock offered hereby are estimated to be approximately $26.3 million
($30.4 million if the Underwriters' over-allotment option is exercised in
full), assuming an initial public offering price of $13.00 per share and after
deducting the estimated underwriting discount and offering expenses. The
primary purposes of this Offering are to increase the Company's equity
capital, to create a public market for the Company's Common Stock and to
facilitate future access to public markets.

The Company intends to use the net proceeds, including the interest thereon,
of this Offering for general corporate purposes, including sales and marketing
and administrative expenses, research and development, working capital and
capital expenditures. The Company may use a portion of the net proceeds of
this Offering to repay approximately $4.3 million in debt that has a maturity
date of January 31, 2000 and bears interest at the rate of 14.55% per annum.
The Company may also use a portion of the net proceeds for the acquisition of
complementary businesses, products or technologies. There are at present no
arrangements or agreements for any such acquisitions.

DIVIDEND POLICY

The Company has never declared or paid dividends on its capital stock, and
the Company does not anticipate paying any cash dividends in the foreseeable
future. In addition, certain of the Company's loan agreements prohibit the
Company from paying cash dividends on its capital stock without the lender's
written consent or waiver.

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<PAGE>

CAPITALIZATION

The following table sets forth as of June 30, 1997 (i) the actual
capitalization of the Company after giving effect to the two-for-three reverse
stock split, (ii) the pro forma capitalization of the Company after giving
effect to the conversion of all outstanding shares of Preferred Stock into
Common Stock at the closing of this Offering and (iii) the capitalization of
the Company as adjusted to reflect the foregoing and to give effect to the
sale by the Company of the 2,250,000 shares of Common Stock offered hereby,
assuming an initial public offering price of $13.00 per share less the
estimated underwriting discount and Offering expenses. This table should be
read in conjunction with the Company's financial statements and the notes
thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
JUNE 30, 1997
-----------------------------------
ACTUAL PRO FORMA AS ADJUSTED(2)
-------- --------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-term obligations, less current
portion.................................... $ 3,489 $ 3,489 $ 3,489
Stockholders' equity:
Convertible preferred stock, $.001 par
value; 14,548,963 shares authorized
actual and pro forma; 9,432,956 shares
issued and outstanding actual; 10,000,000
shares authorized as adjusted; no shares
issued and outstanding pro forma and as
adjusted................................. 9 -- --
Common stock, $.001 par value; 20,000,000
shares authorized actual and pro forma;
1,329,036 shares issued and outstanding
actual; 10,761,992 shares issued and
outstanding pro forma; 75,000,000 shares
authorized as adjusted; and 13,011,992
shares issued and outstanding as adjusted
(1)...................................... 2 11 13
Notes receivable from stockholder......... (136) (136) (136)
Additional paid-in capital................ 49,951 49,951 76,252
Deferred compensation..................... (960) (960) (960)
Accumulated deficit....................... (31,656) (31,656) (31,656)
-------- -------- --------
Total stockholders' equity............... 17,210 17,210 43,513
-------- -------- --------
Total capitalization........................ $ 20,699 $ 20,699 $ 47,002
======== ======== ========
</TABLE>
- --------

(1) Based on shares outstanding as of June 30, 1997. Does not include (i)
738,160 shares of Common Stock issuable upon exercise of options
outstanding as of June 30, 1997 at a weighted average exercise price of
approximately $3.03 per share and (ii) 157,907 shares of Common Stock
issuable upon the exercise of warrants outstanding at June 30, 1997 at a
weighted average exercise price of $6.52 per share.

(2) Assumes the Company does not use a portion of the net proceeds of this
Offering to repay approximately $4.8 million in debt.

18
<PAGE>

DILUTION

The net tangible book value of the Company at June 30, 1997 was
approximately $17.2 million or $1.60 per share of Common Stock. Net tangible
book value per share of Common Stock represents the amount of total tangible
assets of the Company less total liabilities divided by the number of shares
of Common Stock outstanding. After giving effect to the sale of the 2,250,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $13.00 per share, and after deducting the estimated underwriting
discount and offering expenses payable by the Company, the Company's net
tangible book value as of June 30, 1997 would have been approximately $43.5
million or $3.34 per share of Common Stock. This represents an immediate
increase in net tangible book value per share of Common Stock of $1.74 to
existing stockholders and immediate dilution in net tangible book value of
$9.66 per share to new investors purchasing Common Stock in this Offering. The
following table illustrates the per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $13.00
Net tangible book value per share at June 30, 1997............ $1.60
Increase per share attributable to new investors.............. 1.74
-----
Net tangible book value per share after this Offering........... 3.34
------
Dilution per share to new investors (1)......................... $ 9.66
======
</TABLE>
- --------

(1) If the Underwriters' over-allotment option is exercised in full, dilution
per share to new investors would be $9.43.

The following table summarizes, on a pro forma basis as of June 30, 1997,
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid by the existing
stockholders and by new investors purchasing shares in this Offering (before
deduction of underwriting discounts and commissions and estimated offering
expenses):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 10,761,992 82.7% $48,464,806 62.4% $ 4.50
New investors............... 2,250,000 17.3 29,250,000 37.6 13.00
---------- ----- ----------- -----
Total..................... 13,011,992 100.0% $77,714,806 100.0%
========== ===== =========== =====
</TABLE>

All of the above computations assume no exercise of outstanding options or
warrants to purchase Common Stock. As of June 30, 1997, options to purchase
738,160 shares of Common Stock were outstanding at a weighted average exercise
price of approximately $3.03 per share under the Company's stock option plans.
As of June 30, 1997, warrants to purchase 157,907 shares of Common Stock were
outstanding at a weighted average price of $6.52 per share. To the extent
these options and warrants are exercised, there will be further dilution to
new investors. As of June 30, 1997, the Company also had an additional 599,473
shares of Common Stock available for grant pursuant to the Company's stock
option plan. Further dilution may result from the exercise of such options.
See "Management--Benefit Plans."

19
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data should be read in conjunction with the
Company's financial statements and related notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this Prospectus. The selected financial data presented
below under the captions "Statement of Operations Data" for the period from
December 5, 1994 (inception) to December 31, 1994 and for each of the years
ended December 31, 1995 and 1996 and "Balance Sheet Data" as of December 31,
1995 and 1996 are derived from the financial statements of the Company, which
have been audited by KPMG Peat Marwick LLP, independent auditors. The
financial statements are included elsewhere in this Prospectus. The selected
financial data presented below as of December 31, 1994 are derived from the
financial statements of Corsair Communications, Inc., which financial
statements have been audited by KPMG Peat Marwick LLP, independent
accountants, but are not included elsewhere in this Prospectus. The selected
financial data presented below for the six months ended June 30, 1996 and
1997, and as of June 30, 1997, are derived from the unaudited financial
statements of the Company. The unaudited financial statements have been
prepared by the Company on a basis consistent with the Company's audited
financial statements and in the opinion of management include all adjustments,
consisting only of normal recurring accruals, necessary for a fair
presentation of the Company's operating results and financial position for the
periods and dates to which such statements relate. The operating results for
the periods presented are not necessarily indicative of the results to be
expected for any future interim period or any future fiscal year.

<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 5, 1994 YEAR ENDED
(INCEPTION) TO DECEMBER 31, SIX MONTHS ENDED JUNE 30,
DECEMBER 31, ----------------- ---------------------------------
1994 1995 1996 1996 1997
---------------- ------- -------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Total revenues.......... $ -- $ 7,593 $ 19,606 $ 4,892 $20,320
Total cost of revenues.. -- 8,137 19,197 5,443 16,503
------- ------- -------- ------- -------
Gross profit (deficit).. -- (544) 409 (551) 3,817
Operating costs and
expenses:
Research and
development........... 507 3,094 4,983 2,142 2,994
Sales and marketing.... 62 2,981 5,374 2,031 3,331
General and
administrative........ 498 2,115 2,591 1,206 1,968
Write-off of in-process
research and
development........... 4,894 -- -- -- --
------- ------- -------- ------- -------
Total operating costs
and expenses.......... 5,961 8,190 12,948 5,379 8,293
------- ------- -------- ------- -------
Operating loss.......... (5,961) (8,734) (12,539) (5,930) (4,476)
Interest income
(expense), net......... 20 218 (220) 55 43
------- ------- -------- ------- -------
Loss before income
taxes.................. (5,941) (8,516) (12,759) (5,875) (4,433)
Income taxes............ 1 1 2 -- 3
------- ------- -------- ------- -------
Net loss................ $(5,942) $(8,517) $(12,761) $(5,875) $(4,436)
======= ======= ======== ======= =======
Pro forma net loss per
share (1).............. $ (1.44) $(0.69) $ (0.40)
======== ======= =======
Shares used in per share
computation(1)......... 8,870 8,499 10,962
======== ======= =======
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------- JUNE 30,
1994 1995 1996 1997
------- ------- ------- --------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA: (IN THOUSANDS)
Cash, cash equivalents, and short-term
investments................................. $ 6,819 $ 9,029 $19,504 $20,286
Working capital.............................. 9,560 9,767 19,682 17,519
Total assets................................. 11,305 14,156 34,911 38,594
Long-term obligations........................ 3,010 1,155 4,394 3,489
Total stockholders' equity................... 7,273 10,592 18,011 17,210
</TABLE>
- -------
(1) See Note 2 of Notes to Financial Statements for information concerning the
computation of pro forma net loss per share and shares used in computing
pro forma net loss per share.

20
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and the Company's financial statements and notes
thereto included elsewhere in this Prospectus. This Prospectus contains
forward-looking statements that involve risks and uncertainties. The Company's
actual results may differ materially from the results discussed in such
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed below and in "Risk Factors" and
"Business" as well as those discussed elsewhere in this Prospectus.

OVERVIEW

Corsair was incorporated in December 1994 in connection with the purchase of
certain in-process research and development and certain assets from a
subsidiary of TRW Inc. The Company further developed this technology into the
PhonePrint cloning fraud prevention system, and first recorded revenues from
commercial shipment of this system in June 1995. From inception, the Company's
operating activities have related primarily to the commercialization, continued
development and enhancement of PhonePrint, the sale and marketing of PhonePrint
and the development of potential new products. In 1995, the Company generated
revenues of $7.6 million based upon sales of PhonePrint to two customers. In
1996, the Company generated revenues of $19.6 million based upon sales of
PhonePrint to nine customers. In the six months ended June 30, 1997, the
Company generated revenues of $20.3 million based upon sales of PhonePrint to
15 customers. See "Risk Factors--Customer Concentration."

To date, all of the Company's revenues have been attributable to PhonePrint,
and the Company anticipates that the sale and license of the hardware and
software that constitute PhonePrint and the sale of associated services will
continue to account for substantially all of the Company's revenues at least
through the end of 1998. As a result, the Company's future operating results
will depend on the demand for and market acceptance of PhonePrint. See "Risk
Factors--Dependence on PhonePrint; Dependence on Analog Networks."

There are two components of revenues attributable to PhonePrint: system
revenue and service revenue. System revenue is comprised of both the sale of
hardware and the licensing of software. Revenue from hardware sales is
recognized upon the commissioning of the product (the activation of the cell
site equipment) unless a sales contract contains specific acceptance criteria,
in which case hardware revenue is recognized upon achievement of those
criteria. Software license revenue is recognized over the period of the
software license term. Service revenue is primarily derived from maintenance
contracts and subscriptions to the PhonePrint Roaming Network, which is
recognized monthly over the term of the contract. Service revenue also includes
revenue resulting from time and material billing, training courses, consulting
and the provision of spare parts, each of which is recognized in the month the
service is provided to the customer.

Cost of system revenue consists of the cost of hardware and software, as well
as license and royalty fees. Cost of hardware revenue consists of manufacturing
overhead for the Company's test and assembly operation, materials purchased
from the Company's subcontractors and vendors, hardware purchased from third
party vendors and shipping costs. Cost of software license revenue primarily
includes fees paid to third party software vendors, as well as costs associated
with the installation and configuration of the software. Cost of service
revenue consists primarily of expenses for personnel engaged in network
support,

21
<PAGE>

customer support, installation, training and consulting as well as
communications charges and network equipment depreciation.

The Company's gross margin has varied significantly in the past and may vary
significantly in the future, depending on the mix of services and systems. The
Company's software licenses have a higher gross margin than its service and
hardware revenue. In addition, the hardware gross margin varies from customer
to customer depending on the contract and from model to model depending upon
the customer's cell site and switch configuration. Therefore, the Company's
operating results will be affected by the mix of hardware units, software
licenses and service fees recognized during the period. The Company has
certain programs in place intended to reduce the costs of certain components
of the system.

The Company sells PhonePrint primarily through its direct sales force, but
has also entered into distribution agreements with Motorola, Inc. and Aurora
Wireless Technologies, Ltd. and seeks to enter into additional distribution
agreements for international markets. The Company's gross margin will also
vary depending on the mix of direct sales and sales through distribution
channels.

The Company continues to make efforts to achieve profitability by increasing
sales volume and decreasing costs of goods sold and through certain other
measures. Although the Company is attempting to control certain costs in order
to achieve profitability, the Company's operating expenses continue to
increase as the Company seeks to develop the infrastructure necessary to
support a growing business. The Company believes that continued expansion of
its operations is essential to achieving its strategy and therefore may
continue to increase expenditures in all operational areas. The Company has
not been profitable in any period to date, and there can be no assurance that
the Company will achieve or sustain profitability. See "Risk Factors--Limited
Operating History; Lack of Profitability."

RESULTS OF OPERATIONS--SIX MONTHS ENDED JUNE 30, 1997 AND 1996

Revenues. For the six months ended June 30, 1997, total revenues were $20.3
million, compared with $4.9 million for the comparable 1996 period. This
increase resulted primarily from an increase in sales of PhonePrint systems.
System revenue was $18.3 million for the six months ended June 30, 1997,
compared with $4.4 million for the comparable 1996 period. Service revenue was
$2.0 million for the six months ended June 30, 1997, compared with $455,000
for the comparable 1996 period. The increase in service revenue was
attributable to growth in the installed base of PhonePrint units covered by
service contracts ($850,000) and initial revenue attributable to the Company's
PhonePrint Roaming Network service ($720,000). For the six month periods ended
June 30, 1997 and 1996, international revenues comprised 17.3% and 0.0% of
total revenues respectively.

Gross Profit (Deficit). Gross profit increased to $3.8 million in the six
months ended June 30, 1997 from a gross deficit of $551,000 in the comparable
1996 period. The increase in gross profit was due primarily to system revenue
which contributed $3.3 million in gross profit for the six months ended June
30, 1997 as compared to a gross deficit of $235,000 in the comparable 1996
period. In the first six months of 1997, total gross margin was 18.8%
consisting of 18.2% system gross margin and 23.9% service gross margin.

Research and Development. Research and development expenses were $3.0
million, or 14.7% of total revenues, for the six months ended June 30, 1997,
compared with $2.1 million for the comparable 1996 period. This increase in
expenditures was due primarily to the hiring of additional engineering
personnel related to the continued development of PhonePrint and incremental
development work on new products. The Company believes that continued

22
<PAGE>

investment in research and development is critical to attaining its strategic
objectives, and as a result, expects absolute dollars spent on product
development to increase.

Sales and Marketing. Sales and marketing expenses were $3.3 million, or 16.4%
of total revenues, during the six months ended June 30, 1997, compared with
$2.0 million for the comparable 1996 period. The increase in expenses resulted
from the hiring of additional sales and marketing personnel to support the
increased sales of PhonePrint and to support the increase in service revenue.
The Company expects its sales and marketing expenses to increase in absolute
dollars as it expands the scope of these efforts.

General and Administrative. General and administrative expenses increased to
$2.0 million or 9.7% of total revenues, in the six months ended June 30, 1997,
compared with $1.2 million for the comparable 1996 period. This increase in
expenditures was due primarily to higher personnel expenses related to
increased staffing.

Interest Income (Expense), Net. Net interest income was $43,000 in the six
months ended June 30, 1997 as compared to net interest income of $55,000 in the
comparable 1996 period. Net interest income and expense consists of interest
income from the Company's cash and short-term investments, net of interest
expense on the Company's equipment loans, equipment lease lines and other
loans.

Income Taxes. The income tax expense in the six months ended June 30, 1997
and 1996 represents minimum state tax liabilities. Due to the losses incurred
in these periods, there was no income tax provision.

RESULTS OF OPERATIONS--YEARS ENDED DECEMBER 31, 1996 AND 1995

Revenues. In 1996, total revenues were $19.6 million, compared with $7.6
million in 1995. This increase resulted primarily from an increase in sales of
PhonePrint systems. System revenue was $18.2 million in 1996 compared with $7.4
million revenue in 1995. Service revenue was $1.4 million in 1996 compared with
$242,000 in 1995. The increase in service revenue was attributable to growth in
the installed base of PhonePrint units ($1.1 million) covered by service
contracts and the increase in customers subscribing to the PhonePrint Roaming
Network service ($94,000).

Gross Profit (Deficit). Gross profit increased to $409,000 in 1996 from a
gross deficit of $544,000 in 1995. The improvement in gross profit was due
primarily to system revenue which contributed $943,000 in gross profit in 1996
as compared to gross deficit of $171,000 in 1995.

Research and Development. Research and development expenses were $5.0
million, or 25.4% of total revenues, in 1996, compared with $3.1 million, or
40.8% of total revenues, in 1995. This increase was due primarily to the hiring
of additional engineering personnel ($540,000) and increased consulting
expenses ($730,000) related to the continued development and enhancement of
PhonePrint and the development of new products.

Sales and Marketing. Sales and marketing expenses were $5.4 million, or 27.4%
of total revenues, in 1996, compared with $3.0 million, or 39.3% of total
revenues, in 1995. The increase in expenses in 1996 resulted from the hiring of
sales and marketing personnel to support the increased sales of PhonePrint
($1.3 million) and increased sales commissions ($1.1 million).

General and Administrative. General and administrative expenses increased to
$2.6 million, or 13.2% of total revenues, in 1996, compared with $2.1 million,
or 27.9% of total revenues, in 1995. This increase in expenditures was due
primarily to higher personnel expenses related to increased staffing.

23
<PAGE>

Interest Income (Expense), Net. Net interest expense was $220,000 in 1996 as
compared to net interest income of $218,000 in 1995. The $438,000 increase in
1996 interest expense as compared to 1995 expenses was primarily due to
increased interest costs on additional equipment leases and other loans.

Income Taxes. The 1996 income tax expense represents minimum state tax
liabilities. Due to the losses incurred in these periods, there was no income
tax provision.

QUARTERLY RESULTS OF OPERATIONS

The following tables present unaudited statement of operations data for each
of the six quarters in the period ended June 30, 1997. This information has
been prepared by the Company on a basis consistent with the Company's audited
financial statements and includes all adjustments (consisting only of normal
recurring adjustments) that management considers necessary for a fair
presentation of the data.

<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1996 1996 1996 1996 1997 1997
-------- -------- --------- -------- -------- --------
Revenues: (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
System revenue........ $ -- $ 4,437 $ 5,552 $ 8,189 $ 8,167 $10,135
Service revenue....... 146 309 372 601 929 1,089
------- ------- ------- ------- ------- -------
Total revenues...... 146 4,746 5,924 8,790 9,096 11,224
Cost of revenues:
Cost of system reve-
nue.................. 42 4,630 5,165 7,398 7,480 7,487
Cost of service reve-
nue.................. 213 558 548 643 829 707
------- ------- ------- ------- ------- -------
Total cost of reve-
nues............... 255 5,188 5,713 8,041 8,309 8,194
------- ------- ------- ------- ------- -------
Gross profit (deficit).. (109) (442) 211 749 787 3,030
Operating expenses:
Research and develop-
ment................. 951 1,191 1,259 1,582 1,382 1,612
Sales and marketing... 832 1,199 1,374 1,969 1,548 1,783
General and adminis-
trative.............. 567 639 581 804 991 977
------- ------- ------- ------- ------- -------
Total operating ex-
penses............. 2,350 3,029 3,214 4,355 3,921 4,372
------- ------- ------- ------- ------- -------
Operating loss.......... (2,459) (3,471) (3,003) (3,606) (3,134) (1,342)
Interest income (ex-
pense), net............ 73 (18) (150) (125) (3) 46
------- ------- ------- ------- ------- -------
Loss before income tax-
es..................... (2,386) (3,489) (3,153) (3,731) (3,137) (1,296)
Income taxes............ -- -- 1 1 3 --
------- ------- ------- ------- ------- -------
Net loss................ $(2,386) $(3,489) $(3,154) $(3,732) $(3,140) $(1,296)
======= ======= ======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
AS A PERCENTAGE OF TOTAL REVENUES
-----------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30,
1996 1996 1996 1996 1997 1997
Revenues: -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
System revenue........ 0.0% 93.5% 93.7% 93.2% 89.8% 90.3%
Service revenue....... 100.0 6.5 6.3 6.8 10.2 9.7
-------- ----- ----- ----- ----- -----
Total revenues...... 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenues:
Cost of system reve-
nue.................. 28.8 97.5 87.2 84.2 82.2 66.7
Cost of service reve-
nue.................. 145.9 11.8 9.2 7.3 9.2 6.3
-------- ----- ----- ----- ----- -----
Total cost of reve-
nues............... 174.7 109.3 96.4 91.5 91.4 73.0
-------- ----- ----- ----- ----- -----
Gross profit (deficit).. (74.7) (9.3) 3.6 8.5 8.6 27.0
Operating expenses:
Research and develop-
ment................. 651.4 25.1 21.3 18.0 15.2 14.4
Sales and marketing... 569.9 25.2 23.2 22.4 17.0 15.9
General and adminis-
trative.............. 388.3 13.5 9.8 9.1 10.9 8.7
-------- ----- ----- ----- ----- -----
Total operating ex-
penses............. (1,609.6) (63.8) (54.3) (49.5) (43.1) (39.0)
-------- ----- ----- ----- ----- -----
Loss from operations.... (1,684.3) (73.1) (50.7) (41.0) (34.5) (12.0)
Interest income (ex-
pense), net............ 50.0 (0.4) (2.5) (1.4) (0.0) 0.5
Loss before income tax-
es..................... (1,634.3) (73.5) (53.2) (42.4) (34.5) (11.5)
Income taxes............ 0.0 0.0 0.0 0.0 0.0 0.0
-------- ----- ----- ----- ----- -----
Net loss................ (1,634.3)% (73.5)% (53.2)% (42.4)% (34.5)% (11.5)%
======== ===== ===== ===== ===== =====
</TABLE>

24
<PAGE>

These quarterly results are not necessarily indicative of future results of
operations and may fluctuate, depending on: the level and timing of revenues
associated with PhonePrint; the timing of the introduction or acceptance of
product enhancements and new products and services offered by the Company and
its competitors; changes in regulations affecting the wireless
telecommunications industry; technological changes or developments in the
wireless telecommunications industry; dependence on a single product; size,
product mix and timing of significant orders; timing of system revenue;
competition and pricing in the markets in which the Company competes; possible
recalls; lengthy sales cycles; production or quality problems; timing of
development expenditures; further expansion of sales and marketing operations;
changes in material costs; disruptions in sources of supply; capital spending;
timing of payments by customers; and changes in general economic conditions.
This information should be read in conjunction with the Company's financial
statements and notes thereto included elsewhere in this Prospectus. See "Risk
Factors--Fluctuations in Quarterly Financial Results; Lengthy Sales Cycle."

Total revenues increased in each of the quarters presented. System revenue
increased due to an increase in the number of units commissioned and accepted.
Service revenue increased due to a larger installed base of units covered by
maintenance contracts and the introduction of the Company's PhonePrint Roaming
Network. Despite these recent increases in the Company's quarterly revenues,
there can be no assurance that the Company will experience similar increases,
if any, in future quarters.

Gross profit (deficit) has improved in each of the quarters presented largely
due to increased unit volumes, manufacturing efficiencies and cost reductions.
System gross margin was negatively impacted by retrofit accruals of
approximately $500,000 and $200,000 recorded in the quarters ended September 30
and December 31, 1996, respectively. In the quarter ended June 30, 1997,
service gross margin was higher than in prior periods due to increased service
revenue and a favorable inventory variance of approximately $110,000. As the
Company has grown, total operating expenses have increased each quarter.
Research and development expenses have varied due to expenses for prototypes
and consulting fees related to certain projects. Sales and marketing expenses
have generally increased as unit volumes have increased, but decreased in the
first quarter of 1997 due to a change in the Company's sales commission
structure.

The Company recorded noncash deferred compensation of $1.1 million and
$73,000 in connection with certain stock options granted during the six months
ended June 30, 1997 and the year ended December 31, 1996, respectively, and
recognized approximately $238,000 and $4,000 in amortization of deferred
compensation in the six months ended June 30, 1997 and the year ended December
31, 1996, respectively. The unamortized balance of the deferred compensation
will be expensed over the four-year vesting periods of the options and,
therefore, will continue to affect the Company's operating results through
2001.

LIQUIDITY AND CAPITAL RESOURCES

The Company has funded its operations primarily through a series of Preferred
Stock and debt financings. From its incorporation through June 30, 1997, the
Company completed four Preferred Stock financings providing aggregate net
proceeds of approximately $47.9 million. The debt financings provided aggregate
net proceeds of approximately $5.9 million. At June 30, 1997, the Company had
cash and cash equivalents of approximately $20.3 million and working capital of
approximately $17.5 million.

In June 1997, the Company signed a loan and security agreement which made
available a $3.0 million equipment term loan facility at prime plus 0.75%
(9.25% at June 30, 1997). The loan

25
<PAGE>

facility is available through July 1998 and is secured by any underlying
equipment purchased. As of June 30, 1997, the Company did not have any
borrowings under the equipment term loan, and any future borrowings will be
repaid over three years.

The Company also has available a $3.0 million revolving line of credit under
a facility that is available through August 30, 1997 and bears interest at a
floating rate of prime plus 0.5%. At June 30, 1997, the prime rate was 8.5%.
Borrowings under this credit facility are secured by accounts receivable and
inventory and are subject to certain maximum advance percentages against
eligible accounts receivable and inventory. The Company did not have any
borrowings outstanding under the line of credit as of June 30, 1997, and the
Company does not intend to renew this credit facility.

The Company's operating activities used cash of $722,000 for the six months
ended June 30, 1997, and $13.5 million and $5.7 million for the years ended
December 31, 1996 and 1995, respectively. In the first six months of 1997, cash
used by operations decreased by $5.9 million over the comparable 1996 period.
The decrease in cash used by operations in 1996 as compared to 1995 was due
primarily to increased cash collections in accounts receivable. As of June 30,
1997, trade accounts receivable were significantly lower than at March 31, 1997
due to the timing of the recognition of certain significant revenue
transactions and successful cash collection efforts during the quarter. There
can be no guarantee that such trends will continue.

The Company's investing activities used cash of $8.2 million for the six
months ended June 30, 1997, and $1.1 million and $3.5 million for the years
ended December 31, 1996 and 1995, respectively. In each period, cash was used
for the purchase of property and equipment, primarily computer hardware and
software, and for leasehold improvements to the Company's facility.

The Company's financing activities generated cash of $2.4 million for the six
months ended June 30, 1997, and $24.6 million and $9.5 million for the years
ended December 31, 1996 and 1995, respectively. In the quarter ended June 30,
1997, cash provided by financing activities was primarily from a $3.0 million
Preferred Stock financing. In 1996, cash provided by financing activities was
primarily from an approximately $20.0 million Preferred Stock financing and an
approximately $4.9 million debt financing. In 1995, the cash provided by
financing activities was primarily from a $8.8 million Preferred Stock
financing.

The Company believes that the combination of the net proceeds of this
Offering, existing sources of liquidity and internally generated cash, if any,
will be sufficient to meet the Company's projected cash needs for at least the
next 12 months. The Company intends to continue its significant product
development efforts in the future and expects to fund those activities out of
working capital. There can be no assurance, however, that the Company will not
require additional financing prior to such date to fund its operations or
possible acquisitions. In addition, the Company may require additional
financing after such date to fund its operations. There can be no assurance
that any additional financing will be available to the Company on acceptable
terms, or at all, when required by the Company.

26
<PAGE>

BUSINESS

Corsair Communications, Inc. provides an open architecture hardware and
software system that can serve as a platform for the delivery of multiple
products and services to the wireless telecommunications industry. The genesis
for the platform is PhonePrint, a system that has proven highly effective in
reducing cloning fraud. The PhonePrint system has prevented over 100 million
fraudulent call attempts and some customers have reported up to a 90%
reduction in cloning fraud losses after deploying PhonePrint. In addition to
providing cloning fraud prevention, the Company's platform is designed to
support a broad range of products and services for the wireless
telecommunications industry, including churn reduction and phone location
products. The Company believes that new products can be integrated with its
open, scaleable platform, which can provide a number of benefits to wireless
telecommunications carriers, including accelerated development and deployment,
reduced costs, efficient use of cell site space and improved customer service.

The Company sells and markets its products to wireless telecommunications
carriers domestically and internationally. The Company's customers include
AT&T Wireless Services, Bell Atlantic NYNEX Mobile, BellSouth Cellular Corp.,
Comcast Cellular Communications, Inc., GTE Mobilnet Service Corp., Los Angeles
Cellular Telephone Company, Pilipino Telephone Corporation (Piltel),
RadioMovil DIPSA, S.A. de C.V. (Telcel) and Southwestern Bell Mobile Systems,
Inc.

INDUSTRY BACKGROUND

The worldwide demand for wireless telecommunications services has grown
significantly in recent years as those services have become widely available
and increasingly affordable. The growth in the worldwide subscriber base,
together with changes in telecommunications regulations and allocations of
additional radio spectrum frequencies, has resulted in the build-out of a
significant number of new networks and plans for additional networks.
Dataquest Incorporated estimates that the number of wireless
telecommunications subscribers worldwide increased from approximately 16
million in 1991 to approximately 125 million in 1996, and the number of
subscribers is expected to exceed 360 million by the end of 2000.

There are two types of wireless telecommunications networks: analog and
digital. Analog networks broadcast the actual voice waveform; digital networks
digitize the voice waveform using various coding techniques before the signal
is broadcast. In the 1980s, carriers around the world installed primarily
analog networks. In North America, all analog networks use a single
transmission standard, called Advanced Mobile Phone Services ("AMPS"), that
enables carriers to provide nearly seamless roaming coverage by partnering
with other carriers. The Company believes that over 90% of wireless
telecommunications subscribers in North America use analog networks.
Worldwide, a substantial majority of wireless telecommunications subscribers
use analog networks.

Carriers began to deploy digital networks in the late 1980s and more
extensively during the 1990s, in large part to overcome capacity constraints
associated with analog networks. In the U.S. many carriers that operate analog
networks have deployed digital networks alongside their existing analog
networks to supplement capacity and to compete with new carriers deploying
digital networks. Carriers have elected to implement different digital
transmission standards, including Time Division Multiple Access ("TDMA"), Code
Division Multiple Access ("CDMA") and Global System for Mobile Communications
("GSM"). These transmission standards are not compatible with each other or
with analog standards. The lack of a single digital standard in the U.S. has
led many digital network carriers to use existing analog networks to provide
roaming

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service when compatible digital networks are not available. To provide roaming
service to digital subscribers, the industry has developed "multi-mode"
digital/analog phones that default to analog mode in the absence of a
compatible digital transmission standard. Internationally, digital networks
have developed at varying speeds. In Europe, digital networks have grown
quickly in many areas due in part to the convergence upon a single digital
transmission standard, GSM. In other parts of the world, digital networks
employing various standards are being installed as new carriers enter existing
markets and as new markets are opened to wireless telecommunications. In many
of these countries, analog networks are expected to coexist with digital
networks.

The Company believes that analog networks will continue to play a
significant role in the provision of wireless telecommunications services for
the foreseeable future. The Company believes that the costs required to
replace existing analog phones, the capacity available on existing analog
networks, the existence of multiple digital transmission standards and the
need to provide seamless roaming services make the exclusive implementation of
digital networks across all markets impractical and unlikely for the
foreseeable future. Additionally, there are many smaller markets in the U.S.
that are not expected to deploy digital technology. International Data
Corporation forecasts that the number of digital subscribers will not exceed
the number of analog subscribers in the U.S. until 2000.

Issues Facing Wireless Telecommunications Carriers

As the wireless telecommunications industry evolves, it faces severe
competitive, pricing and cost pressures and additional regulatory hurdles. In
the U.S., existing carriers are anticipating increased competition as new
Personal Communications Services ("PCS") and Enhanced Specialized Mobile Radio
("ESMR") carriers enter their markets. Also, as the industry shifts from a
predominantly high usage business subscriber base to the mass market, carriers
are being impacted by a decline in the average revenue per subscriber. As a
result, carriers must retain subscribers for a longer period of time to
recover their marketing investment per subscriber and the high costs of
spectrum acquisition and network build-out.

These market forces have focused carriers on reducing the rate at which
subscribers switch to another carrier's services or cease using wireless
telecommunications services altogether, also known as "churn." According to
industry sources, churn is in the range of 20% to 30% per year for many
carriers, and is expected to remain a significant issue as competition
intensifies. The Company believes that the high rates of churn experienced in
the wireless telecommunications industry can be attributed, in part, to
subscriber dissatisfaction with the scope and quality of service. In order to
increase subscriber satisfaction and improve the overall quality of service,
carriers are currently attempting to increase network capacity, offer enhanced
services, improve network security and voice quality and reduce the impact of
fraud on legitimate subscribers. The Company believes wireless
telecommunications carriers will seek solutions to reduce churn by identifying
and correcting problems before subscriber turnover occurs.

Wireless telecommunications carriers in the U.S. are also seeking cost-
effective means to comply with new industry regulations. An FCC mandate
currently requires that by October 2001 all wireless telecommunications
carriers in the U.S. be capable of locating emergency 911 callers on their
networks within a certain range of accuracy. Although the FCC mandate contains
a provision that may allow carriers to pass the cost of this service to their
subscribers, the Company believes that cost containment and pricing pressures
likely will encourage the implementation of low-cost solutions that minimize
the cost of service to subscribers.

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Fraud is one of the most pervasive problems facing the wireless
telecommunications industry. The most common types of fraud are cloning fraud,
subscription fraud and phone theft. Fraud in the U.S. cost wireless
telecommunications carriers in excess of $1 billion in 1996, according to the
Yankee Group. It is also believed that fraud poses a significant problem for
wireless telecommunications carriers worldwide. Wireless telecommunications
carriers are forced to incur significant operating costs associated with
roaming fraud settlements with other carriers, interconnect fees and long
distance toll charges, the creation of internal fraud management departments,
customer service efforts to retain subscribers who have been affected by fraud
and infrastructure costs to replace the capacity used by fraudulent calls.

Cloning Fraud in Wireless Telecommunications Networks

The Company believes that cloning fraud accounts for most fraud losses in
analog networks and is also the most widespread and fastest growing form of
wireless telecommunications fraud today. Cloning occurs when a thief uses a
scanning device to steal the mobile identification number ("MIN") and
electronic serial number ("ESN") transmitted over the air during a wireless
call, and then reprograms other phones with the stolen numbers. The
reprogrammed phones, or "clones," are then used to make fraudulent calls on
the wireless carriers' networks. Calls made on clones are charged to the
legitimate subscriber's account. Stolen MIN/ESN numbers can be used locally
within the legitimate subscriber's local service area or can be sold in other
markets and programmed in phones that will then roam on another carrier's
network. In a number of instances, roaming settlement charges have been so
large that the defrauded carrier has temporarily terminated the ability of all
of its customers to roam in certain high fraud markets. These temporary
interruptions of service result in lost carrier revenue and customer
inconvenience.

To address cloning fraud, a number of prevention techniques, including fraud
profilers, personal identification numbers ("PINs") and voice recognition,
have been developed. None of these techniques has proven to be a practical and
effective solution to cloning fraud on analog networks. A fraud profiler is a
software tool that tracks anomalies in a subscriber's behavior and notifies a
carrier of unusual calling patterns. Profilers detect suspicious activity only
after it has occurred and do not identify fraud conclusively, but instead only
assist carriers in identifying fraud and require manual intervention. PINs
involve the use of a numeric code that must be dialed by the subscriber before
a call is connected. PINs are considered inconvenient, and because they are
transmitted over the air during a call, they have been compromised in the same
manner as MIN/ESN numbers. Voice recognition requires the use of a spoken
password before a call is connected. The technological feasibility of voice
recognition systems for the prevention of cloning fraud is still being
evaluated and voice recognition systems are not generally viewed as a cost-
effective or convenient solution.

Another cloning fraud prevention technique, known as authentication, uses
encryption technologies and requires a phone to prove its validity before a
call is connected. While authentication has been adopted by many digital
carriers and is expected to be used in a large number of digital networks in
the future, the Company believes that it will not be cost effective to replace
the large number of existing analog phones that do not allow authentication.
In addition, recent announcements relating to breaches of other wireless
encryption algorithms have heightened concerns about the vulnerability of
authentication processes to fraud.

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<PAGE>

THE CORSAIR SOLUTION

Corsair's PhonePrint system provides highly effective cloning fraud
prevention to wireless telecommunications carriers by using proprietary RF
signal analysis technology to identify attempted fraudulent calls and prevent
cloners from gaining access to a carrier's analog network. The system measures
specific characteristics of each phone's unique RF waveform to develop an "RF
fingerprint" that is a reliable tool to distinguish between a clone and a
legitimate phone. Just as no two human fingerprints are the same, differences
in phone designs and components as well as subtle manufacturing differences
mean that no two wireless phones generate the same waveform. The RF
fingerprint of one wireless phone cannot be emulated by another wireless
phone, and is therefore not subject to being compromised like MIN/ESN numbers,
PINs or potentially authentication codes. The scaleable design of the
PhonePrint system allows carriers to deploy the system initially in areas
where fraud is most prevalent and to further deploy the system over time in
other parts of their networks. In addition, by purchasing subscriptions to the
Company's PhonePrint Roaming Network, carriers can share RF fingerprints in
real-time between PhonePrint systems in different markets to protect against
losses associated with roaming fraud.

The Corsair platform has been designed as a distributed, open architecture
system into which products addressing other needs of wireless
telecommunications carriers can be integrated. The Company believes that this
platform is capable of supporting a broad range of products, including churn
reduction, phone location and other products that may be demanded by the
wireless telecommunications industry. Additionally, the Company believes that
the open platform will provide significant cost advantages for products
developed for it, as compared to stand-alone products offered by others,
because of the ability to leverage common designs and components.

STRATEGY

The Company's objective is to be the leading provider of value-added
solutions to wireless telecommunications carriers. Key elements of the
Company's strategy include:

Maintain Leadership in RF Fingerprinting Solutions. The Company believes
that its proprietary approach to developing RF fingerprints, based upon
technology originally developed for the military, is a key differentiator of
the Company's solution that results in highly effective cloning fraud
prevention. The Company also believes that it deployed the first real-time
network for the exchange of fingerprints between carriers, and that it was
also the first to expand real-time roaming protection internationally. The
Company intends to focus on enhancing and improving PhonePrint in order to
optimize its performance.

Further Penetrate Domestic Markets. The Company intends to leverage its
reputation and experience as a leading provider of RF fingerprinting solutions
to increase its share of the domestic market for cloning fraud prevention
solutions. The Company plans to capitalize on the PhonePrint system's initial
success in reducing cloning fraud and the resulting desire of carriers to
deploy PhonePrint in other parts of their network. In addition, the Company
intends to develop programs to facilitate purchases by new customers in both
urban and rural markets.

Pursue International Markets. The Company believes that carriers in
international markets are experiencing substantial cloning fraud on their
analog networks and may ultimately present an even greater opportunity for
PhonePrint sales than domestic markets. The Company intends to expand
PhonePrint sales internationally by increasing its direct sales force and
marketing through distribution partners. The Company believes that the
reputation, customer relationships and global field support capabilities of
distribution partners may accelerate the penetration of

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<PAGE>

its products in international markets. To date, the Company has deployed
PhonePrint in Mexico and the Philippines.

Leverage Corsair Platform to Provide Low-Cost Solutions. The Company intends
to use the PhonePrint system as an open platform from which additional
products and services can be provided to the wireless telecommunications
industry. The Company believes that new products can be integrated with
certain hardware and software designs and components of its open, scaleable
platform, which can provide a number of benefits, including accelerated
development and deployment, reduced costs, efficient use of cell site space
and improved customer service. Once installed, the Corsair platform can
support additional Company and third-party products that the Company believes
would be more cost-effective than stand-alone products. The Company seeks to
collaborate with third party product developers to integrate new products into
the Corsair platform.

Leverage Core Expertise to Develop New Products. The Company intends to use
its core expertise in RF signal analysis, digital signal processing and real-
time networking in distributed systems environments to develop and introduce
other products that can be integrated into the Corsair platform. The Company
is currently developing products designed to run on the Corsair platform that
would address challenges facing the wireless telecommunications industry
relating to customer churn and the FCC phone location mandate.

Provide Superior Customer Support. The Company believes that providing
superior customer support is critical to maintaining long-term relationships
and to capitalizing upon future sales opportunities. The Company has invested
in building a customer support organization with the range of technical skills
and depth of expertise necessary to serve various wireless customers. The
Company has developed proprietary software tools that permit extensive
monitoring and diagnosis of system performance and provide for the flexibility
of remote operation.

THE PHONEPRINT SYSTEM

PhonePrint is an open architecture hardware and software system that reduces
cloning fraud by detecting and promptly disconnecting fraudulent call
attempts. A key element of the architecture is its distributed processing
capability, which provides high performance and efficiency and reduces network
bandwidth requirements. The system supports real-time network connectivity,
allowing PhonePrint markets to interoperate both domestically and abroad. The
scaleable design of the PhonePrint system has allowed both large and small
carriers to deploy the system initially in areas where cloning fraud is most
prevalent and to further deploy the system over time in other parts of their
networks.

PhonePrint's cloning fraud prevention capability is based upon proprietary
RF signal analysis technology. Every wireless phone's signal creates a unique
waveform due to differences in phone designs and components, as well as subtle
manufacturing variances. PhonePrint creates an RF fingerprint by using complex
proprietary algorithms to measure physical features of these waveforms. RF
fingerprints of legitimate subscribers' phones are stored in a database.
PhonePrint compares the observed RF fingerprint of the caller with the RF
fingerprint of the subscriber in the database. If the two fingerprints do not
match, the call is promptly disconnected. In addition, PhonePrint reduces
roaming fraud by exchanging RF fingerprints between markets connected to the
PhonePrint Roaming Network in real-time, allowing the immediate disconnection
of fraudulent roaming call attempts.

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<PAGE>

The following chart illustrates the PhonePrint architecture.

LOGO
[DESCRIPTION OF PHONEPRINT(R) SYSTEM ARCHITECTURE]

The PhonePrint system is comprised of three components for each market:
radio frequency units located in multiple cell sites, a single system control
center and a single real-time application server. All of these components are
connected by a real-time open internet protocol ("IP") network.

Radio Frequency Units ("RFUs"). Each RFU is an intelligent, self-contained
unit that detects fraudulent calls. Key elements of the RFU include
sophisticated receivers, a PC-based processor and a database of subscriber RF
fingerprints. An RFU constantly monitors the RF waveforms generated by phones,
analyzes them via proprietary algorithms and initiates disconnections when
fraud is detected. The RF collection, signal analysis and fraud detection
process requires less than 0.5 seconds. RFUs have been designed so that they
can be installed, exchanged or taken off-line without interrupting the
carrier's wireless network.

System Control Center ("SCC"). An SCC administers and maintains the master
database of RF fingerprints and activates RF fingerprint validation processes
for a market. An SCC also communicates with the market's RFUs to receive new
RF fingerprint observations and update RF fingerprint databases. The SCC also
supports remote system diagnostics and configuration administration.

Real-Time Application Server ("RTAS"). The RTAS hosts a graphical user
interface that allows different carrier personnel, including customer care
representatives and fraud analysts, to generate a variety of system activity
reports based on real-time and historical data.

Real-Time Network. The RFUs, SCC and RTAS for each market are connected
together, and the PhonePrint system is connected to the carrier's network
infrastructure, using an open

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<PAGE>

IP network. Carriers can subscribe to the PhonePrint Roaming Network service
to exchange RF fingerprints with other markets in real-time to reduce roaming
fraud.

The hardware and software components of the PhonePrint system have been
designed to be compatible with various vendors' infrastructure equipment to
maximize the testability, reliability and performance of the system and to
reduce software release cycle times.

The Company believes that it has established a platform from which multiple
integrated products can be offered to customers at relatively low cost
compared to stand-alone products through the use of common designs and
components. The platform was designed to use standard computer and networking
protocols to allow for the integration of future products. For example, the
platform operates in UNIX, and uses a structured query language ("SQL")
relational database, standard PC processor, and network messaging supported
via TCP/IP standards. The Corsair platform, by virtue of its flexibility,
distributed processing power and location within a carrier's cell site, is
positioned to perform a variety of tasks. Decreasing the cost of cell site
equipment, obtaining superior customer support and saving cell site space are
all important considerations for carriers in selecting products. The Company
believes that all of these considerations can be addressed by leveraging
common designs and components incorporated within the Corsair platform across
a broad range of products.

PRODUCT DEVELOPMENT

The current focus of the Company's product development efforts is on
enhancing the PhonePrint system and developing new products to address
potential market opportunities. Future releases of PhonePrint are being
developed to support additional signal transmission standards. Additional
research and development activities are focused on developing new products
that would integrate into the Corsair platform and expand and enhance the
capabilities of the platform.

The Company is developing a churn reduction product that is intended to
report on the performance of subscribers' phones and is expected to be
introduced in 1998. This product is being developed to use RF data obtained by
the PhonePrint system as part of its fraud prevention operation to determine
the performance of wireless phones. Carriers would be able to use the
information provided by this product to determine which subscribers are likely
to be receiving poor call quality due to phone problems and who are therefore
more likely to terminate service. The Company expects to market this churn
reduction product primarily to its existing carrier customers. The product is
being designed to integrate into the Corsair platform.

The Company is also developing a phone location product, currently targeted
to be introduced in 1999, that is intended to leverage the key designs and
components of its existing platform to create a product that enables U.S.
wireless telecommunications carriers to meet the FCC mandate that requires
them to be capable of identifying the location of wireless callers to 911
emergency systems. The mandate requires that these products be operational and
accurate to within 125 meters of the wireless caller not less than 67% of the
time by October 2001. The Company believes that certain hardware and software
designs and components of the PhonePrint system can be integrated with a phone
location product to accelerate development and reduce cost and cell site space
requirements. The Company believes that its knowledge of RF signal analysis
technologies, its digital signal processing ("DSP") expertise and its
installed base of PhonePrint systems are competitive advantages in its
development of an emergency 911 caller location product for the wireless
telecommunications industry.

The process of developing new products and product enhancements for use in
the wireless telecommunications industry is extremely complex and is expected
to become more complex

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<PAGE>

and expensive in the future as new platforms and technologies emerge. In
particular, the Company is aware of significant technical challenges with
respect to the phone location product it is currently attempting to develop.
In the past, the Company has experienced delays in the introduction of certain
product enhancements, and there can be no assurance that new products or
product enhancements will be introduced on schedule or at all. Any new
products or product enhancements may also contain defects when first
introduced or when new versions are released. There can be no assurance that,
despite testing by the Company, defects will not be found in new products or
product enhancements after commencement of commercial shipments, resulting in
loss of or delay in market acceptance. Any loss of or delay in market
acceptance would have a material adverse effect on the Company's business,
operating results and financial condition.

During 1996 and 1995, total research and development expenditures were $5.0
million and $3.1 million, respectively. The Company anticipates that it will
continue to commit substantial resources to product development in the future.
All research and development expenditures have been expensed as incurred. For
the past two years, product development activities have significantly improved
the PhonePrint system by identifying new algorithms and refining existing
algorithms to bolster PhonePrint's fraud detection capabilities and by
improving reliability and manufacturability. During this same period of time,
end-to-end real-time network connectivity capabilities and a graphical user
interface were also developed, and significant size and cost reductions were
achieved.

As of June 30, 1997, 41 employees were engaged in research and development
programs, including hardware and software development, test and engineering
support. The Company believes that recruiting and retaining engineering
personnel is essential to its success. Competition for such personnel is
intense. See "Risk Factors--Dependence on Personnel."

CUSTOMERS

The end users of the Company's PhonePrint system are both domestic and
international wireless telecommunications carriers. Los Angeles Cellular
Telephone Company, AT&T Wireless Services, Southwestern Bell Mobile Systems,
Inc. and Comcast Cellular Communications, Inc. each accounted for greater than
10% of the Company's total revenues in 1996, and collectively accounted for
over 70% of the Company's total revenues in 1996. AT&T Wireless Services and
AirTouch Communications, Inc. accounted for virtually all of the Company's
total revenues in 1995. See "Risk Factors--Customer Concentration."

The following is a list of the wireless telecommunications carriers that
have deployed the Company's PhonePrint system:

American Cellular Communications Corporation
Houston Cellular Telephone Company
AT&T Wireless Services Los Angeles Cellular Telephone
Bell Atlantic NYNEX Mobile Company
BellSouth Cellular Corp. Pilipino Telephone Corporation
Centennial Cellular Corporation (Piltel)
Comcast Cellular Communications, Puerto Rico Cellular Telephone
Inc. Company
RadioMovil DIPSA, S.A. de C.V.
(Telcel)
CCPR Services, Inc. (Cellular One Puerto Rico)
GTE Mobilnet Service Corp.
Southwestern Bell Mobile Systems,
Inc.
Vanguard Cellular Financial Corp.

United States Cellular Corporation
SALES, MARKETING, DISTRIBUTION AND CUSTOMER SUPPORT

The Company markets its products to wireless telecommunications carriers
domestically and internationally primarily through its direct sales force. The
Company has also entered into

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<PAGE>

two distribution agreements. The Company sells and licenses PhonePrint
pursuant to agreements that typically provide for hardware purchases and
software licenses, customer service and support and roaming service fees. A
carrier's decision to deploy PhonePrint typically involves a significant
commitment of capital by the carrier, with the attendant delays frequently
associated with significant capital expenditures. In addition, purchases of
PhonePrint involve testing, integration, implementation and support
requirements. For these and other reasons, the sales cycle associated with the
purchase of PhonePrint typically ranges from three to 18 months and is subject
to a number of risks over which the Company has little control, including the
carrier's budgetary and capital spending constraints and the internal decision
making processes. See "Risk Factors--Fluctuations in Quarterly Financial
Results; Lengthy Sales Cycle" and "Customer Concentration."

For the six months ended June 30, 1997, international revenues accounted for
approximately 17.3% of the Company's total revenues. Revenue from
international customers did not account for any of the Company's total
revenues in 1996. The Company expects that revenue from international
customers may account for a material portion of the Company's total revenues
at various times in the future. The Company is expanding its sales efforts
outside of the United States, both directly and through distributors and
switch vendors. Any such expansion will require significant management
attention and financial resources. See "Risk Factors--Risks Associated with
International Expansion."

The Company is actively seeking to enter into distribution agreements and
other marketing arrangements. While no revenue has been generated from
distributors to date, the Company believes it will depend on distributors in
the future, both with respect to PhonePrint and new products, if any, that the
Company may offer. Recently, the Company entered into a distribution agreement
with Motorola, Inc. ("Motorola"), which provides Motorola with the ability to
distribute PhonePrint worldwide on a non-exclusive basis. To date, the Company
has not recognized any revenues under this agreement. In 1996, the Company
entered into a distribution agreement with Aurora Wireless Technologies, Ltd.
("Aurora"), which provides Aurora with the ability to distribute PhonePrint
throughout the Asia/Pacific region, as defined in the agreement. Pursuant to
this arrangement, Aurora has placed a PhonePrint system with a carrier in the
Philippines, but consistent with the Company's accounting practices, the
Company will not recognize any revenue from this installation until it meets
specific acceptance criteria. See "Risk Factors--Dependence on Distributors."

The Company provides service and technical support for its products through
both its direct field service and support personnel and its distributors. A
high level of continuing service and support is critical to the Company's
objective of developing long-term relationships with its customers. The
Company also provides on-site installations and technical assistance as part
of the standard support and service package that its customers typically
purchase for the length of their respective agreements with the Company. The
Company also offers various training courses for its distributors and
customers.

COMPETITION

The market for PhonePrint is new and intensely and increasingly competitive.
The Company believes that the primary competitive factors in the cloning fraud
prevention market in which it currently competes include product effectiveness
and quality, price, service and support capability and compatibility with
cloning fraud prevention systems used by the carrier in other geographic
markets and by the carrier's roaming partners. There has been a tendency for
carriers that purchase cloning fraud prevention systems to purchase products
from the company that supplies cloning fraud prevention systems to other
carriers with whom the purchasing carrier has a roaming arrangement. As a
result, the Company expects it will be

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<PAGE>

significantly more difficult to sell PhonePrint to a carrier if the carrier's
roaming partners use cloning fraud prevention systems supplied by a
competitor. Furthermore, once a competitor has made a sale of RF-based cloning
fraud prevention systems to a carrier, the Company expects that it is unlikely
that the Company would be able to sell PhonePrint to that carrier.

The Company's principal competitor for RF-based cloning fraud prevention
systems is Cellular Technical Services Company, Inc. ("CTS"). CTS has
agreements pursuant to which it has installed or will install its RF-based
cloning fraud prevention system in many major U.S. markets. PhonePrint also
competes with a number of alternative technologies, including profilers,
personal identification numbers and authentication. The Company is aware of
numerous companies, including GTE Telecommunications Services, Inc., Authentix
Network, Inc., Signal Science, Inc. (a subsidiary of The Allen Group) and
Coral Systems, Inc., that currently are or are expected to offer products in
the cloning fraud prevention area. In addition, carriers may themselves
develop technologies that limit the demand for PhonePrint. There can be no
assurance that any such company or any other competitor will not introduce a
new product at a lower price or with greater functionality than PhonePrint.
Furthermore, the demand for PhonePrint would be materially adversely affected
if wireless telecommunications carriers implement authentication technology
applicable to analog phones as their sole cloning fraud solution in major
markets, if U.S. wireless telecommunications carriers adopt a uniform digital
standard that reduces the need for digital phones to operate in analog mode
while roaming, or if analog phone makers change product designs and/or improve
manufacturing standards to a point where the difference from phone to phone in
the radio waveform becomes so small that it is difficult for PhonePrint to
identify a clone. There can be no assurance that any currently available
alternative technology or any new technology will not render the Company's
products obsolete or significantly reduce the market share afforded to RF-
based cloning fraud prevention systems like PhonePrint. The Cellular Telephone
Industry Association is currently supervising a study conducted by a third
party to determine whether PhonePrint and the cloning fraud prevention system
marketed by CTS are able to operate with each other. The Company is not able
to predict the effect of this study on competition. An increase in competition
could result in price reductions or the loss of market share by the Company
and could have a material adverse effect on the Company's business, operating
results and financial condition.

The market for other products and services provided to wireless
telecommunications carriers is highly competitive and subject to rapid
technological change, regulatory developments and emerging industry standards.
In addition, many wireless telecommunications carriers and vendors of switches
and other telecommunications equipment may be capable of developing and
offering products and services competitive with new products, if any, that the
Company may offer in the future. Trends in the wireless telecommunications
industry, including greater consolidation and technological or other
developments that make it simpler or more cost-effective for wireless
telecommunications carriers to provide certain services themselves could
affect demand for new products, if any, offered by the Company, and could make
it more difficult for the Company to offer a cost-effective alternative to a
wireless telecommunications carrier's own capabilities. The Company is aware
of a number of companies that have either announced an intention to develop or
are capable of developing products that would compete with the products the
Company is developing, and the Company anticipates the entrance of new
competitors in the wireless telecommunications carrier service industry in the
future. The Company's ability to sell new products, if any, may be hampered by
relationships that competitors have with carriers based upon the prior sale of
other products to carriers.

The Company believes that its ability to compete in the future depends in
part on a number of competitive factors outside its control, including the
ability to hire and retain employees, the

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<PAGE>

development by others of products and services that are competitive with the
Company's products and services, the price at which others offer comparable
products and services and the extent of its competitors' responsiveness to
customer needs. Many of the Company's competitors and potential competitors
have significantly greater financial, marketing, technical and other
competitive resources than the Company. As a result, the Company's competitors
may be able to adapt more quickly to new or emerging technologies and changes
in customer requirements or may be able to devote greater resources to the
promotion and sale of their products and services. To remain competitive in
the market for products and services sold to wireless telecommunications
carriers, the Company will need to continue to invest substantial resources in
engineering, research and development and sales and marketing. There can be no
assurance that the Company will have sufficient resources to make such
investments or that the Company will be able to make the technological
advances necessary to remain competitive. Accordingly, there can be no
assurance that the Company will be able to compete successfully with respect
to new products, if any, it offers in the future.

MANUFACTURING

The Company's manufacturing objective is to produce products that conform to
Corsair's specifications at the lowest possible manufacturing cost.
Manufacturing, system integration and certain testing operations are performed
at the Company's headquarters in Palo Alto, California. The Company's
manufacturing operations consist primarily of assembling finished goods from
components and subassemblies purchased from third parties. The Company
monitors quality at each stage of the production process, including the
selection of component suppliers, the assembly of finished goods and final
testing, packaging and shipping.

The Company relies to a substantial extent on outside vendors to manufacture
many of the components and subassemblies used in PhonePrint, some of which are
obtained from a single supplier or a limited group of suppliers. The Company's
reliance on outside vendors generally, and a sole or a limited group of
suppliers in particular, involves several risks, including a potential
inability to obtain an adequate supply of required components and reduced
control over quality, pricing and timing of delivery of components. In the
past, the Company has experienced delays in receiving materials from vendors,
sometimes resulting in delays in the assembly of products by the Company. See
"Risk Factors--Dependence on Third-Party Products and Services; Sole or
Limited Sources of Supply."

PATENTS AND PROPRIETARY RIGHTS

The Company relies on a combination of patent, trade secret, copyright and
trademark protection and nondisclosure agreements to protect its proprietary
rights. As of April 30, 1997, the Company had one issued U.S. patent, six
pending U.S. patent applications, one issued foreign patent and ten pending
foreign patent applications. The Company's success will depend in large part
on the ability of the Company to obtain patent protection, defend patents once
obtained, license third-party proprietary rights, maintain trade secrets and
operate without infringing upon the patents and proprietary rights of others.
The patent positions of companies in the wireless telecommunications industry,
including the Company, are generally uncertain and involve complex legal and
factual questions. There can be no assurance that patents will issue from any
patent applications owned or licensed to the Company or that, if patents do
issue, the claims allowed would be sufficiently broad to protect the Company's
technology. In addition, there can be no assurance that any issued patents
owned by or licensed to the Company will not be challenged, invalidated or
circumvented, or that the rights granted thereunder will provide competitive
advantages to the Company.

37
<PAGE>

Patents issued and patent applications filed relating to products used in
the wireless telecommunications industry are numerous and there can be no
assurance that current and potential competitors and other third parties have
not filed or in the future will not file applications for, or have not
received or in the future will not receive, patents or obtain additional
proprietary rights relating to products used or proposed to be used by the
Company. The Company is aware of patents granted to third parties that relate
to the potential products the Company is currently developing. The Company
will need to either design those potential products in a manner that does not
infringe the third-party patents or obtain licenses from the third parties and
there can be no assurance that the Company will be able to do so. There can be
no assurance that the Company is aware of all patents or patent applications
that may materially affect the Company's ability to make, use or sell any
current or future products. U.S. patent applications are confidential while
pending in the U.S. Patent and Trademark Office, and patent applications filed
in foreign countries are often first published six months or more after
filing. There can also be no assurance that third parties will not assert
infringement claims against the Company in the future or that any such
assertions will not result in costly litigation or require the Company to
obtain a license to intellectual property rights of such parties. There can be
no assurance that any such licenses would be available on terms acceptable to
the Company, if at all. Furthermore, parties making such claims may be able to
obtain injunctive or other equitable relief that could effectively block the
Company's ability to make, use, sell or otherwise practice its intellectual
property (whether or not patented or described in pending patent
applications), or to further develop or commercialize its products in the U.S.
and abroad and could result in the award of substantial damages. Defense of
any lawsuit or failure to obtain any such license could have a material
adverse effect on the Company's business, operating results or financial
condition.

The Company also relies on unpatented trade secrets to protect its
proprietary technology, and no assurance can be given that others will not
independently develop or otherwise acquire the same or substantially
equivalent technologies or otherwise gain access to the Company's proprietary
technology or disclose such technology or that the Company can ultimately
protect its rights to such unpatented proprietary technology. No assurance can
be given that third parties will not obtain patent rights to such unpatented
trade secrets, which patent rights could be used to assert infringement claims
against the Company. The Company also relies on confidentiality agreements
with its employees, vendors, consultants and customers to protect its
proprietary technology. There can be no assurance that these agreements will
not be breached, that the Company would have adequate remedies for any breach
or that the Company's trade secrets will not otherwise become known to or be
independently developed by competitors. Failure to obtain or maintain patent
and trade secret protection, for any reason, could have a material adverse
effect on the Company's business, operating results and financial condition.

LEGAL PROCEEDINGS

From time to time, the Company may be involved in litigation relating to
claims arising out of its operations in the normal course of business. As of
the date of this Prospectus, the Company is not engaged in any legal
proceedings that are expected, individually or in the aggregate, to have a
material adverse effect on the Company.

EMPLOYEES

As of June 30, 1997, the Company had 132 employees, including 38 in sales
and marketing, 18 in manufacturing, 41 in research and development, 19 in
operations, field service and customer support and 16 in finance and
administration. None of the Company's employees are represented by a
collective bargaining agreement, nor has the Company experienced any work

38
<PAGE>

stoppages. The Company believes that its relations with its employees are
good. See "Risk Factors--Dependence on Personnel."

FACILITIES

The Company's principal administrative, assembly, manufacturing, marketing
and sales facilities total approximately 34,555 square feet and are located in
a single building in Palo Alto, California. The Company occupies its current
facilities under a lease that expires on June 1, 2002. The Company has the
right to expand into the remaining 20,455 feet of space in the building
beginning in April 1998.

39
<PAGE>

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information regarding the executive
officers and directors of the Company as of June 30, 1997:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Kevin R. Compton (1)............. 38 Chairman of the Board and Director
Mary Ann Byrnes.................. 40 President, Chief Executive Officer and
Director
Martin J. Silver................. 40 Chief Financial Officer and Secretary
Evan J. McDowell................. 50 Vice President, Sales
Thomas C. Meyer.................. 40 Vice President, Operations
Donald R. Oestreicher............ 52 Vice President, Engineering
Walter M. Price.................. 37 Vice President, Manufacturing
Jeannette Robinson............... 46 Vice President, Human Resources
John F. Scott.................... 33 Vice President, Strategy and Business
Development
David G. Thompson................ 36 Vice President, Marketing
Peter L.S. Currie (1)............ 40 Director
Stephen M. Dow (2)............... 42 Director
David H. Ring (2)................ 42 Director
Roland L. Robertson.............. 62 Director
</TABLE>
- --------
(1) Member of Audit Committee.
(2) Member of Compensation Committee.

KEVIN R. COMPTON. Mr. Compton has served as Chairman of the Board and a
Director of the Company since December 1994 and served as Secretary of the
Company from December 1994 to December 1995. Since 1990, Mr. Compton has
served as a general partner of Kleiner Perkins Caufield & Byers, a venture
capital investment firm. Mr. Compton is a director of Citrix Systems, Inc.,
Digital Generation Systems, Inc. and Global Village Communication, Inc., and
is also a director of several privately-held companies.

MARY ANN BYRNES. Ms. Byrnes has served as President of the Company since
December 1994 and as Chief Executive Officer and a Director of the Company
since May 1995. Before joining Corsair, from June 1987 to November 1994, Ms.
Byrnes served at Bay Area Cellular Telephone Company, a wireless
telecommunications carrier, as Vice President of Sales and Marketing and Vice
President of Operations. Ms. Byrnes holds a BA in economics from Wellesley
College and an MBA from Harvard Business School.

MARTIN J. SILVER. Mr. Silver has served as Chief Financial Officer and
Secretary of the Company since January 1996. Mr. Silver most recently served
as Chief Financial Officer and Treasurer at Superconductivity, Inc., a
developer of magnets for use by utilities to store energy, from January 1993
to December 1995. Prior to that, Mr. Silver served as Chief Financial Officer
and Corporate Secretary at Credence Systems Corporation, a developer of
testing devices for semiconductors, from November 1988 to December 1992. Mr.
Silver holds a BS in electrical engineering from Purdue University and an MBA
from The University of Pennsylvania, The Wharton School of Business.

EVAN J. MCDOWELL. Mr. McDowell has served as Vice President, Sales of the
Company since January 1997. Prior to joining Corsair, Mr. McDowell was
employed by Polycom, Inc., a telecommunications products company, where he
served as Vice President of Sales and Marketing from November 1993 to January
1997. From March 1989 to November 1993,

40
<PAGE>

Mr. McDowell served as General Manager of the Voice Information Services
Division at Octel Communications Corporation, a voice messaging company. Mr.
McDowell holds a BS in accounting and an MBA from San Diego State University.

THOMAS C. MEYER. Mr. Meyer has served as Vice President, Operations of the
Company since April 1996. Before joining Corsair, Mr. Meyer was Senior Vice
President of Operations at Blyth Software Inc., a software development
company, from April 1994 to March 1996. Previous to that, he was Vice
President and General Manager of the Customer Services Division of Pyramid
Technology Corporation, a company that develops open systems servers for the
commercial computing market, from January 1990 to March 1994. Mr. Meyer holds
a BS in computer engineering from the University of Bridgeport in Connecticut.

DONALD R. OESTREICHER. Dr. Oestreicher has served as Vice President,
Engineering of the Company since joining the Company in July 1996. Prior to
joining Corsair, Dr. Oestreicher was employed by AirSoft, Inc., a software
development company, where he was Vice President of Engineering from July 1995
to July 1996. Dr. Oestreicher served as Vice President, Research & Development
at Blyth Software Inc., a software development company, from January 1993 to
June 1995. From August 1990 to December 1992, Dr. Oestreicher was Director,
Software Product Development for Dow Jones & Company Inc., a securities
trading company. Dr. Oestreicher holds a BS in economics from the
Massachusetts Institute of Technology, a PhD in computer science from the
University of Utah, and an MBA from Santa Clara University.

WALTER M. PRICE. Mr. Price joined the Company in May 1995 as Director of
Manufacturing and was promoted to Vice President, Manufacturing of the Company
in January 1997. Prior to joining Corsair, Mr. Price was Operations Director
at Ericsson-Raynet Corporation, a fiber optics telecommunications company,
from June 1993 to May 1995. From February 1989 to June 1993, Mr. Price served
in various positions including Marketing Operations Manager, Supply Planning
Manager and Process Engineering Manager while at Sun Microsystems, Inc., a
provider of network-based distributed computing systems. Mr. Price holds a BS
in industrial engineering from Stanford University and an MBA from Santa Clara
University.

JEANNETTE ROBINSON. Ms. Robinson joined the Company in January 1996 as
Director of Human Resources and was promoted to Vice President, Human
Resources of the Company in January 1997. Prior to joining Corsair, Ms.
Robinson was employed by Cisco Systems Inc., a provider of internetworking
products, where she held several human resources management and recruiting
positions from June 1990 to January 1996. Ms. Robinson holds a BS in business
administration and a BA in sociology from San Jose State University.

JOHN F. SCOTT. Mr. Scott has served as Vice President, Strategy and Business
Development of the Company since January 1995. Prior to joining Corsair, Mr.
Scott served as Director of Marketing Strategy and Marketing Product Manager
at Bay Area Cellular Telephone Company from September 1992 to January 1995.
Mr. Scott served as a consultant with Boston Consulting Group, a consulting
firm, from August 1990 to March 1992, and served as an independent consultant
from April 1992 to September 1992. Mr. Scott holds a BA in economics from
Claremont McKenna College and an MBA from Harvard Business School.

DAVID G. THOMPSON. Mr. Thompson has served as Vice President, Marketing of
the Company since January 1995. Mr. Thompson also served as Vice President,
Sales of the Company from January 1995 to January 1997. Prior to joining
Corsair, Mr. Thompson served as Director of Marketing at Digital Pictures,
Inc., a software development company, from August 1994 to January 1995.
Previous to that, he was Director of Marketing and Manager of Marketing
Strategy at Bay Area Cellular Telephone Company from March 1992 to August
1994. Mr. Thompson holds a BA in economics from Harvard University.

41
<PAGE>

PETER L.S. CURRIE. Mr. Currie has served as a Director of the Company since
December 1995. Mr. Currie is currently Senior Vice President and Chief
Financial Officer of Netscape Communications Corporation, an internet and
intranet software company, where he has been employed since April 1995. From
April 1989 to March 1995, Mr. Currie held various management positions at
McCaw Cellular Communications, Inc., a wireless telecommunications carrier,
including Executive Vice President of Corporate Development and Chief
Financial Officer.

STEPHEN M. DOW. Mr. Dow has served as a Director of the Company since May
1996. Since 1983, Mr. Dow has served as a general partner of Sevin Rosen
Funds, a venture capital investment firm. Mr. Dow is a director of Arqule
Inc., Citrix Systems, Inc. and Viropharma Incorporated, and is also a director
of several privately-held companies.

DAVID H. RING. Mr. Ring has served as a Director of the Company since July
1995. Since April 1996, Mr. Ring has served as Chairman of the Board of
Tzabaco Group, Inc., a direct marketing company, and has also served as Chief
Executive Officer of Tzabaco Group, Inc. since October 1996. From December
1988 to November 1993, Mr. Ring served as Vice President of Manufacturing for
Cisco Systems Inc. where he also served as a Director from November 1993 to
November 1995. Mr. Ring was also a Director of Global Village Communication,
Inc. from May 1991 to July 1996.

ROLAND L. ROBERTSON. Mr. Robertson has served as a Director of the Company
since April 1996. Since February 1997, Mr. Robertson has served as Vice
President and Deputy General Manager for Operations of the System Integration
Group of TRW Inc., a company focused primarily on government engineering
contracting. From January 1991 through January 1997, Mr. Robertson served as
President and General Manager of TRW Environmental Safety Systems, Inc., a
subsidiary of TRW Inc.

All executive officers are appointed annually by and serve at the discretion
of the Board. All of the Company's executive officers are employed by the
Company at will.

BOARD COMPOSITION AND COMPENSATION

Members of the Board currently hold office and serve until the next annual
meeting of the stockholders of the Company or until their respective
successors have been elected. The Board is currently comprised of six
Directors. Under the Company's Restated Bylaws, beginning with the next annual
meeting of stockholders the Company's Board will be classified into three
classes of Directors serving staggered three-year terms, with one class of
Directors to be elected at each annual meeting of stockholders. The
classification of directors has the effect of making it more difficult to
change the composition of the Board. See "Description of Capital Stock--
Possible Anti-takeover Effects of Certain Charter Provisions."

The Company reimburses its Directors for all reasonable and necessary travel
and other incidental expenses incurred in connection with their attendance at
meetings of the Board. Directors are not currently compensated in cash for
serving on the Board. No Director who is an employee of the Company will
receive separate compensation for services rendered as a director. After this
Offering, on the date of each annual meeting of the Company's stockholders
held after 1997, each non-employee Director who is a director immediately
after such meeting will receive an option to purchase 1,500 shares of Common
Stock. See "--Benefit Plans--1997 Stock Incentive Plan."

In April 1996, Mr. Currie received an option to purchase 33,334 shares of
Common Stock for his service as a Director. In August 1995, Mr. Ring received
an option to purchase

42
<PAGE>

50,750 shares of Common Stock for his service as a Director. Each of these
options vests monthly over a four-year period from the date of grant. In May
1997, Mr. Compton and Mr. Dow each received an option to purchase 7,500 shares
of Common Stock for their service as Directors. Each of these options vests
monthly over a three-year period from the date of grant.

LIMITATIONS ON LIABILITY AND INDEMNIFICATION MATTERS

The Company's Amended and Restated Certificate of Incorporation eliminates,
subject to certain exceptions, Directors' personal liability to the Company or
its stockholders for monetary damages for breaches of fiduciary duties. The
Amended and Restated Certificate of Incorporation does not, however, eliminate
or limit the personal liability of a Director for (i) any breach of the
Director's duty of loyalty to the Company or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) unlawful payments of dividends or unlawful
stock repurchases or redemptions as provided in Section 174 of the Delaware
General Corporation Law or (iv) any transaction from which the Director
derived an improper personal benefit.

The Company's Restated Bylaws provide that the Company shall indemnify its
Directors and executive officers to the fullest extent permitted under the
Delaware General Corporation Law and may indemnify its other officers,
employees and other agents as set forth in the Delaware General Corporation
Law. In addition, the Company has entered into indemnification agreements with
its Directors and officers. The indemnification agreements contain provisions
that require the Company, among other things, to indemnify its Directors and
officers against certain liabilities (other than liabilities arising from
intentional or knowing and culpable violations of law) that may arise by
reason of their status or service as Directors or executive officers of the
Company or other entities to which they provide service at the request of the
Company and to advance expenses they may incur as a result of any proceeding
against them as to which they could be indemnified. The Company believes that
these provisions and agreements are necessary to attract and retain qualified
Directors and officers. The Company has obtained an insurance policy covering
Directors and officers for claims that such Directors and officers may
otherwise be required to pay or for which the Company is required to indemnify
them, subject to certain exclusions.

COMMITTEES OF THE BOARD OF DIRECTORS

The Company has a standing Compensation Committee currently composed of Mr.
Ring and Mr. Dow. The Compensation Committee reviews and acts on matters
relating to compensation levels and benefit plans for executive officers and
certain employees of the Company, including salary and stock options. The
Committee is also responsible for granting stock awards, stock options and
stock appreciation rights and other awards to be made under the Company's
existing incentive compensation plans. The Company also has a standing Audit
Committee composed of Mr. Compton and Mr. Currie. The Audit Committee assists
in selecting the Company's independent auditors and in designating services to
be performed by, and maintaining effective communication with, those auditors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None of the members of the Compensation Committee is an officer or employee
of the Company. No interlocking relationship exists between the Company's
Board or Compensation Committee and the board of directors or compensation
committee of any other company, nor has such an interlocking relationship
existed in the past.

43
<PAGE>

EXECUTIVE COMPENSATION

Summary Compensation Table. The following table sets forth the aggregate
compensation paid by the Company to the President and Chief Executive Officer
and to each of the four other most highly compensated executive officers who
in 1996 earned over $100,000 in salary and bonus (the "Named Executive
Officers") for services rendered in all capacities to the Company for the year
ended December 31, 1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------- ---------------
SECURITIES
UNDERLYING
NAME AND PRINCIPAL POSITION YEAR(1) SALARY(2) BONUS OPTIONS/SARS(#)
- --------------------------- ------- -------------------- ---------------
<S> <C> <C> <C> <C>
Mary Ann Byrnes................ 1996 $ 165,000 $ 82,500 66,667
President and Chief Executive
Officer
David G. Thompson.............. 1996 $ 128,334 $ 456,550(3) 26,667
Vice President, Marketing
Martin J. Silver............... 1996 $ 140,000 $ 55,800 20,000
Chief Financial Officer and
Secretary
John F. Scott.................. 1996 $ 110,000 $ 46,200 26,667
Vice President, Strategy and
Business Development
Walter M. Price................ 1996 $ 106,307 $ 22,324 15,334
Vice President, Manufacturing
</TABLE>
- --------
(1) Pursuant to Instruction to Item 402(b) of Regulation S-K promulgated by
the Securities and Exchange Commission (the "Commission"), information
with respect to fiscal years prior to 1996 has not been included as the
Company was not a reporting company pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
the information has not been previously reported to the Commission in
response to a filing requirement.
(2) Includes amounts deferred pursuant to the Company's 401(k) Plan.
(3) Includes $455,000 earned as commissions while serving as Vice President,
Sales and Marketing.

44
<PAGE>

Option Grants. The following table sets forth information concerning stock
option grants made to each of the Named Executive Officers for the year ended
December 31, 1996. The Company granted no stock appreciation rights ("SARs")
to Named Executive Officers during 1996.

OPTION GRANTS IN 1996

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL RATES OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(4)
OPTIONS EMPLOYEES IN PRICE EXPIRATION ---------------------
NAME GRANTED(1) FISCAL YEAR(2) PER SHARE(3) DATE 5% 10%
- ---- ---------- -------------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Mary Ann Byrnes......... 66,667 10.3% $0.69 9/24/2006 $ 28,510 $ 72,250
David G. Thompson....... 16,667 2.6 $0.69 1/8/2006 7,128 18,063
10,000 1.6 $0.69 9/24/2006 4,276 10,837
Martin J. Silver........ 20,000 3.1 $0.69 9/24/2006 8,553 21,675
John F. Scott........... 16,667 2.6 $0.69 1/8/2006 7,128 18,063
10,000 1.6 $0.69 9/24/2006 4,276 10,837
Walter M. Price......... 10,000 1.6 $0.69 1/8/2006 4,276 10,837
5,334 0.8 $0.69 9/24/2006 2,281 5,780
</TABLE>
- --------
(1) The rights of the optionees vest at various times over a four-year period.
While the options are fully exercisable upon grant, any shares purchased
by the optionee which do not vest prior to the termination of the
optionee's employment may be repurchased by the Company at cost. In
accordance with the terms of the 1996 Stock Option/Stock Issuance Plan
under which the options were granted, all rights of the optionee will
accelerate and vest in full upon an acquisition of the Company unless the
options are assumed or replaced by or the Company's repurchase rights are
assigned to the acquiring corporation. Under the terms of the 1996 Stock
Option/Stock Issuance Plan, following any acquisition of the Company in
which the rights of the optionees do not accelerate and vest in full, the
rights of each optionee shall accelerate and vest (or the Company's
repurchase rights will lapse in the case of exercised options) with
respect to one-half of the then unvested shares if the employment of the
optionee is involuntarily terminated within one year of the acquisition.
(2) The Company granted options to purchase a total of 644,634 shares to
employees in fiscal year 1996.
(3) The exercise price per share of options granted represented the fair
market value of the underlying shares of Common Stock on the dates the
respective options were granted as determined by the Board, considering
all relevant factors. The exercise price may be paid in cash or in shares
of Common Stock valued at fair market value on the exercise date or a
combination of cash or shares or any other form of consideration approved
by the Board. After the effective date of the Registration Statement of
which this Prospectus is a part, the fair market value of shares of Common
Stock will be determined in accordance with certain provisions of the 1997
Stock Incentive Plan based on the closing selling price of a share of
Common Stock on the date in question on the primary exchange or national
market system on which the Company's common stock is listed or reported.
If shares of the Common Stock are neither listed or admitted to trading on
any stock exchange nor traded on the Nasdaq National Market, then the fair
market value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem
appropriate.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Commission. The price used for computing this
appreciation is the exercise price of the options, not the price of Common
Stock in this Offering. There is no assurance provided to any Named
Executive Officer or any other holder of the Company's securities that the
actual stock price appreciation over the 10-year option term will be at
the assumed 5% or 10% levels or at any other defined level.

45
<PAGE>

OPTION EXERCISES AND UNEXERCISED OPTION HOLDINGS. The following table
provides information concerning option exercises during 1996 by the Named
Executive Officers and the value of unexercised options held by each of the
Named Executive Officers as of December 31, 1996. No SARs were exercised
during 1996 or outstanding as of December 31, 1996.

AGGREGATE OPTION EXERCISES IN 1996 AND 1996 YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
ACQUIRED DECEMBER 31, 1996 AT DECEMBER 31, 1996(3)
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED (1) EXERCISABLE(2) UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE
- ---- -------- ------------ -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mary Ann Byrnes......... 370,101 $169,302 0 0 $ 0 0
David G. Thompson....... -- -- 90,000 0 $37,250 0
Martin J. Silver........ -- -- 100,000 0 $15,000 0
John F. Scott........... -- -- 90,000 0 $37,250 0
Walter M. Price......... 13,334 $ 7,000 22,000 0 $ 5,800 0
</TABLE>
- --------
(1) "Value realized" is calculated on the basis of the fair market value of
the Common Stock on the date of exercise minus the exercise price and does
not necessarily indicate that the optionee sold such stock, and does not
take into account that some of such shares are subject to rights of
repurchase on the part of the Company which lapse at various times over
four years after the date of grant.
(2) The options are immediately exercisable; however, any shares purchased
upon exercise may be subject to rights of repurchase on the part of the
Company which lapse at various times over four years after the date of
grant.
(3) "Value" is defined as fair market price of the Common Stock at fiscal
year-end ($0.83) less exercise price.

EMPLOYMENT ARRANGEMENTS

Options granted to Named Executive Officers are immediately exercisable;
however, any shares purchased upon exercise are subject to rights of
repurchase on the part of the Company that generally expire over four or five
years from the date of option grant. In accordance with the terms of the 1996
Stock Option/Stock Issuance Plan and the 1997 Officer Stock Option Plan under
which options were granted to Named Executive Officers, all of the Named
Executive Officers' options will immediately vest and the Company's repurchase
rights will immediately lapse with respect to shares held by the Named
Executive Officers upon an acquisition of the Company, unless the options are
assumed or replaced by, or the Company's repurchase rights are assigned to,
the acquiring entity. Following any acquisition of the Company in which
options remain subject to vesting and repurchase rights do not lapse in the
manner provided above, 50% of a Named Executive Officer's options will vest
and the repurchase rights with respect to 50% of such Named Executive
Officer's shares will lapse if the employment of the Named Executive Officer
is involuntarily terminated within one year of the acquisition.

BENEFIT PLANS

1997 Stock Incentive Plan. The 1997 Stock Incentive Plan (the "Plan") serves
as the successor equity incentive program to the Company's 1996 Stock
Option/Stock Issuance Plan, and the 1997 Officer Stock Option Plan (the "Prior
Plans"). The Plan was adopted by the Board on May 20, 1997 and subsequently
approved by the stockholders on May 27, 1997. 1,337,633 shares of Common Stock
have initially been authorized for issuance under the Plan including, (i) the
shares that remain available for issuance under the Company's 1996 Stock
Option/Stock Issuance Plan, including the shares subject to outstanding
options thereunder, plus (ii) the shares that remain available for issuance
under the Company's 1997 Officer Stock Option Plan, including the shares
subject to outstanding options thereunder, plus (iii) an additional increase
of 333,334 shares. The number of shares of Common Stock included in the Plan
will

46
<PAGE>

automatically be increased by an additional two percent of the outstanding
number of shares of capital stock of the Company per year.

No further option grants will be made under any of the Prior Plans. However,
options incorporated from the Prior Plans will continue to be governed by
their existing terms, unless the Plan Administrator (described below) elects
to extend one or more features of the Plan to those options. However, except
as otherwise noted below, the outstanding options under the Prior Plans
contain substantially the same terms and conditions summarized below for the
Discretionary Option Grant Program in effect under the Plan.

The Plan is divided into four separate components: (i) the Discretionary
Option Grant Program, under which eligible individuals in the Company's employ
or service (including officers and other employees, non-employee Board members
and independent consultants) may, at the discretion of the Plan Administrator,
be granted options to purchase shares of Common Stock at an exercise price not
less than 85% of their fair market value on the grant date, (ii) the Stock
Issuance Program, under which such individuals may, in the Plan
Administrator's discretion, be issued shares of Common Stock directly, through
the purchase of such shares at a price not less than 100% of their fair market
value at the time of issuance or as a bonus tied to the past performance of
services, (iii) the Salary Investment Option Grant Program, under which
executive officers and other highly compensated employees may elect to apply a
portion of their base salary to the acquisition of special stock options, and
(iv) the Automatic Option Grant Program, under which option grants will
automatically be made at periodic intervals to eligible non-employee Board
members to purchase shares of Common Stock at an exercise price equal to 100%
of their fair market value on the grant date.

The Discretionary Option Grant, Stock Issuance and Salary Investment Option
Grant Programs will generally be administered by the Board or one or more
committees appointed by the Board except that a committee consisting of two or
more non-employee Directors will administer each of these programs with
respect to any person subject to Section 16 of the Securities and Exchange Act
of 1934, as amended (the "Plan Administrator"). The Plan Administrator, will
have complete discretion to determine which eligible individuals will receive
option grants or stock issuances, the time or times at which such option
grants or stock issuances are to be made, the number of shares subject to each
such grant or issuance, the vesting schedule to be in effect for the option
grant or stock issuance, the maximum term for which any granted option is to
remain outstanding and whether an option will be granted as an incentive stock
option or a non-statutory stock option under the Federal tax laws. The
administration of the Automatic Option Grant Program will be self-executing in
accordance with the express provisions of such Program. All employees,
Directors and consultants or independent contractors of the Company are
eligible to receive option grants or stock issuances under the Plan.

In the event the Plan Administrator elects to activate the Salary Investment
Option Grant Program for one or more calendar years, each executive officer
and other highly compensated employee of the Company selected for
participation may elect, prior to the start of the calendar year, to reduce
his or her base salary for that calendar year by a specified dollar amount not
less than $10,000 nor more than $50,000. If such election is approved by the
Plan Administrator, the officer will be granted, as soon as possible after the
start of the calendar year for which the salary reduction is to be in effect,
a non-statutory option to purchase that number of shares of Common Stock
determined by dividing the total salary reduction amount by an amount equal to
at least one-third and no more than two-thirds (the exact amount to be
established by the Plan Administrator) of the fair market value per share of
Common Stock on the grant date. The option will be exercisable at a price per
share equal to the difference between the amount of the salary reduction
agreed to by the optionee for the option and the fair market value of the

47
<PAGE>

option shares on the grant date. As a result, upon exercise of the options
issued under the Salary Investment Option Grant Program, the optionee will
have paid 100% of the fair market value of the option shares as of the grant
date through the payment of the exercise price and the agreed salary
reduction. The option will become exercisable in a series of twelve (12) equal
monthly installments over the calendar year for which the salary reduction is
in effect and will become fully exercisable upon certain changes in the
ownership or control of the Company or sale of its assets.

Under the Automatic Option Grant Program, at each annual stockholders
meeting, beginning with the 1998 Annual Stockholders Meeting, each non-
employee Board member will receive an option to purchase 1,500 shares of
Common Stock. Each option granted pursuant to the Automatic Option Grant
Program will have an exercise price equal to the fair market value per share
of Common Stock on the grant date and will have a maximum term of 10 years,
subject to earlier termination following the optionee's cessation of Board
service. The grant of 1,500 shares will vest in 12 equal monthly installments
following the grant date during which the optionee continues to serve as a
Board member. In addition, the option shares will become fully vested upon (i)
certain changes in the ownership or control of the Company or (ii) the death
or disability of the optionee while serving as a Board member. The options may
only be exercised to the extent vested.

Payment of the exercise price for the shares of Common Stock subject to
options granted under the Discretionary Option Grant Program, the Salary
Investment Option Grant Program and the Automatic Option Grant Program may be
made in cash, by check or in shares of Common Stock valued at fair market
value on the exercise date. Payment of the exercise price for the shares of
Common Stock subject to option grants made under the Stock Issuance Program
may be made in cash, by check or with past performance of services. The
optionee may elect to make payment for the option shares upon exercise through
a same-day sale program, which enables the optionee to purchase the option
shares without making any cash payment. In addition, the Plan Administrator
may provide financial assistance to one or more optionees in the exercise of
their outstanding options by allowing such individuals to deliver a full-
recourse, interest-bearing promissory note in full payment of the exercise
price and associated withholding taxes incurred in connection with such
exercise.

In the event that the Company is acquired by merger or asset sale, the
unvested portion of each outstanding option under the Discretionary Option
Grant Program that is not to be assumed by the successor corporation and each
outstanding option under the Salary Investment Option Grant Program will
automatically vest in full. Similarly, unless the Company assigns the
repurchase rights associated with any unvested shares issued under such
programs or the Stock Issuance Program to the successor corporation, such
unvested shares will vest in full. Any outstanding options assumed by the
successor corporation and shares that remain subject to repurchase rights
assigned to the successor corporation will not vest immediately, but will vest
in accordance with their original vesting schedule. The Plan Administrator
will have the authority under the Discretionary Option Grant, Salary
Investment Option Grant and Stock Issuance Programs to grant options and to
structure repurchase rights so that the shares subject to those options or
repurchase rights will automatically vest in the event the individual's
service is terminated, whether involuntarily or through a resignation for good
reason, within a specified period (not to exceed 12 months) following (i) a
merger or asset sale in which those options are assumed or those repurchase
rights are assigned, (ii) a hostile change in control of the Company effected
by a successful tender offer for more than 50% of the outstanding voting stock
or by proxy contest for the election of Board members or (iii) the sale,
transfer or disposition of all or substantially all of the Company's assets
(each a "Corporate Transaction"). The Plan Administrator will also have the
discretion to provide for the automatic acceleration of

48
<PAGE>

options and the lapse of any repurchase rights upon (i) a hostile change in
control of the Company effected by a successful tender offer for more than 50%
of the Company's outstanding voting stock or by proxy contest for the election
of Board members or (ii) the termination of the individual's service, whether
involuntarily or through a resignation for good reason, within a specified
period (not to exceed 18 months) following such a hostile change in control.
Pursuant to the terms of the option agreements the unvested portion of the
options currently outstanding under the Prior Plans will accelerate and such
options will terminate and cease to be exercisable upon an acquisition of the
Company by merger or asset sale, unless those options are assumed by the
acquiring entity. One-half of the unvested portion of any options assumed by
the successor corporation will automatically accelerate upon the involuntary
termination of the optionee's service within 12 months following the
occurrence of a Corporate Transaction in which the options are assumed or
replaced by the successor corporation.

Stock appreciation rights may be issued in tandem with option grants made
under the Discretionary Option Grant Program. The holders of these rights will
have the opportunity to elect between the exercise of their outstanding stock
options for shares of Common Stock or the surrender of those options for an
appreciation distribution from the Company equal to the excess of (i) the fair
market value of the vested shares of Common Stock subject to the surrendered
option over (ii) the aggregate exercise price payable for such shares. The
appreciation distribution may be made in cash or in shares of Common Stock.
There are currently no outstanding stock appreciation rights.

The Plan Administrator has the authority to effect the cancellation of
outstanding options under the Discretionary Option Grant Program (including
options incorporated from the Prior Plans), with the consent of the holders of
such options, in return for the grant of new options for the same or a
different number of option shares with an exercise price per share based upon
the fair market value of the Common Stock on the new grant date.

The Board may amend or modify the Plan at any time. The Plan will terminate
10 years from its effective date unless otherwise terminated by the Board
prior to such date.

Employee Stock Purchase Plan. The Company's Employee Stock Purchase Plan
(the "Purchase Plan") was adopted by the Board on May 20, 1997 and was
subsequently approved by the stockholders on May 27, 1997. The Purchase Plan
is designed to allow eligible employees of the Company to purchase shares of
Common Stock, at semi-annual intervals, through periodic payroll deductions
under the Purchase Plan. A reserve of 166,667 shares of Common Stock has been
established for this purpose.

The Purchase Plan will be implemented in a series of successive offering
periods, each with a maximum duration of 24 months. However, the initial
offering period will begin on the day the underwriting agreement is executed
in connection with this Offering and will end on the last business day in July
1999, unless sooner terminated.

Individuals who are eligible employees on the start date of any offering
period may enter the Purchase Plan on that start date or on any subsequent
semi-annual entry date (February 1 or August 1 each year). Individuals who
become eligible employees after the start date of the offering period may join
the Purchase Plan on any subsequent semi-annual entry date within that period.

Payroll deductions may not exceed 10% of the participant's base salary for
each semi-annual period of participation, and the accumulated payroll
deductions will be applied to the purchase of shares on the participant's
behalf on each semi-annual purchase date (the last business day of January and
July each year, with the first purchase date to occur on the last

49
<PAGE>

business day of January 1998) at a purchase price per share not less than 85%
of the LOWER of (i) the fair market value of the Common Stock on the
participant's entry date into the offering period or (ii) the fair market
value of the Common Stock on the semi-annual purchase date. Should the fair
market value of the Common Stock on any semi-annual purchase date be less than
the fair market value of the Common Stock on the first day of the offering
period, then the current offering period will automatically end and a new 24-
month offering period will begin, based on the lower fair market value.

50
<PAGE>

CERTAIN TRANSACTIONS

Since its formation in December 1994, the Company has issued, in private
placement transactions, shares of its Preferred Stock (as adjusted in price
and number of shares to show the number of shares of Common Stock into which
the Preferred Stock will automatically convert upon the completion of this
Offering at a conversion ratio of 1 to 1) as follows: 5,413,340 shares of
Series A Preferred Stock at a price of $3.00 per share in December 1994;
1,328,084 shares of Series B Preferred Stock at a price of $6.65 per share in
October 1995; 2,424,864 shares of Series C Preferred Stock at a price of $8.25
per share in October 1996; and 266,668 shares of Series D Preferred Stock at a
price of $11.25 per share in March 1997. The purchasers of Preferred Stock
include, among others, the following Directors and holders of more than five
percent of the Company's outstanding stock and their respective affiliates:

<TABLE>
<CAPTION>
PREFERRED STOCK
------------------------------------
EXECUTIVE OFFICERS,
DIRECTORS AND 5% TOTAL
STOCKHOLDERS SERIES A SERIES B SERIES C SERIES D CONSIDERATION
- ------------------- --------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Kevin R. Compton (1)....... 1,333,334 248,308 121,212 -- $6,650,001
Stephen M. Dow (2)......... 1,333,334 37,624 60,606 -- 4,750,002
Roland L. Robertson (3).... 1,346,568 -- -- -- 4,039,700
David H. Ring (4).......... -- 7,526 6,062 -- 100,002
Entities affiliated with
Kleiner Perkins Caufield &
Byers (1)................. 1,333,334 248,308 121,212 -- 6,650,001
Entities affiliated with
Sevin Rosen Funds (2)..... 1,333,334 37,624 60,606 -- 4,750,002
Entities affiliated with
Norwest Equity Partners
(5)....................... 1,066,768 165,538 207,274 -- 6,010,300
TRW Inc. (3)............... 1,346,568 -- -- -- 4,039,700
Entities affiliated with
Accel Partners (6)........ -- 526,714 121,214 -- 4,500,000
</TABLE>
- --------
(1) Includes 1,693,616 shares purchased by Kleiner Perkins Caufield & Byers
VII and 9,238 shares purchased by KPCB Information Sciences Zaibatsu Fund
II. Mr. Compton is a Director of the Company and a general partner of each
of Kleiner Perkins Caufield & Byers VII and KPCB Information Sciences
Zaibatsu Fund II. Mr. Compton disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest therein.
(2) Includes 1,428,230 shares purchased by Sevin Rosen Fund IV L.P. and 3,334
shares purchased by Sevin Rosen Bayless Management Company. Mr. Dow is a
Director of the Company, a general partner of SRB Associates IV L.P., the
general partner of Sevin Rosen Fund IV L.P., and an officer of Sevin Rosen
Bayless Management Company. Mr. Dow disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest therein.
(3) Includes 1,346,568 shares purchased by ESL Incorporated and subsequently
transferred to TRW Inc. Mr. Robertson is a Director of the Company and an
officer of TRW Inc. Because Mr. Robertson does not have voting or
dispository control over such shares, he disclaims beneficial ownership of
such shares.
(4) Includes 7,526 shares purchased by Eureka Investments, L.P. and 6,062
shares purchased by the David H. Ring Charitable Remainder Unitrust. Mr.
Ring is a director of the Company, a general partner of Eureka
Investments, L.P. and the trustee of the David H. Ring Charitable
Remainder Unitrust. Mr. Ring disclaims beneficial ownership of the shares
held by Eureka Investments, L.P. and the David H. Ring Charitable
Remainder Unitrust except to the extent of his pecuniary interest therein.
(5) Includes 1,066,768 shares purchased by Norwest Equity Partners, IV and
372,812 shares purchased by Norwest Equity Partners, V.
(6) Includes 593,498 shares purchased by Accel IV L.P., 27,862 shares
purchased by Accel Investors '95 L.P., 12,312 shares purchased by Accel
Keiretsu L.P. and 14,256 shares purchased by Ellmore C. Patterson
Partners.

Holders of Preferred Stock are entitled to certain registration rights with
respect to the Common Stock issued or issuable upon conversion thereof. See
"Description of Capital Stock--Registration Rights."

In December 1994, the Company sold 5,413,340 shares of its Series A
Preferred Stock to ESL Incorporated ("ESL"), a subsidiary of TRW Inc., and
various venture capital funds, including

51
<PAGE>

funds which are principal stockholders of the Company and/or are affiliated
with directors of the Company, in a private placement pursuant to which the
Company received $13,240,000 and various promissory notes in the aggregate
principal amount of $3,000,000, bearing interest at a rate of 6.34% per annum.
All principal and interest accrued with respect to the notes has been repaid
to the Company and the notes have been cancelled.

In December 1994, the Company purchased from ESL certain in-process research
and development and assets relating to wireless telecommunications fraud
prevention, including its rights and obligations under a certain Development
and License Agreement with AirTouch Communications, Inc. (the "Acquired
Technology"), in exchange for $6,240,000 and a promissory note in the
principal amount of $3,000,000 bearing interest at a rate of 6.66% per annum
(the "$3,000,000 Note"). In connection with its purchase of the Acquired
Technology, the Company also obtained a perpetual license with respect to
certain trade secrets and know-how related to the Acquired Technology for use
in the fields of wireless telecommunications, transportation and systems
integration (the "License"). The price of the Acquired Technology and the
License was determined based on negotiations between the Company and ESL, and
was not fixed based on a third party's independent appraisal. All principal
and interest with respect to the $3,000,000 Note has been repaid by the
Company and the $3,000,000 Note has been cancelled.

In December 1994, in connection with the purchase of the Acquired
Technology, the Company entered into an Assignment and Assumption Agreement
with ESL providing for the assignment to the Company of and the assumption by
the Company of all of ESL's right, title and interest under a certain lease
with Westminster Management Corporation (the "Lease") with respect to a
certain facility located at 207 East Java Drive in Sunnyvale, California. The
Lease expired on February 15, 1995.

In April 1996, the Company made a loan in the amount of $100,000 to Martin
J. Silver, the Chief Financial Officer of the Company, which loan is
represented by two promissory notes, each in the principal amount of $50,000,
and is secured pursuant to a Deed of Trust by Mr. Silver's residence. Both
promissory notes bear annual interest at the greater of 5.5% or the lowest
applicable federal rate of interest as published by the Internal Revenue
Service. One of the promissory notes is to be forgiven at a rate of 20% per
year on each anniversary date of such note for so long as Mr. Silver continues
to be employed as a full-time employee of the Company, and otherwise the
outstanding principal and accrued interest with respect to such note is due
and payable upon the expiration of the 60-day period following the date Mr.
Silver ceases to be a full-time employee of the Company. The other promissory
note is due and payable upon the earlier of: (i) April 10, 1999; (ii) the
expiration of the 60-day period following the date Mr. Silver ceases to be a
full-time employee of the Company; (iii) the expiration of the 190-day period
following the closing of the Company's initial public offering; (iv) the
expiration of the 10-day period following the date on which Mr. Silver sells
or transfers his residence; or (v) upon the occurrence of certain corporate
transactions. The entire principal amount and accrued interest (other than
amounts forgiven in accordance with the description above) on the loan to Mr.
Silver remains outstanding as of the date hereof.

In November 1996, the Company made a loan in the amount of $200,000 to Mary
Ann Byrnes, the President and Chief Executive Officer of the Company, which
loan is represented by a promissory note and is secured pursuant to a pledge
agreement by 370,101 shares of Common Stock of the Company held by Ms. Byrnes.
The promissory note is due and payable upon the earlier of: (i) November 13,
2000; (ii) the expiration of the 60-day period following the date Ms. Byrnes
ceases to be a full-time employee of the Company; (iii) the expiration of the
190-day period following the closing of the Company's initial public offering;
or (iv) upon the occurrence of certain corporate transactions, and bears
interest at the rate of 7% per annum.

52
<PAGE>

The entire principal amount and accrued interest on the loan to Ms. Byrnes
remains outstanding as of the date hereof.

All of the Company's officers are employed by the Company at will. The
Company has entered into indemnification agreements with each of its directors
and executive officers. See "Management--Limitations on Liability and
Indemnification Matters."

At the request of the Company, the Underwriters have reserved for sale at
the initial public offering price to persons designated by the Company a
number of shares of Common Stock not to exceed five percent of the total
number of shares of Common Stock in this Offering. The number of shares
available for sale to the general public will be reduced to the extent such
persons purchase these shares.

The Company believes that all of the transactions set forth above were made
on terms no less favorable to the Company than could have been obtained from
unaffiliated third parties. The Company expects that all future transactions
between the Company and its officers, directors and principal stockholders and
their affiliates will be approved in accordance with the Delaware General
Corporation Law by a majority of the Board, as well as by a majority of the
independent and disinterested directors, and will be on terms no less
favorable to the Company than could be obtained from unaffiliated third
parties.

53
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of the Common Stock as of June 30, 1997, and as adjusted to reflect
the sale of the shares of the Common Stock offered hereby by the Company, by
(i) all those known by the Company to be beneficial owners of more than 5% of
its outstanding Common Stock, (ii) each Director of the Company, (iii) each of
the Named Executive Officers and (iv) all Directors and executive officers of
the Company as a group.

<TABLE>
<CAPTION>
PERCENTAGE BENEFICIALLY
OWNED(2)
--------------------------------
NAME AND ADDRESS OF BENEFICIAL NUMBER OF
OWNER SHARES(1) PRIOR TO OFFERING AFTER OFFERING
- ------------------------------ --------- ----------------- --------------
<S> <C> <C> <C>
Kleiner Perkins Caufield & 1,702,854 15.8% 13.1%
Byers(3)..........................
2750 Sand Hill Road
Menlo Park, CA 94025
Sevin Rosen Funds(4)............... 1,431,564 13.3% 11.0%
Two Galleria Tower
13455 Noel Road, Suite 1670
Dallas, TX 75240
Norwest Equity Partners(5)......... 1,439,580 13.4% 11.1%
245 Lytton Avenue, Suite 250
Palo Alto, CA 94301
TRW Inc............................ 1,346,568 12.5% 10.4%
1 Federal System Park Drive
Fairfax, VA 22033
Accel Partners(6).................. 647,928 6.0% 5.0%
One Palmer Square
Princeton, NJ 08542
Kevin R. Compton(7)................ 1,710,354 15.9% 13.1%
Mary Ann Byrnes(8)................. 454,520 4.2% 3.5%
Stephen M. Dow(9).................. 1,439,064 13.4% 11.0%
Roland L. Robertson(10)............ 1,346,568 12.5% 10.4%
David H. Ring(11).................. 64,338 * *
Peter L.S. Currie(12).............. 33,334 * *
David G. Thompson(13).............. 109,762 1.0% *
Martin J. Silver(14)............... 120,000 1.1% *
John F. Scott(15).................. 108,001 1.0% *
Walter M. Price(16)................ 66,982 * *
All directors and executive
officers as a group
(14 persons)(17).................. 5,844,802 52.4% 43.6%
</TABLE>
- --------
* Less than 1%

(1) Except as indicated in the footnotes to this table, the persons named in
the table have sole voting and investment power with respect to all
shares of Common Stock shown as beneficially owned by them. Shares of
Common Stock subject to options that are currently exercisable or
exercisable within 60 days of June 30, 1997 are deemed to be outstanding
and to be beneficially owned by the person holding such options for the
purpose of computing the percentage ownership of such person but are not
treated as outstanding for the purpose of computing the percentage
ownership of any other person.
(2) Percentage ownership is calculated pursuant to Commission Rule 13d-
3(d)(1).
(3) Includes 1,693,616 shares held by Kleiner Perkins Caufield & Byers VII
and 9,238 shares held by KPCB Information Sciences Zaibatsu Fund II.
(4) Includes 1,428,230 shares held by Sevin Rosen Fund IV L.P. and 3,334
shares held by Sevin Rosen Bayless Management Company.
(5) Includes 1,066,768 shares held by Norwest Equity Partners, IV and 372,812
shares held by Norwest Equity Partners, V.

54
<PAGE>

(6) Includes 593,498 shares held by Accel IV L.P., 27,862 shares held by
Accel Investors '95 L.P., 12,312 shares held by Accel Keiretsu L.P. and
14,256 shares held by Ellmore C. Patterson Partners.

(7) Includes 1,693,616 shares held by Kleiner Perkins Caufield & Byers VII
and 9,238 shares held by KPCB Information Sciences Zaibatsu Fund II. Mr.
Compton is a Director of the Company and a general partner of each of
Kleiner Perkins Caufield & Byers VII and KPCB Information Sciences
Zaibatsu Fund II. Mr. Compton disclaims beneficial ownership of such
shares except to the extent of his pecuniary interest therein. Also
includes 7,500 shares issuable to Mr. Compton upon the exercise of
options exercisable within 60 days of June 30, 1997.

(8) Includes 75,754 shares issuable upon the exercise of options exercisable
within 60 days of June 30, 1997.

(9) Includes 1,428,230 shares held by Sevin Rosen Fund IV L.P. and 3,334
shares held by Sevin Rosen Bayless Management Company. Mr. Dow is a
Director of the Company, a general partner of SRB Associates IV L.P., the
general partner of Sevin Rosen Fund IV L.P., and an officer of Sevin
Rosen Bayless Management Company. Mr. Dow disclaims beneficial ownership
of such shares except to the extent of his pecuniary interest therein.
Also includes 7,500 shares issuable to Mr. Dow upon the exercise of
options exercisable within 60 days of June 30, 1997.
(10) Includes 1,346,568 shares held by TRW Inc. Mr. Robertson is a Director of
the Company and an officer of TRW Inc. Because Mr. Robertson does not
have voting or dispository control over such shares, he disclaims
beneficial ownership of all of such shares.
(11) Includes 7,526 shares held by Eureka Investments, L.P. and 6,062 shares
held by the David H. Ring Charitable Remainder Unitrust. Mr. Ring is a
Director of the Company, a general partner of Eureka Investments, L.P.
and the trustee of the David H. Ring Charitable Remainder Unitrust. Mr.
Ring disclaims beneficial ownership of the shares held by Eureka
Investments, L.P. and the David H. Ring Charitable Remainder Unitrust
except to the extent of his pecuniary interest therein.

(12) Includes 33,334 shares issuable upon the exercise of options exercisable
within 60 days of June 30, 1997.

(13) Includes 26,627 shares issuable upon the exercise of options exercisable
within 60 days of June 30, 1997.

(14) Includes 20,000 shares issuable upon the exercise of options exercisable
within 60 days of June 30, 1997.

(15) Includes 18,000 shares issuable upon the exercise of options exercisable
within 60 days of June 30, 1997.

(16) Includes 40,315 shares issuable upon the exercise of options exercisable
within 60 days of June 30, 1997.

(17) Includes 380,677 shares issuable upon the exercise of options exercisable
within 60 days of June 30, 1997.

55
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Upon completion of this Offering, the Company will be authorized to issue
75,000,000 shares of Common Stock, $.001 par value per share, of which
approximately 13,012,000 shares will be issued and outstanding, and 10,000,000
shares of undesignated Preferred Stock, $.001 par value per share, of which no
shares will be issued and outstanding.

COMMON STOCK

At June 30, 1997, there were 10,761,992 shares of Common Stock outstanding
and held of record by approximately 120 stockholders. The holders of Common
Stock are entitled to one vote for each share held of record on all matters
submitted to a vote of the stockholders. Subject to preferences that may be
applicable to any outstanding shares of Preferred Stock, holders of Common
Stock are entitled to receive ratably such dividends as may be declared by the
Board out of funds legally available. See "Dividend Policy." All outstanding
shares of Common Stock are fully paid and nonassessable.

PREFERRED STOCK

After completion of this Offering, the Board will have the authority,
without further action by the stockholders, to issue up to 10,000,000 shares
of Preferred Stock in one or more series and to fix the rights, priorities,
preferences, qualifications, limitations and restrictions of such shares,
including dividend rights, conversion rights, voting rights, terms of
redemption, terms of sinking funds, liquidation preferences and the number of
shares constituting any series or the designation of such series, which could
decrease the amount of earnings and assets available for distribution to
holders of Common Stock or adversely affect the rights and powers, including
voting rights, of the holders of the Common Stock. The issuance of Preferred
Stock could have the effect of delaying or preventing a change in control of
the Company or make removal of management more difficult. Additionally, the
issuance of Preferred Stock may have the effect of decreasing the market price
of the Common Stock and may adversely affect the voting and other rights of
the holders of Common Stock.

WARRANTS

In August 1995, in conjunction with a Master Lease Agreement, the Company
issued a warrant to Comdisco, Inc. to purchase 27,073 shares of Common Stock
at $5.91 per share which is exercisable until August 31, 2005. In connection
with the financing of additional equipment under this Master Lease Agreement,
the Company issued an additional warrant to Comdisco, Inc. to purchase 5,834
shares of Common Stock at $6.65 per share which is exercisable until August 5,
2006. Each warrant contains provisions for the adjustment of the exercise
price and the aggregate number of shares issuable upon exercise of the warrant
under certain circumstances, including stock dividends, stock splits,
reorganizations, reclassifications or consolidations. Each warrant provides
that the warrant holder may exercise the warrant without payment of cash by
surrendering the warrant and receiving shares of Common Stock equal to the
value of the warrant surrendered.

In July 1996, the Company issued warrants to Comdisco, Inc. and MMC/GATX
Partnership No. 1 to purchase 50,000 and 75,000 shares of Common Stock,
respectively, at $6.65 per share which are exercisable before July 31, 2006.
These warrants contain provisions for the adjustment of the exercise price and
the aggregate number of shares issuable upon exercise of the warrant under
certain circumstances, including stock dividends, stock splits,
reorganizations, reclassifications or consolidations. Each warrant provides
that the warrant holder may exercise

56
<PAGE>

the warrant without payment of cash by surrendering the warrant and receiving
shares of Common Stock equal to the value of the warrant surrendered.

REGISTRATION RIGHTS

The holders of approximately 9,433,000 shares of Common Stock or their
permitted transferees (the "Holders") are entitled to certain rights with
respect to the registration of such shares under the Securities Act. Under the
terms of agreements between the Company and such Holders, if the Company
proposes to register any of its securities under the Securities Act for its
own account, such Holders are entitled to notice of such registration and are
entitled to include shares of such Common Stock therein, provided, among other
conditions, that the underwriters of any such offering have the right to limit
the number of shares included in such registration in certain ways. In
addition, Holders of at least 33% of approximately 9,433,000 shares of Common
Stock with demand registration rights may require the Company to prepare and
file a registration statement under the Securities Act with respect to the
shares entitled to demand registration rights, and provided that the aggregate
offering price, net of underwriting discounts and commissions, exceeds $2.5
million, the Company is required to use its best efforts to effect such
registration, subject to certain conditions and limitations. The Company is
not obligated to effect more than two of these stockholder-initiated
registrations nor to effect such a registration until six months after this
Offering. The Holders of approximately 9,433,000 shares of Common Stock may
also request the Company to register such shares on Form S-3 provided the
shares registered have an aggregate market value of at least $1.0 million. The
Company is not obligated to effect more than two of these registrations
pursuant to Form S-3 per year. Generally, the Company is required to bear the
expense of all such registrations. The registration rights of the Holders
expire on the fifth anniversary of the effective date of this Offering. All
rights of the Holders to require registration of the resale of their shares in
connection with this Offering have been waived. In addition, holders of
warrants to purchase approximately 125,000 shares of Common Stock have similar
registration rights (other than demand registration rights) for the Common
Stock underlying such warrants.

POSSIBLE ANTITAKEOVER EFFECTS OF CERTAIN CHARTER PROVISIONS

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION AND RESTATED BYLAWS. The
Company's Amended and Restated Certificate of Incorporation authorizes the
Board to establish one or more series of undesignated Preferred Stock, the
terms of which can be determined by the Board at the time of issuance. See "--
Preferred Stock." The Amended and Restated Certificate of Incorporation also
provides that all stockholder action must be effected at a duly called meeting
of stockholders and not by a consent in writing. The Company's Restated Bylaws
provide that the Company's Board will be classified into three classes of
Directors beginning at the 1998 annual meeting of stockholders. See
"Management--Executive Officers and Directors." In addition, the Restated
Bylaws will not permit stockholders of the Company to call a special meeting
of stockholders; only the Company's Chief Executive Officer, President,
Chairman of the Board or a majority of the Board will be permitted to call a
special meeting of stockholders. The Restated Bylaws will also require that
stockholders give advance notice to the Company's secretary of any nominations
for Director or other business to be brought by stockholders at any
stockholders' meeting and will require a supermajority vote of members of the
Board and/or stockholders to amend certain Bylaw provisions. These provisions
of the Amended and Restated Certificate of Incorporation and the Restated
Bylaws could discourage potential acquisition proposals and could delay or
prevent a change in control of the Company. Such provisions may also have the
effect of preventing changes in the management of the Company. See "Risk
Factors--Antitakeover Effects of Charter, Bylaws and Delaware Law."

57
<PAGE>

DELAWARE TAKEOVER STATUTE. The Company is subject to Section 203 of the
Delaware General Corporation Law ("Section 203") which, subject to certain
exceptions, prohibits a Delaware corporation from engaging in any business
combination with any interested stockholder (defined as any person or entity
that is the beneficial owner of at least 15% of a corporation's voting stock)
for a period of three years following the time that such stockholder became an
interested stockholder, unless: (i) prior to such time, the board of directors
of the corporation approved either the business combination or the transaction
that resulted in the stockholder's becoming an interested stockholder; (ii)
upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced, excluding, for purposes of determining the number of
shares outstanding, those shares owned (x) by persons who are directors and
also officers and (y) by employee stock plans in which employee participants
do not have the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer; or (iii) at or
subsequent to such time, the business combination is approved by the Board and
authorized at an annual or special meeting of stockholders, and not by written
consent, by the affirmative vote of at least two-thirds of the outstanding
voting stock that is not owned by the interested stockholder.

Section 203 defines business combination to include: (i) any merger or
consolidation involving the corporation and the interested stockholder; (ii)
any sale, lease, exchange, mortgage, transfer, pledge or other disposition
involving the interested stockholder and 10% or more of the assets of the
corporation; (iii) subject to certain exceptions, any transaction which
results in the issuance or transfer by the corporation of any stock of the
corporation to the interested stockholder; (iv) any transaction involving the
corporation that has the effect of increasing the proportionate share of the
stock of any class or series of the corporation beneficially owned by the
interested stockholder; or (v) the receipt by the interested stockholder of
the benefit of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is BankBoston, N.A.

58
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this Offering, the Company will have approximately
13,012,000 shares of Common Stock outstanding (assuming no exercise of options
or other convertible securities or issuances of Common Stock subsequent to
March 31, 1997). The 2,250,000 shares sold in this Offering will be freely
tradeable without restriction or further registration under the Securities
Act, except that any shares purchased by "affiliates" of the Company, as that
term is defined in Rule 144 under the Securities Act ("Affiliates"), may
generally be sold only in compliance with certain of the limitations of Rule
144 described below.

The remaining approximately 10,762,000 shares of Common Stock are deemed
"Restricted Shares" under Rule 144. Subject to the lockup restrictions
described below, (i) approximately 334,000 Restricted Shares will be eligible
for sale in the public market immediately after this Offering pursuant to Rule
144(k) under the Securities Act, and (ii) approximately 7,737,000 additional
Restricted Shares will be eligible for sale in the public market in accordance
with Rule 144 or Rule 701 under the Securities Act beginning 90 days after the
date of this Prospectus. The holders of approximately 10,756,000 Restricted
Shares have agreed not to sell or otherwise dispose of any of their shares for
a period of 180 days after the date of this Prospectus without Deutsche Morgan
Grenfell Inc.'s prior written consent. Deutsche Morgan Grenfell Inc. may, in
its sole discretion, and at any time without notice, release all or any
portion of the Restricted Shares subject to lock-up agreements.

Upon expiration of the lock-up agreements 180 days after the date of this
Prospectus, approximately 10,496,000 shares of Common Stock will be available
for sale in the public market; the remaining approximately 266,000 shares will
become eligible for sale under Rule 144 at various dates thereafter as the
holding period provisions of Rule 144 are satisfied.

In general, under Rule 144, beginning approximately 90 days after the
effective date of the Registration Statement of which this Prospectus is a
part, a stockholder, including an Affiliate, who has beneficially owned his or
her restricted securities (as that term is defined in Rule 144) for at least
one year from the later of the date such securities were acquired from the
Company or (if applicable) the date they were acquired from an Affiliate is
entitled to sell, within any three-month period, a number of such shares that
does not exceed the greater of 1% of the then outstanding shares of Common
Stock (approximately 130,000 shares immediately after this Offering) or the
average weekly trading volume in the Common Stock during the four calendar
weeks preceding the date on which notice of such sale was filed under Rule
144, provided certain requirements concerning availability of public
information, manner of sale and notice of sale are satisfied. In addition,
under Rule 144(k), if a period of at least two years has elapsed between the
later of the date restricted securities were acquired from the Company or (if
applicable) the date they were acquired from an Affiliate of the Company, a
stockholder who is not an Affiliate of the Company at the time of sale and has
not been an Affiliate of the Company for at least three months prior to the
sale is entitled to sell the shares immediately without compliance with the
foregoing requirements of Rule 144.

Securities issued in reliance on Rule 701 (such as shares of Common Stock
that may be acquired pursuant to the exercise of certain options granted prior
to this Offering) are also restricted securities and, beginning 90 days after
the date of this Prospectus, may be sold by stockholders other than Affiliates
of the Company subject only to the manner of sale provisions of Rule 144 and
by an Affiliate under Rule 144 without compliance with its one-year holding
period requirement.

Prior to this Offering, there has been no public market for the Common
Stock. No prediction can be made as to the effect, if any, that market sales
of shares or the availability of shares for

59
<PAGE>

sale will have on the market price of the Common Stock prevailing from time to
time. The Company is unable to estimate the number of shares that may be sold
in the public market pursuant to Rule 144, since this will depend on the
market price of the Common Stock, the personal circumstances of the sellers
and other factors. Nevertheless, sales of significant amounts of the Common
Stock of the Company in the public market could adversely affect the market
price of the Common Stock and could impair the Company's ability to raise
capital through an offering of its equity securities.

In addition, the Company intends to register on the effective date of this
Offering a total of approximately 1,338,000 shares of Common Stock subject to
outstanding options or reserved for issuance under the Plan and approximately
167,000 shares of Common Stock reserved for issuance under the Purchase Plan.
Further, upon expiration of the lock-up agreements described above, holders of
approximately 9,433,000 shares of Common Stock will be entitled to certain
registration rights with respect to such shares. If such holders, by
exercising their registration rights, cause a large number of shares to be
registered and sold in the public market, such sales could have a material
adverse effect on the market price for the Common Stock.

60
<PAGE>

UNDERWRITING

The Underwriters named below, for whom Deutsche Morgan Grenfell Inc.,
Hambrecht & Quist LLC and Wessels, Arnold & Henderson, L.L.C. are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions contained in the Underwriting Agreement (the form of
which will be filed as an exhibit to the Company's Registration Statement, of
which this Prospectus is a part), to purchase from the Company the respective
number of shares of Common Stock indicated below opposite their respective
names. The Underwriters are committed to purchase all of the shares, if they
purchase any.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Deutsche Morgan Grenfell Inc.......................................
Hambrecht & Quist LLC..............................................
Wessels, Arnold & Henderson, L.L.C.................................
---------
Total............................................................ 2,250,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to approval of certain legal matters by
counsel and to various other conditions.

The Representatives have advised the Company that the Underwriters propose
initially to offer the Common Stock to the public on the terms set forth on
the cover page of this Prospectus. The Underwriters may allow to selected
dealers (who may include the Underwriters) a concession of not more than $
per share. The selected dealers may reallow a concession of not more than $
per share to certain other dealers. After the initial public offering, the
price and concessions and re-allowances to dealers and other selling terms may
be changed by the Representatives. The Common Stock is offered subject to
receipt and acceptance by the Underwriters, and to certain other conditions,
including the right to reject orders in whole or in part. The Underwriters do
not intend to sell any of the shares of Common Stock offered hereby to
accounts for which they exercise discretionary authority.

The Company has granted an option to the Underwriters to purchase up to a
maximum of 337,500 additional shares of Common Stock to cover over-allotments,
if any, at the initial public offering price, less the underwriting discount
set forth on the cover page of this Prospectus. Such option may be exercised
at any time until 30 days after the date of the Underwriting Agreement. To the
extent the Underwriters exercise this option, each of the Underwriters will be
committed, subject to certain conditions, to purchase such additional shares
in approximately the same proportion as set forth in the above table. The
Underwriters may purchase such shares only to cover over-allotments made in
connection with this Offering.

In connection with this Offering, the Company and the Directors, executive
officers and certain stockholders have agreed not to offer or sell any Common
Stock until the expiration of 180 days following the date of the final
Prospectus without the prior written consent of Deutsche Morgan Grenfell Inc.

61
<PAGE>

The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain liabilities, including civil liabilities
under the Securities Act or will contribute to payments the Underwriters may
be required to make in respect thereof.

Prior to this Offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiation
between the Company and the Representatives. The principal factors to be
considered in determining the initial public offering price include the
information set forth in this Prospectus and otherwise available to the
Representatives; the history and the prospects for the industry in which the
Company will compete; the ability of the Company's management; the prospects
for future earnings of the Company; the present state of the Company's
development and its current financial condition; the general condition of the
securities markets at the time of this Offering; and the recent market prices
of, and the demand for, publicly traded common stock of generally comparable
companies. Each of the Representatives has informed the Company that it
currently intends to make a market in the shares subsequent to the
effectiveness of this Offering, but there can be no assurance that the
Representatives will take any action to make a market in any securities of the
Company.

In October 1996, the Company issued 37,273 shares of Series C Preferred
Stock to Hambrecht & Quist California which will be converted into 24,849
shares of Common Stock upon completion of this Offering. Hambrecht & Quist
California is an affiliate of Hambrecht & Quist LLC. In October 1996, the
Company issued 8,181 shares of Series C Preferred Stock to certain employees
of Hambrecht & Quist LLC which will be converted into 5,454 shares of Common
Stock upon completion of this Offering. Such shares were issued as part of the
Company's private placement of 3,637,272 shares of Series C Preferred Stock at
$5.50 per share.

Certain persons participating in this Offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the
open market, including by entering stabilizing bids, effecting syndicate
covering transactions or imposing penalty bids. A stabilizing bid means the
placing of any bid or effecting of any purchase for the purpose of pegging,
fixing or maintaining the price of the Common Stock. A syndicate covering
transaction means the placing of any bid on behalf of the underwriting
syndicate or the effecting of any purchase to reduce a short position created
in connection with this Offering. A penalty bid means an arrangement that
permits the Underwriters to reclaim a selling concession from a syndicate
member in connection with this Offering when shares of Common Stock sold by
the syndicate member are purchased in syndicate covering transactions. Such
transactions may be effected on the Nasdaq Stock Market, in the over-the-
counter market, or otherwise. Such stabilizing, if commenced, may be
discontinued at any time.

62
<PAGE>

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Brobeck, Phleger & Harrison LLP, San Diego, California. Certain
legal matters in connection with this Offering will be passed upon for the
Underwriters by Wilson Sonsini Goodrich & Rosati, Professional Corporation,
Palo Alto, California. Certain attorneys of Brobeck, Phleger & Harrison LLP
own 5,436 shares of the Company's Common Stock.

EXPERTS

The financial statements and schedule of Corsair Communications, Inc. as of
December 31, 1995 and 1996, and for the period from December 5, 1994
(inception) to December 31, 1994 and for each of the years in the two-year
period ended December 31, 1996, have been included in this Prospectus and
Registration Statement in reliance upon the reports of KPMG Peat Marwick LLP,
independent accountants, appearing elsewhere herein and in the Registration
Statement, and upon the authority of said firm as experts in accounting and
auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission the Registration Statement under
the Securities Act with respect to the Common Stock offered hereby. This
Prospectus, which is part of the Registration Statement, does not contain all
of the information set forth in the Registration Statement and the exhibits
and schedules filed therewith. For further information with respect to the
Company and the Common Stock offered hereby, reference is hereby made to such
Registration Statement and to the exhibits and schedules filed therewith.
Statements contained in this Prospectus regarding the contents of any contract
or other document are not necessarily complete, and in each instance reference
is made to the copy of such contract or document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respect by
such reference. The Registration Statement, including the exhibits and
schedules thereto, may be inspected without charge at the principal office of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
regional offices of the Commission located at Seven World Trade Center, Suite
1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661, and copies of all of any part thereof may
be obtained at prescribed rates from the Commission's Public Reference Section
at such addresses. Also, the Commission maintains a World Wide Web site on the
Internet at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file
electronically with the Commission. Upon approval of the Common Stock for
quotation on the Nasdaq National Market, such reports, proxy and information
statements and other information also can be inspected at the office of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.

63
<PAGE>

CORSAIR COMMUNICATIONS, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report.............................................. F-2
Balance Sheets as of December 31, 1995 and 1996 and June 30, 1997 (unau-
dited)................................................................... F-3
Statements of Operations for the Period from December 5, 1994 (inception)
to December 31, 1994 and for the Years Ended December 31, 1995 and 1996
and the Six Months Ended June 30, 1996 and 1997 (unaudited).............. F-4
Statements of Stockholders' Equity for the Period from December 5, 1994
(inception) to December 31, 1994 and for the Years Ended December 31,
1995 and 1996 and the Six Months Ended June 30, 1997 (unaudited)......... F-5
Statements of Cash Flows for the Period from December 5, 1994 (inception)
to December 31, 1994 and for the Years Ended December 31, 1995 and 1996
and the Six Months Ended June 30, 1996 and 1997 (unaudited).............. F-6
Notes to Financial Statements............................................. F-7
</TABLE>

F-1
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
Corsair Communications, Inc.:

We have audited the accompanying balance sheets of Corsair Communications,
Inc. as of December 31, 1995 and 1996, and the related statements of
operations, stockholders' equity, and cash flows for the period from December
5, 1994 (inception) to December 31, 1994 and for each of the years in the two-
year period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Corsair Communications,
Inc. as of December 31, 1995 and 1996, and the results of its operations and
its cash flows for the period from December 5, 1994 (inception) to December
31, 1994 and for each of the years in the two-year period ended December 31,
1996, in conformity with generally accepted accounting principles.

KPMG PEAT MARWICK LLP

San Francisco, California

March 7, 1997, except as to
Note 9 which is as of June
13, 1997

F-2
<PAGE>

CORSAIR COMMUNICATIONS, INC.

BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PRO FORMA
DECEMBER 31, JUNE 30,
------------------ JUNE 30, 1997
1995 1996 1997 (NOTE 2)
-------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........ $ 7,072 $ 17,052 $ 10,500 $ 10,500
Short-term investments........... 1,957 2,452 9,786 9,786
Trade accounts receivable, less
allowance for doubtful accounts
of $404 for 1995 and 1996 and
$451 for 1997................... 807 3,260 2,964 2,964
Other receivables................ 15 43 159 159
Evaluation inventory............. -- 5,328 6,231 6,231
Inventories, net................. 2,212 3,970 5,087 5,087
Prepaid expenses................. 113 83 687 687
-------- -------- -------- --------
Total current assets........... 12,176 32,188 35,414 35,414
Property and equipment, net........ 1,814 2,424 2,815 2,815
Other assets....................... 166 299 365 365
-------- -------- -------- --------
$ 14,156 $ 34,911 $ 38,594 $ 38,594
======== ======== ======== ========

LIABILITIES AND
STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable................. $ 338 $ 3,428 $ 1,270 $ 1,270
Accrued expenses................. 722 2,502 3,240 3,240
Notes payable--current portion... 222 1,803 1,905 1,905
Current portion of obligations
under capital leases............ 44 286 379 379
Deferred revenue................. 1,083 4,487 11,101 11,101
-------- -------- -------- --------
Total current liabilities...... 2,409 12,506 17,895 17,895
Notes payable...................... 666 3,780 2,889 2,889
Obligations under capital leases,
net of current portion............ 109 614 600 600
Other long-term liabilities........ 380 -- -- --
-------- -------- -------- --------
Total liabilities.............. 3,564 16,900 21,384 21,384
-------- -------- -------- --------
Commitments and contingencies
Stockholders' equity:
Convertible preferred stock,
$.001 par value; 14,548,963
shares authorized; 6,741,424,
9,166,288, and 9,432,956 shares
issued and outstanding,
respectively; aggregate
liquidation preference of
$48,174 as of June 30, 1997;
none issued or outstanding on a
pro forma basis................. 7 9 9 --
Common stock, $.001 par value;
20,000,000 shares authorized;
50,750, 604,094, and 1,329,036
shares issued and outstanding,
respectively; 10,761,992 shares
issued and outstanding on a pro
forma basis..................... -- 1 2 11
Note receivable from stockhold-
er.............................. -- (136) (136) (136)
Additional paid-in capital....... 25,044 45,426 49,951 49,951
Deferred compensation............ -- (69) (960) (960)
Accumulated deficit.............. (14,459) (27,220) (31,656) (31,656)
-------- -------- -------- --------
Total stockholders' equity..... 10,592 18,011 17,210 17,210
-------- -------- -------- --------
$ 14,156 $ 34,911 $ 38,594 $ 38,594
======== ======== ======== ========
</TABLE>
See accompanying notes to financial statements.

F-3
<PAGE>

CORSAIR COMMUNICATIONS, INC.

STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 5, 1994 YEAR ENDED SIX MONTHS ENDED
(INCEPTION) TO DECEMBER 31, JUNE 30,
DECEMBER 31, ----------------- ------------------
1994 1995 1996 1996 1997
---------------- ------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
System revenue........ $ -- $ 7,351 $ 18,178 $ 4,437 $ 18,302
Service revenue....... -- 242 1,428 455 2,018
------- ------- -------- -------- --------
Total revenues...... -- 7,593 19,606 4,892 20,320
------- ------- -------- -------- --------
Cost of revenues:
System revenue costs.. -- 7,522 17,235 4,672 14,967
Service revenue
costs................ -- 615 1,962 771 1,536
------- ------- -------- -------- --------
Total cost of reve-
nues............... -- 8,137 19,197 5,443 16,503
------- ------- -------- -------- --------
Gross profit (defi-
cit)............... -- (544) 409 (551) 3,817
------- ------- -------- -------- --------
Operating costs and ex-
penses:
Research and develop-
ment................. 507 3,094 4,983 2,142 2,994
Sales and marketing... 62 2,981 5,374 2,031 3,331
General and adminis-
trative.............. 498 2,115 2,591 1,206 1,968
Write-off of in-
process research and
development.......... 4,894 -- -- -- --
------- ------- -------- -------- --------
Total operating
costs and
expenses........... 5,961 8,190 12,948 5,379 8,293
------- ------- -------- -------- --------
Operating loss...... (5,961) (8,734) (12,539) (5,930) (4,476)
Interest income (ex-
pense), net............ 20 218 (220) 55 43
------- ------- -------- -------- --------
Loss before income
taxes.............. (5,941) (8,516) (12,759) (5,875) (4,433)
Income taxes............ 1 1 2 -- 3
------- ------- -------- -------- --------
Net loss............ $(5,942) $(8,517) $(12,761) $(5,875) $(4,436 )
======= ======= ======== ======== ========
Pro forma net loss per
share data (Note 2):
Pro forma net loss per
share................ $ (1.44) $ (0.69) $ (0.40)
======== ======== ========
Shares used in per
share computation.... 8,870 8,499 10,962
======== ======== ========
</TABLE>

See accompanying notes to financial statements.

F-4
<PAGE>

CORSAIR COMMUNICATIONS, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY

PERIOD FROM DECEMBER 5, 1994 (INCEPTION) TO JUNE 30, 1997

(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
CONVERTIBLE NOTES
PREFERRED STOCK COMMON STOCK RECEIVABLE ADDITIONAL TOTAL
---------------- ---------------- FROM PAID-IN DEFERRED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT STOCKHOLDER CAPITAL COMPENSATION DEFICIT EQUITY
--------- ------ --------- ------ ----------- ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of Series A
convertible preferred
stock, net of issuance
costs of $25 . 4,066,772 $ 4 -- $-- $(3,000) $12,171 $ -- $ -- $ 9,175
Issuance of Series A
convertible preferred
stock in conjunction
with asset purchase
agreement............. 1,346,568 1 -- -- -- 4,039 -- -- 4,040
Net loss............... -- -- -- -- -- -- -- (5,942) (5,942)
--------- ---- --------- ---- ------- ------- ------ -------- --------
Balances as of December
31, 1994.............. 5,413,340 5 -- -- (3,000) 16,210 -- (5,942) 7,273
Collection of
stockholders' notes... -- -- -- -- 3,000 -- -- -- 3,000
Exercise of common
stock options......... -- -- 50,750 -- -- 15 -- -- 15
Issuance of convertible
preferred stock
warrants in
conjunction with debt
financings............ -- -- -- -- -- 30 -- -- 30
Issuance of Series B
convertible preferred
stock, net of issuance
costs of $34 . 1,328,084 2 -- -- -- 8,789 -- -- 8,791
Net loss............... -- -- -- -- -- -- -- (8,517) (8,517)
--------- ---- --------- ---- ------- ------- ------ -------- --------
Balances as of December
31, 1995.............. 6,741,424 7 50,750 -- -- 25,044 -- (14,459) 10,592
Exercise of common
stock options......... -- -- 553,344 1 (136) 230 -- -- 95
Issuance of convertible
preferred stock
warrants in
conjunction with debt
financings............ -- -- -- -- -- 131 -- -- 131
Issuance of Series C
convertible preferred
stock, net of issuance
costs of $56 . 2,424,864 2 -- -- -- 19,948 -- -- 19,950
Deferred compensation
related to grant of
stock options......... -- -- -- -- -- 73 (73) -- --
Amortization of
deferred
compensation.......... -- -- -- -- -- -- 4 -- 4
Net loss............... -- -- -- -- -- -- -- (12,761) (12,761)
--------- ---- --------- ---- ------- ------- ------ -------- --------
Balances as of December
31, 1996.............. 9,166,288 9 604,094 1 (136) 45,426 (69) (27,220) 18,011
Deferred compensation
related to grant of
stock options
(unaudited)........... -- -- -- -- -- 1,129 (1,129) -- --
Amortization of
deferred compensation
(unaudited)........... -- -- -- -- -- -- 238 -- 238
Exercise of common
stock options
(unaudited)........... -- -- 724,942 1 -- 399 -- -- 400
Issuance of Series D
convertible preferred
stock, net of issuance
costs of $3
(unaudited)........... 266,668 -- -- -- -- 2,997 -- -- 2,997
Net loss (unaudited)... -- -- -- -- -- -- -- (4,436) (4,436)
--------- ---- --------- ---- ------- ------- ------ -------- --------
Balances as of June 30,
1997 (unaudited)...... 9,432,956 $ 9 1,329,036 $ 2 $ (136) $49,951 $ (960) $(31,656) $ 17,210
========= ==== ========= ==== ======= ======= ====== ======== ========
</TABLE>

See accompanying notes to financial statements.

F-5
<PAGE>

CORSAIR COMMUNICATIONS, INC.

STATEMENTS OF CASH FLOWS
(In thousands)

<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 5, 1994 YEAR ENDED SIX MONTHS ENDED
(INCEPTION) TO DECEMBER 31, JUNE 30,
DECEMBER 31, ----------------- -----------------
1994 1995 1996 1996 1997
---------------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operat-
ing activities:
Net loss............... $(5,942) $(8,517) $(12,761) $(5,875) $(4,436)
Adjustments to recon-
cile net loss to net
cash used in operating
activities:
Depreciation and amor-
tization.............. 8 472 1,013 453 712
Write-off of in proc-
ess research and de-
velopment............. 4,894 -- -- -- --
Amortization of de-
ferred compensation... -- -- 4 -- 238
Loss on disposition of
fixed assets.......... -- -- -- -- 100
Changes in operating
assets and liabili-
ties:
Trade accounts re-
ceivable............. -- (808) (2,453) (418) 296
Other receivables..... -- -- (28) (38) (116)
Inventories........... -- 1,551 (7,086) (3,440) (2,020)
Prepaid expenses and
other assets......... (18) (162) (78) (49) (690)
Accounts payable and
accrued expenses..... 905 302 4,870 2,686 (1,420)
Deferred revenue...... -- 1,423 3,024 16 6,614
------- ------- -------- ------- --------
Net cash used in op-
erating activities.. (153) (5,739) (13,495) (6,665) (722)
------- ------- -------- ------- --------
Cash flows from invest-
ing activities:
Purchase of short-term
investments........... -- (1,957) (2,452) -- (13,260)
Proceeds from
sales/maturity of
short-term invest-
ments................. -- -- 1,957 1,957 5,926
Purchases of property
and equipment......... (3) (1,528) (605) (84) (889)
------- ------- -------- ------- --------
Net cash (used in)
provided by invest-
ing activities...... (3) (3,485) (1,100) 1,873 (8,223)
------- ------- -------- ------- --------
Cash flows from financ-
ing activities:
Proceeds from sale of
preferred stock, net
of offering costs..... 13,215 8,791 19,950 -- 2,997
Proceeds from exercise
of common stock op-
tions................. -- 15 95 3 400
Proceeds from notes
payable............... -- 970 4,925 -- --
Proceeds from issuance
of warrants........... -- 30 131 -- --
Principal payments on
note payable.......... -- (82) (230) (100) (789)
Principal payments on
capital lease......... -- (12) (232) (58) (215)
Loan to stockholder.... -- -- (64) -- --
Repayment of notes pay-
able to ESL Incorpo-
rated................. -- (3,235) -- -- --
Payment to ESL Incorpo-
rated for asset pur-
chase................. (6,240) -- -- -- --
Proceeds from note re-
ceivable from stock-
holders............... -- 3,000 -- -- --
------- ------- -------- ------- --------
Net cash provided by
(used in) financing
activities.......... 6,975 9,477 24,575 (155) 2,393
------- ------- -------- ------- --------
Net increase (decrease)
in cash and cash equiv-
alents................. 6,819 253 9,980 (4,947) (6,552)
Cash and cash equiva-
lents, beginning of
year/period............ -- 6,819 7,072 7,072 17,052
------- ------- -------- ------- --------
Cash and cash equiva-
lents, end of
year/period............ $ 6,819 $ 7,072 $ 17,052 $ 2,125 $ 10,500
======= ======= ======== ======= ========
Supplemental disclosures
of cash flow informa-
tion:
Cash paid during the
year/period:
Interest............... $ 10 $ 112 $ 458 $ 62 $ 431
======= ======= ======== ======= ========
Income taxes........... $ -- $ 1 $ 2 $ -- $ 3
======= ======= ======== ======= ========
Noncash financing and
investing activities:
Issuance of note pay-
able to ESL Incorpo-
rated................. $ 3,000 $ -- $ -- $ -- $ --
======= ======= ======== ======= ========
Receipt of note re-
ceivable from stock-
holders............... $ 3,000 $ -- $ -- $ -- $ --
======= ======= ======== ======= ========
Assets acquired
through capital
lease................. $ -- $ 165 $ 979 $ 402 $ 294
======= ======= ======== ======= ========
Common stock issued
upon exercise of
stock options in ex-
change for stock-
holder note........... $ -- $ -- $ 136 $ -- $ --
======= ======= ======== ======= ========
Deferred compensation
relating to stock op-
tion grants........... $ -- $ -- $ 73 $ -- $ 1,129
======= ======= ======== ======= ========
</TABLE>
See accompanying notes to financial statements.

F-6
<PAGE>

CORSAIR COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1995 AND 1996

(INFORMATION AS OF JUNE 30, 1996 AND 1997 AND FOR THE

SIX MONTHS THEN ENDED IS UNAUDITED)

1. BUSINESS

Corsair Communications, Inc. (the Company) was incorporated in the state of
Delaware in December 1994 to develop an open architecture hardware and
software system that can serve as a platform for the delivery of multiple
products and services to the wireless telecommunications industry. The Company
sells and markets its products to wireless telecommunications carriers
domestically and internationally.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Pro Forma Balance Sheet

In May 1997, the Company's Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission (SEC)
permitting the Company to sell shares of its common stock in connection with a
proposed initial public offering (IPO). If this Offering is consummated under
the terms and at the pricing presently anticipated, all the currently
outstanding preferred stock will automatically convert to common stock upon
the closing of the IPO, and the number of shares of preferred and common stock
authorized will change to 10,000,000 and 75,000,000, respectively. The effect
of the above transactions has been reflected in the accompanying pro forma
balance sheet as of June 30, 1997.

Revenue Recognition

System revenue is comprised of hardware sales and software licensing, net of
estimated allowances. Revenue from hardware sales is recognized upon
commissioning of the product (the activation of the cell site equipment,
following testing, integration and implementation), unless a sales agreement
contains specific acceptance criteria, in which case hardware revenue is
recognized upon achievement of such criteria. Revenue from the licensing of
system software, which includes post-contract customer support and certain
product enhancements, is recognized ratably over the term of the license
period.

Service revenue is comprised of field maintenance and other services.
Revenue from field maintenance contracts is recognized ratably over the term
of the maintenance period. Revenue from other sources is recognized as the
services are performed.

Deferred revenue primarily includes deferred software license and
maintenance revenue and deposits received from customers after shipment but
prior to installation of systems.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentrations
of credit risk principally consist of cash, cash equivalents, short-term
investments, and accounts receivable.

The Company limits the amounts invested in any one type of investment. The
Company maintains its cash investments with several financial institutions.
Management believes the financial risks associated with such deposits are
minimal.

The Company has historically sold its products directly to wireless
telecommunications carriers. Sales generally are not collateralized, credit
evaluations are performed as appropriate, and allowances are provided for
estimated credit losses. The Company has not experienced significant losses on
trade receivables from any particular customer or geographic region.

F-7
<PAGE>

CORSAIR COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AS OF JUNE 30, 1996 AND 1997 AND FOR

THE SIX MONTHS THEN ENDED IS UNAUDITED)

Cash Equivalents and Short-Term Investments

Cash equivalents consist of instruments with remaining maturities of 90 days
or less at the date of acquisition. Certain cash equivalents and all of the
Company's investments are classified as available-for-sale under the
provisions of Statement of Financial Accounting Standards (SFAS) No. 115,
ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. The
securities are carried at fair value which approximates cost. To date, the
fair value of the securities has not differed significantly from the cost
basis of the securities.

The amortized cost of available-for-sale debt securities is adjusted for
amortization of premiums and accretion of discounts to maturity. Realized
gains and losses, and declines in value judged to be other than temporary on
available-for-sale securities, if any, are included in interest income, net.
The cost of securities sold is based on the specific identification method.
Interest and dividends on securities classified as available-for-sale are
included in interest income, net.

Investments, all of which are debt securities maturing in one year or less
as of December 31, 1996 and are classified as available-for-sale, consisted of
the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
------ ------
<S> <C> <C>
Commercial paper............................................ $ -- $3,955
U.S. Treasury notes......................................... 3,947 --
Certificates of Deposit..................................... -- 525
------ ------
$3,947 $4,480
====== ======
</TABLE>

Included in short-term investments as of December 31, 1996 is $480,000 in a
restricted access account as required under a special sale agreement.

Inventories

Inventories are stated at the lower of cost, on a first-in, first-out basis,
or market.

Evaluation inventory is comprised of finished hardware units (stated at the
lower of cost or market) delivered to a customer which are pending
commissioning of the product.

Property and Equipment

Property and equipment are recorded at cost. Equipment under capital leases
is stated at the present value of minimum lease payments at the inception of
the lease. Depreciation is calculated under the straight-line method over the
estimated useful lives of the assets, generally three to five years. Equipment
held under capital leases is amortized over the shorter of the lease term or
the estimated useful life of the asset. Leasehold improvements are amortized
on a straight-line method over the shorter of the lease term or the estimated
useful life of the asset.

Software Research and Development Costs

All costs incurred to establish the technological feasibility of software
are expensed as incurred. Costs incurred subsequent to establishing
technological feasibility are capitalized and amortized on a straight-line
basis over their estimated useful lives. The Company determines that
technological feasibility has been established once a product design and
working model

F-8
<PAGE>

CORSAIR COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AS OF JUNE 30, 1996 AND 1997 AND FOR

THE SIX MONTHS THEN ENDED IS UNAUDITED)

have been completed and tested. No software research and development costs
have been capitalized to date as such amounts have not been significant.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years that those temporary
differences are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income in
the period that includes the enactment date.

Use of Estimates

The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

The Company adopted the provisions of SFAS No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,
on January 1, 1996. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which
the carrying amount of the assets exceed the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying amount or fair
value less costs to sell. The adoption of SFAS No. 121 did not have a material
impact on the Company's financial position, results of operations, or
liquidity.

Pro Forma Net Loss Per Share

Pro forma net loss per share data is based on the weighted-average number of
shares of common stock and common equivalent shares from stock options and
warrants outstanding, using the treasury stock method, and convertible
preferred stock on an "as if converted" basis.

Pursuant to certain SEC Staff Accounting Bulletins, common stock and
convertible preferred stock issued for consideration below the assumed IPO
price and stock options granted and warrants issued with exercise prices below
the assumed IPO price during the 12-month period prior to the date of the
initial filing of the registration statement, even when antidilutive, have
been included in the calculation of pro forma net loss per share, using the
treasury stock

F-9
<PAGE>

CORSAIR COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AS OF JUNE 30, 1996 AND 1997 AND FOR

THE SIX MONTHS THEN ENDED IS UNAUDITED)

method based on the assumed IPO price, as if they were outstanding for all
periods presented prior to their issuance or grant.

The Financial Accounting Standards Board recently issued SFAS No. 128,
EARNINGS PER SHARE. SFAS No. 128 requires the presentation of basic earnings
per share (EPS) and, for companies with complex capital structures, diluted
EPS. SFAS No. 128 is effective for annual and interim periods ending after
December 15, 1997. The Company expects that for profitable periods basic EPS
will be higher than earnings per share as presented in the accompanying
financial statements and diluted EPS will not differ materially from earnings
per share as presented in the accompanying financial statements. Computations
for loss periods should not change significantly.

Interim Financial Statements

The accompanying unaudited financial statements as of and for the six months
ended June 30, 1996 and 1997, have been prepared on substantially the same
basis as the audited financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial information set forth therein.

3. BALANCE SHEET AND STATEMENT OF OPERATIONS COMPONENTS

Inventories

Inventories consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
------------- JUNE 30,
1995 1996 1997
------ ------ --------
<S> <C> <C> <C>
Raw materials......................................... $2,056 $2,492 $3,150
Work in process....................................... 62 1,026 988
Finished goods........................................ 94 452 949
------ ------ ------
$2,212 $3,970 $5,087
====== ====== ======
</TABLE>

Property and Equipment

Property and equipment consisted of the following (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
------ ------
<S> <C> <C>
Computer equipment............................................ $ 789 $1,779
Furniture and fixtures........................................ 439 589
Purchased software............................................ 118 407
Leasehold improvements........................................ 524 524
Machinery & equipment......................................... 424 579
------ ------
2,294 3,878
Less accumulated depreciation and amortization................ 480 1,454
------ ------
$1,814 $2,424
====== ======
</TABLE>

F-10
<PAGE>

CORSAIR COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AS OF JUNE 30, 1996 AND 1997 AND FOR

THE SIX MONTHS THEN ENDED IS UNAUDITED)

The cost of capitalized leased assets included in property and equipment is
approximately $130,000 and $1,109,000 as of December 31, 1995 and 1996,
respectively.

Accrued Expenses

Accrued expenses consisted of the following (In thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
-------------
<S> <C> <C>
Accrued retrofit............................................ $ -- $ 912
Accrued warranty costs...................................... -- 140
Accrued benefits............................................ 114 820
Other....................................................... 608 630
----- -------
$ 722 $ 2,502
===== =======
</TABLE>

Significant Customers

The following tables summarize the Company's significant customers as of and
for the years ended December 31, 1995 and 1996:
<TABLE>
<CAPTION>
PERCENTAGE
OF TOTAL
REVENUES
------------
1995 1996
----- -----
<S> <C> <C>
Customer A.................................................... 56% --
Customer B.................................................... 40% 15%
Customer C.................................................... -- 18%
Customer D.................................................... -- 27%
Customer E.................................................... -- 13%
</TABLE>

<TABLE>
<CAPTION>
PERCENTAGE
OF TRADE
ACCOUNTS
RECEIVABLE
-----------
DECEMBER
31,
-----------
1995 1996
----- -----
<S> <C> <C>
Customer B.................................................... 100% --
Customer D.................................................... -- 54%
</TABLE>

4. PURCHASE OF ASSETS

On December 14, 1994, the Company paid $6,240,000 in cash and issued a
$3,000,000 promissory note (6.66% interest rate) to ESL Incorporated (ESL) (a
subsidiary of TRW Inc.) for the purchase of rights to certain research and
development projects which had no future alternative uses and certain assets.
The promissory note was repaid in full during fiscal 1995. A schedule of the
assets acquired follows (In thousands):

<TABLE>
<S> <C>
Inventory.......................................................... $3,762
Property and equipment............................................. 598
In process research and development................................ 4,894
Other liabilities, net............................................. (14)
------
$9,240
======
</TABLE>

F-11
<PAGE>

CORSAIR COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AS OF JUNE 30, 1996 AND 1997 AND FOR

THE SIX MONTHS THEN ENDED IS UNAUDITED)

Following the asset purchase, ESL continued to provide certain services to
the Company, which were reimbursed in fiscal 1995.

5. DEBT

In August 1995, the Company entered into a loan and security agreement with
a lending institution pursuant to which the Company borrowed $1.0 million,
secured by the Company's inventory and fixed assets, at a 14.95% stated
interest rate. Principal and interest payments are due ratably over 42 months
with the final installment due on March 1, 1999. As of December 31, 1996, the
outstanding obligation totaled $717,000. In conjunction with the loan and
security agreement, the Company issued a warrant to purchase 27,073 shares of
Series B convertible preferred stock at an exercise price of $5.91 per share.
The warrant shall be exercisable for a period of 10 years, or 5 years from the
closing of an underwritten public offering. The warrant was assigned a value
of $30,000, with the value being amortized over the term of the loan and
recorded as interest expense.

In July 1996, the Company entered into loan and security agreements with two
lending institutions pursuant to which the Company borrowed $5.0 million at a
14.55% stated interest rate. The creditors were granted a security interest in
certain of the Company's tangible and intangible assets. The notes are due in
January 2000. As of December 31, 1996, the outstanding obligation totaled $5.0
million. The Company issued a warrant in conjunction with this debt financing
to purchase 130,834 shares of Series B convertible preferred stock at an
exercise price of $6.65 per share. The warrant shall be exercisable for a
period of 10 years, or 5 years from the closing of an underwritten public
offering. The warrant was assigned a value of $131,000, with the value being
amortized over the term of the loan and recorded as interest expense.

During 1996, the Company obtained a $3.0 million line of credit
collateralized by eligible accounts receivable. The line bears interest at
prime plus 0.5% (8.75% as of December 31, 1996) and expires in August 1997. As
of December 31, 1996, no borrowings were outstanding under the line of credit.

Debt outstanding as of December 31, 1996 will be due in aggregate annual
principal payments of $1,803,000, $1,879,000, $1,762,000, and $139,000 in each
of the years from 1997 through 2000, respectively.

6. INCOME TAXES

A reconciliation of the federal statutory rate of 34% to the Company's
effective tax rate is as follows (In thousands):

<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 5, 1994 YEAR ENDED
(INCEPTION) TO DECEMBER 31,
DECEMBER 31, ----------------
1994 1995 1996
---------------- ------- -------
<S> <C> <C> <C>
Benefit at U.S. federal statutory rate...... $(2,020) $(2,895) $(4,338)
Unutilized net operating losses............. 1,938 2,856 4,244
State income taxes.......................... -- 1 2
Nondeductible expenses...................... 83 39 94
------- ------- -------
Total tax expense......................... $ 1 $ 1 $ 2
======= ======= =======
</TABLE>

F-12
<PAGE>

CORSAIR COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AS OF JUNE 30, 1996 AND 1997 AND FOR

THE SIX MONTHS THEN ENDED IS UNAUDITED)

The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below (in
thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1995 1996
------- --------
<S> <C> <C>
Deferred tax assets:
Inventory, due to reserves and additional amounts
capitalized for tax.................................. $ 504 $ 553
Other accruals and reserves not currently deductible
for tax purposes..................................... 590 761
Technology asset...................................... 1,978 1,817
Net operating loss carryforward and deferred start-up
costs................................................ 2,997 7,548
Credit carryforwards.................................. 265 543
Other................................................. 38 104
------- --------
Gross deferred tax assets............................... 6,372 11,326
Less valuation allowance.............................. (6,371) (11,326)
------- --------
Total deferred tax assets............................... 1 --
------- --------
Deferred tax liabilities:
Fixed assets.......................................... (1) --
------- --------
Net deferred taxes.................................... $ -- $ --
======= ========
</TABLE>

The net change in the valuation allowance for the years ended December 31,
1995 and 1996, was an increase of approximately $3,904,000 and $4,955,000,
respectively. Management believes that sufficient uncertainty exists as to
whether the deferred tax assets will be realized, and accordingly, a valuation
allowance is required.

As of December 31, 1996, the Company had net federal and California
operating loss carryforwards of approximately $18.1 million and $13.7 million,
respectively, for income tax reporting. The federal net operating loss
carryforwards expire beginning in 2009 through 2011. The California net
operating loss carryforwards expire beginning in 1999 through 2001.

The Company also has research and experimental tax credits aggregating
approximately $265,000 and $198,000 for federal and California purposes,
respectively. The federal credits expire beginning in 2009 through 2011. The
California credits carry over indefinitely until utilized.

There are also California credit carryforwards for qualified manufacturing
and research and development equipment of approximately $80,000; these credits
expire in 2005.

The Tax Reform Act of 1986 and the California Conformity Act of 1987 impose
restrictions on the utilization of net operating loss and tax credit
carryforwards in the event of an "ownership change" as defined by the Internal
Revenue Code. The Company's ability to utilize its net operating loss and tax
credit carryforwards may be subject to restriction pursuant to these
provisions.

F-13
<PAGE>

CORSAIR COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AS OF JUNE 30, 1996 AND 1997 AND FOR

THE SIX MONTHS THEN ENDED IS UNAUDITED)

7. STOCKHOLDERS' EQUITY

Convertible Preferred Stock

The Company has four series of preferred stock that are outstanding: Series
A, B, C, and D. Each share of preferred stock is convertible, at the option of
the holder, into fully paid shares of common stock. The conversion rate is
based on the original purchase price, subject to adjustments for stock
dividends, stock splits and capital reorganizations and dilution.

As of June 30, 1997, preferred stock consisted of the following:

<TABLE>
<CAPTION>
SHARES
DIVIDENDS LIQUIDATION ISSUED AND
SERIES PER ANNUM PREFERENCE OUTSTANDING
------ --------- ----------- -----------
<S> <C> <C> <C>
A $0.150 $ 3.00 5,413,340
B 0.330 6.65 1,328,084
C 0.413 8.25 2,424,864
D 0.563 11.25 266,668
</TABLE>

In the event of liquidation, consolidation, merger, or winding up of the
Company prior to conversion, holders of preferred stock are entitled to
receive, in preference to the holders of the common stock, an amount equal to
their liquidation preference or a pro rata share of the remaining assets,
based on their ownership of the Company.

Series A Convertible Preferred Stock

In December 1994, the Company issued 5,413,340, shares of Series A
convertible preferred stock for gross proceeds of $13,240,000 in cash and a
$3,000,000 note receivable from stockholders, which was collected in 1995.

Series B Convertible Preferred Stock

In October 1995, the Company issued 1,328,084 shares of Series B convertible
preferred stock for gross proceeds of $8,825,000 in cash.

Series C Convertible Preferred Stock

In October 1996, the Company issued 2,424,864 shares of Series C convertible
preferred stock for gross proceeds of $20,006,000 in cash.

Series D Convertible Preferred Stock

In March 1997, the Company issued 266,668 shares of Series D convertible
preferred stock for gross proceeds of $3,000,000 in cash.

Common Stock

As of December 31, 1996, employees held 384,242 shares of common stock
outstanding by virtue of option exercises which were subject to repurchase by
the Company at prices ranging from $0.30 to $0.69 per share. The Company's
right of repurchase expires 25% on the first anniversary of the original
issuance date and monthly thereafter, over a four-year period.

F-14
<PAGE>

CORSAIR COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AS OF JUNE 30, 1996 AND 1997 AND FOR

THE SIX MONTHS THEN ENDED IS UNAUDITED)

Stock Option Plans

The Company has a 1996 Stock Option/Stock Issuance Plan and a 1997 Officer
Stock Option Plan (the Plans) under which the Company's Board of Directors may
issue either nonqualified or incentive stock options to employees or
consultants of the Company. The Company reserved 2,333,334 shares of common
stock for issuance under the Plans. The Plans expire 10 years after adoption.
Under provisions of the Plans, options are granted at fair market value at
date of grant for incentive stock options or no less than 85% of fair market
value for nonqualified options. The options are fully exercisable upon grant.
Options generally expire 10 years from date of grant. Options generally vest
over 4 years with 25% vesting on the first anniversary of the vesting
commencement date and monthly thereafter. Under the stock issuance provision,
the Board of Directors may issue shares of the Company's common stock directly
at discounts of up to 15% of fair market value.

Accounting for Stock-based Compensation

The Company has elected to continue to use the intrinsic value-based method
to account for all of its stock-based employee compensation plans. Under
Accounting Principles Board (APB) Opinion No. 25, ACCOUNTING FOR STOCK ISSUED
TO EMPLOYEES, the Company recorded deferred compensation costs totaling
$1,202,000 related to its stock option plans for the difference between the
exercise price of each option and the fair market value of the underlying
common stock as of the grant date for each stock option. This amount is being
amortized over the vesting period of the individual options, generally four
years. Amortization of deferred compensation totaled $4,000 in 1996 and
$238,000 in the six months ended June 30, 1997, and has been charged to
operating expenses.

Pursuant to SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, the
Company is required to disclose the pro forma effects on the net losses of the
Company as if the Company had elected to use the fair value approach to
account for all its stock-based employee compensation plans. Had compensation
cost for the Company's plans been determined consistent with the fair value
approach enumerated in SFAS No. 123, the Company's 1995 and 1996 net losses
and 1996 pro forma net loss per share would not have been materially impacted.

The fair value of each option is estimated using the minimum value method on
the date of grant with the following weighted-average assumptions: a risk-free
interest rate of 6%; and an expected life of 2.5 years. No dividend impact was
considered as the Company has never declared, and does not have plans to
declare, any future dividends.

F-15
<PAGE>

CORSAIR COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AS OF JUNE 30, 1996 AND 1997 AND FOR

THE SIX MONTHS THEN ENDED IS UNAUDITED)

The following table summarizes activity under the Plans:

<TABLE>
<CAPTION>
WEIGHTED- OPTIONS WEIGHTED-
AVERAGE VESTED AT AVERAGE
EXERCISE PERIOD- FAIR VALUE OF
SHARES PRICE END OPTIONS GRANTED
--------- --------- --------- ---------------
<S> <C> <C> <C> <C>
Outstanding as of December 31,
1994.......................... -- $ --
Options granted................ 1,223,543 0.33 $0.04
=====
Options exercised.............. (50,750) 0.30
Options canceled............... (128,835) 0.30
--------- -----
Outstanding as of December 31,
1995.......................... 1,043,958 0.34 148,351
=======
Options granted................ 644,634 0.70 $0.20
=====
Options exercised.............. (553,344) 0.42
Options canceled............... (161,321) 0.50
--------- -----
Outstanding as of December 31,
1996.......................... 973,927 0.51 243,699
=======
Options granted (unaudited).... 507,258 4.27 $3.11
=====
Options exercised (unaudited).. (724,942) 0.56
Options canceled (unaudited)... (18,083) 0.69
--------- -----
Outstanding as of June 30, 1997
(unaudited)................... 738,160 $3.03 95,979
========= ===== =======
</TABLE>

The following table summarizes information about fixed stock options
outstanding as of December 31, 1996:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------- ------------------------
WEIGHTED-AVERAGE
REMAINING WEIGHTED-AVERAGE WEIGHTED-AVERAGE
EXERCISE PRICES OPTIONS CONTRACTUAL LIFE EXERCISE PRICE OPTIONS EXERCISE PRICE
- --------------- ------- ---------------- ---------------- ------- ----------------
<S> <C> <C> <C> <C> <C>
$0.30 473,098 8.48 $0.30 210,700 $0.30
$0.69 471,161 8.67 $0.69 32,999 $0.69
$0.84 29,668 9.87 $0.84 -- --
</TABLE>

Notes Receivable from Stockholder

In November 1996, the Company issued an aggregate of 370,101 shares of
common stock in connection with option exercises by the Company's President.
In connection with such issuance, the Company's President paid for the stock
by issuing a note payable (secured pursuant to a pledge agreement for 370,101
shares of common stock held by the Company's President) to the Company. The
Company has the right to repurchase such stock at the original purchase price
per share upon the purchaser's cessation of service prior to vesting in such
shares. The repurchase right lapses over the following four years. As of
December 31, 1996, 218,385 of such shares of common stock are included in the
384,242 total shares of common stock subject to repurchase by the Company. The
secured note payable bears interest at the rate of 7% per annum with the
entire principal balance of the note, together with all accrued or unpaid
interest, due and payable on the earlier of (a) November 13, 2000; (b) the
expiration of

F-16
<PAGE>

CORSAIR COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AS OF JUNE 30, 1996 AND 1997 AND FOR

THE SIX MONTHS THEN ENDED IS UNAUDITED)

the 60-day period following the date the Company's President ceases employment
on a regular or full-time basis with the Company; (c) the expiration of the
190-day period following the date the Company completes a successful IPO; or
(d) the date on which the Company completes a transaction where 50% of the
outstanding shares of common stock of the Company is acquired by a single
purchaser or by a group of purchasers acting together.

8. COMMITMENTS AND CONTINGENCIES

Leases

In August 1995, the Company entered into a leasing agreement to finance the
purchase of up to $1.0 million in equipment. In 1996, the Company entered into
a second leasing agreement to finance the purchase of an additional $500,000
in equipment. Lease terms under both agreements are for 42 months, are secured
by the leased equipment and are accounted for as capital leases.

The Company is obligated under certain noncancelable operating leases for
office space and equipment expiring at various dates through 1999. Total
rental expense was $10,064, $508,000 and $461,256 for the period from December
5, 1994 (inception) to December 31, 1994, and for the years ended December 31,
1995 and 1996, respectively.

Future minimum payments under capital and operating leases that have initial
or remaining noncancelable lease terms in excess of one year are as follows
(In thousands):

<TABLE>
<CAPTION>
YEAR ENDING CAPITAL OPERATING
DECEMBER 31, LEASES LEASES
- ------------ ------- ---------
<S> <C> <C>
1997......................................................... $ 367 $1,167
1998......................................................... 367 1,614
1999......................................................... 282 1,658
2000......................................................... 15 1,707
2001......................................................... -- 1,760
Thereafter................................................... -- 743
------ ------
Total minimum lease payments................................. 1,031 $8,649
======
Less amount representing interest............................ 131
------
900
Less current portion of obligations under capital lease...... 286
------
Long-term obligations under capital lease.................... $ 614
======
</TABLE>

Litigation

The Company is involved in various legal matters that have arisen in the
normal course of business. Management believes, after consultation with
counsel, any liability that may result from the disposition of such legal
matters will not have a material adverse effect on the Company's financial
condition or results of operations.

F-17
<PAGE>

CORSAIR COMMUNICATIONS, INC.

NOTES TO FINANCIAL STATEMENTS--(CONTINUED)

(INFORMATION AS OF JUNE 30, 1996 AND 1997 AND FOR

THE SIX MONTHS THEN ENDED IS UNAUDITED)

9. SUBSEQUENT EVENTS

Stock Split

On May 27, 1997, the Company's Board of Directors authorized a two-for-three
reverse stock split on all outstanding shares and options, which has been
approved by the stockholders. Accordingly, all share and per share amounts
have been adjusted to reflect the stock split.

1997 Stock Incentive Plan

On May 20, 1997, the Board of Directors adopted (approved by the
stockholders on May 27, 1997) the 1997 Stock Incentive Plan (the 1997 Plan).
The 1997 Plan succeeds the previous equity incentive programs, and 1,337,633
shares of the Company's common stock have been authorized under the 1997 Plan.
Included in the 1997 Plan is a provision for the automatic grant of
nonstatutory options to nonemployee Board of Director members of 1,500 shares
per annum. The options are exercisable at the then current fair market value
and generally vest over a 12-month period beginning one month after the grant
date. The options expire 10 years from grant date.

1997 Employee Stock Purchase Plan

On May 20, 1997, the Board of Directors adopted (approved by the
stockholders on May 27, 1997) the 1997 Employee Stock Purchase Plan (the
Purchase Plan) and reserved 166,667 shares of common stock for issuance under
the Purchase Plan.

Loan and Security Agreement

In June 1997, the Company signed a Loan and Security Agreement which made
available a $3.0 million equipment term loan facility at prime plus 0.75%
(9.25% at June 30, 1997). The loan facility is available through July 1998 and
is secured by any underlying equipment purchased. As of June 30, 1997, the
Company did not have any borrowings under the equipment term loan, and any
future borrowings will be repaid over three years.

F-18
<PAGE>

[INSIDE BACK COVER]

Background: Green

Main inner box background: Tan

Upper box background: Blue with one orange fingerprint at right

Text in upper box: Corsair has developed a leading system
solution to cloning fraud-PhonePrint(R)
Text in upper left box
(slightly lower): PhonePrint In Action

Graphics in center of page: Two faces at left next to cellular
telephone handsets. Text below top
face is "Cloner" and text below
lower face is "Customer." Jagged
lines from each handset to cellular
telephone site depicted by an
antennae near a small building next
to text "Cell Site." To right of
cell site, box with text "Step 1"
inside and text "Create Fingerprint"
below. Fingerprints below overlaying
jagged lines. Text inside box to
right "Step 2" with text "Compare"
below. Cylinder below with text
"Fingerprint Database." To right of
fingerprint database, box with text
"Step 3" inside and text "Decide"
below. Red X at end of upper jagged
line next to text "Mismatch: Call
Disconnected." Lower jagged line
continues to hexagon with text
"Wireless Network" inside which has
multiple arrows to right.
Text in center box
(below graphics): PhonePrint Fraud Prevention System

Text in lower left box: PhonePrint Deployed

Text below in bullet format: Protects millions of subscribers in over 40
wireless markets in North America, the
Caribbean, and Asia.
Proven, sustainable results--100 million
"cloned" calls disconnected.

Text in lower right corner: CORSAIR COMMUNICATIONS (with logo)

<PAGE>

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

NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE COMMON
STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

- --------------------------------------------------------------------------------
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................................................... 3
The Company............................................................ 4
Risk Factors........................................................... 5
Use of Proceeds........................................................ 17
Dividend Policy........................................................ 17
Capitalization......................................................... 18
Dilution............................................................... 19
Selected Financial Data................................................ 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations......................................................... 21
Business............................................................... 27
Management............................................................. 40
Certain Transactions................................................... 51
Principal Stockholders................................................. 54
Description of Capital Stock........................................... 56
Shares Eligible for Future Sale........................................ 59
Underwriting........................................................... 61
Legal Matters.......................................................... 63
Experts................................................................ 63
Additional Information................................................. 63
Index to Financial Statements.......................................... F-1
</TABLE>

UNTIL , 1997, (25 DAYS FROM THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
[LOGO OF CORSAIR COMMUNICATIONS]

2,250,000 SHARES

COMMON STOCK

DEUTSCHE MORGAN GRENFELL

HAMBRECHT & QUIST

WESSELS, ARNOLD & HENDERSON

PROSPECTUS
, 1997
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth all expenses, other than underwriting
discounts and commissions, payable by the Registrant in connection with the
sale of the Common Stock being registered. All the amounts shown are
estimates, except for the registration fee, the Nasdaq National Market filing
fee and the NASD fee.

<TABLE>
<S> <C>
Registration fee................................................. $ 10,978
Nasdaq National Market fee....................................... 17,938
NASD fee......................................................... 4,123
Blue Sky fees and expenses....................................... 10,000
Printing and engraving expenses.................................. 150,000
Legal fees and expenses.......................................... 450,000
Accounting fees and expenses..................................... 235,000
Transfer Agent and Registrar fees................................ 5,000
Miscellaneous expenses........................................... 16,961
--------
TOTAL.......................................................... $900,000
========
</TABLE>

ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.

Section 145 of the Delaware General Corporation Law permits indemnification
of officers and directors of the Company under certain conditions and subject
to certain limitations. Section 145 of the Delaware General Corporation Law
also provides that a corporation has the power to purchase and maintain
insurance on behalf of its officers and Directors against any liability
asserted against such person and incurred by him or her in such capacity, or
arising out of his or her status as such, whether or not the corporation would
have the power to indemnify him or her against such liability under the
provisions of Section 145 of the Delaware General Corporation Law.

Article VII, Section 1 of the Restated Bylaws of the Company provides that
the Company shall indemnify its directors and executive officers to the
fullest extent not prohibited by the Delaware General Corporation Law. The
rights to indemnity thereunder continue as to a person who has ceased to be a
Director, officer, employee or agent and inure to the benefit of the heirs,
executors and administrators of the person. In addition, expenses incurred by
a Director or executive officer in defending any civil, criminal,
administrative or investigative action, suit or proceeding by reason of the
fact that he or she is or was a Director or officer of the Company (or was
serving at the Company's request as a Director or officer of another
corporation) shall be paid by the Company in advance of the final disposition
of such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such Director or officer to repay such amount if it shall ultimately
be determined that he or she is not entitled to be indemnified by the Company
as authorized by the relevant section of the Delaware General Corporation Law.

As permitted by Section 102(b)(7) of the Delaware General Corporation Law,
Article V, Section (A) of the Company's Amended and Restated Certificate of
Incorporation provides that a Director of the Company shall not be personally
liable for monetary damages for breach of fiduciary duty as a Director, except
for liability (i) for any breach of the Director's duty of loyalty to the
Company or its stockholders, (ii) for acts or omissions not in good faith or
acts or omissions that involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the Delaware General Corporation Law or
(iv) for any transaction from which the Director derived any improper personal
benefit.

II-1
<PAGE>

The Company has entered into indemnification agreements with each of its
Directors and executive officers. Generally, the indemnification agreements
attempt to provide the maximum protection permitted by Delaware law as it may
be amended from time to time. Moreover, the indemnification agreements provide
for certain additional indemnification. Under such additional indemnification
provisions, however, an individual will not receive indemnification for
judgments, settlements or expenses if he or she is found liable to the Company
(except to the extent the court determines he or she is fairly and reasonably
entitled to indemnity for expenses), for settlements not approved by the
Company or for settlements and expenses if the settlement is not approved by
the court. The indemnification agreements provide for the Company to advance
to the individual any and all reasonable expenses (including legal fees and
expenses) incurred in investigating or defending any such action, suit or
proceeding. In order to receive an advance of expenses, the individual must
submit to the Company copies of invoices presented to him or her for such
expenses. Also, the individual must repay such advances upon a final judicial
decision that he or she is not entitled to indemnification.

The Company intends to enter into additional indemnification agreements with
each of its Directors and executive officers to effectuate these indemnity
provisions and to purchase Directors' and officers' liability insurance.

The Underwriting Agreement (to be filed by amendment to the Registration
Statement) contains provisions by which the Underwriters have agreed to
indemnify the Company, each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act, each director of the Company,
and each officer of the Company who signs this Registration Statement, with
respect to information furnished in writing by or on behalf of the
Underwriters for use in the Registration Statement.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since December 1994, the Company has sold and issued the following
unregistered securities (which numbers have not been adjusted for the two-for-
three reverse stock split to be effected prior to the closing of this
Offering):

(1) From July 1995 to June 1997, the Company issued options to purchase
an aggregate of 3,563,033 shares of Common Stock with exercise prices
ranging from $0.20 to $8.00 per share under the Prior Plans and an
aggregate of 1,993,502 shares of Common Stock were issued through the
exercise of options granted under the Prior Plans for an aggregate exercise
price of $649,111.00. For additional information concerning these
transactions, reference is made to the information contained under the
caption "Management--Benefit Plans" in the form of the Prospectus included
herein.

(2) On December 10, 1994, the Company issued an aggregate of 6,100,150
shares of Series A Preferred Stock to certain venture capital funds for an
aggregate consideration of $12,200,300.00.

(3) On December 14, 1994, the Company issued an aggregate of 2,019,850
shares of Series A Preferred Stock to ESL Incorporated for an aggregate
consideration of $4,039,700.00.

(4) On August 31, 1995, the Company issued a warrant to Comdisco, Inc. to
purchase 40,609 shares of Series B Preferred Stock at $3.94 per share which
is exercisable until August, 31, 2005.

(5) On October 31, 1995, the Company issued an aggregate of 1,992,104
shares of Series B Preferred Stock to various venture capital funds and
certain other investors for an aggregate consideration of $8,825,020.72.

II-2
<PAGE>

(6) On July 31, 1996, the Company issued a warrant to Comdisco, Inc. to
purchase 75,000 shares of Series B Preferred Stock at $4.43 per share which
is exercisable until July 31, 2006.

(7) On July 31, 1996, the Company issued a warrant to MMC/GATX
Partnership No. 1 to purchase 112,500 shares of Series B Preferred Stock at
$4.43 per share which is exercisable until July 31, 2006.

(8) On August 5, 1996, the Company issued a warrant to Comdisco, Inc. to
purchase 8,750 shares of Series B Preferred Stock at $4.43 per share which
is exercisable until August 5, 2006.

(9) On October 30, 1996, the Company issued an aggregate of 3,637,272
shares of Series C Preferred Stock to various venture capital funds and
certain other investors for an aggregate consideration of $20,004,996.00.

(10) On March 7, 1997, the Company issued an aggregate of 400,000 shares
of Series D Preferred Stock to certain investors for an aggregate
consideration of $3,000,000.00.

The sales and issuances of securities in the above transactions were deemed
to be exempt under the Act by virtue of Section 4(2) thereof and/or Regulation
D and Rule 701 promulgated thereunder as transactions not involving any public
offering. The purchasers in each case represented their intention to acquire
the securities for investment only and not with a view to the distribution
thereof. Appropriate legends were affixed to the stock certificates issued in
such transactions. Similar representations of investment intent were obtained
and similar legends imposed in connection with any subsequent transfers of any
such securities. The Company believes that all recipients had adequate access,
through employment or other relationships, to information about the Company to
make an informed investment decision.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE.

(a) EXHIBITS.

II-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.5*+ AirTouch Assignment Agreement between the Company and ESL
Incorporated, dated December 14, 1994.
10.6*+ Development and License Agreement between ESL Incorporated and PacTel
Corporation, dated October 4, 1993.
10.7*+ First Amendment to the Development and License Agreement between ESL
Incorporated and PacTel Corporation, dated October 23, 1994.
10.8*+ Second Amendment to and Consent of Assignment of the Development and
License Agreement between the Company and AirTouch, dated December
14, 1994.
10.9*+ Third Amendment to the Development and License Agreement between the
Company and AirTouch, dated August 18, 1995.
10.10+ 1995 Stock Option/Stock Issuance Plan.
10.11+ 1995 Stock Option/Stock Issuance Plan Form of Notice of Grant.
10.12+ 1995 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.
10.13+ 1995 Stock Option/Stock Issuance Plan Form of Stock Purchase
Agreement.
10.14*+ Patent License Agreement.
10.15+ Master Lease Agreement, as amended, and Schedules VL-1 and VL-2
between the Company and Comdisco, Inc., dated August 31, 1995.
10.16+ Loan and Security Agreement between the Company and Comdisco, Inc.,
dated August 31, 1995.
10.17+ Secured Promissory Note from the Company to Comdisco, Inc., dated
August 31, 1995.
10.18+ Warrant granted to Comdisco, Inc. to purchase Series B Preferred
Stock, dated August 31, 1995.
10.19+ Series B Preferred Stock Purchase Agreement between the Company and
the investors listed on Schedule A thereto, dated October 31, 1995.
10.20+ 1996 Stock Option/Stock Issuance Plan, as amended.
10.21+ 1996 Stock Option/Stock Issuance Plan Form of Notice of Grant, as
amended.
10.22+ 1996 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.
10.23+ 1996 Stock Option/Stock Issuance Plan Form of Stock Purchase
Agreement, as amended.
10.24+ Promissory Note from Martin Silver to the Company, dated April 10,
1996.
10.25+ Promissory Note from Martin Silver to the Company, dated April 10,
1996.
10.26+ Loan and Security Agreement between the Company and Comdisco, Inc.,
dated July 31, 1996.
10.27+ Warrant granted to Comdisco, Inc. to purchase Series B Preferred
Stock, dated July 31, 1996.
10.28+ Secured Promissory Note from the Company to Comdisco, Inc., dated
July 31, 1996.
10.29+ Loan and Security Agreement between the Company and MMC/GATX
Partnership No. 1, dated July 31, 1996.
10.30+ Warrant granted to MMC/GATX Partnership No. 1 to purchase Series B
Preferred Stock, dated July 31, 1996.
10.31+ Secured Promissory Note from the Company to MMC/GATX Partnership No.
1, dated July 31, 1996.
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.32+ Warrant granted to Comdisco, Inc. to purchase Series B Preferred
Stock, dated August 5, 1996.
10.33+ Loan and Security Agreement between the Company and Silicon Valley
Bank, dated August 30, 1996.
10.34+ Series C Preferred Stock Purchase Agreement between the Company and
the investors listed on Schedule A thereto, dated October 30, 1996.
10.35+ Amended and Restated Investors' Rights Agreement between the Company
and various stockholders, dated October 30, 1996.
10.36+ Amendment No. 1 to the Amended and Restated Investors' Rights
Agreement between the Company and various stockholders, dated March 7,
1997.
10.37+ Directed Share Agreement between the Company and the investors listed
on Exhibit A thereto, dated October 30, 1996.
10.38+ Promissory Note from Mary Ann Byrnes to the Company, dated November
14, 1996, as amended.
10.39+ 1997 Officer Stock Option Plan.
10.40 1997 Officer Stock Option Plan Form of Stock Option Agreement, as
amended.
10.41+ 1997 Employee Stock Purchase Plan.
10.42+ 1997 Stock Incentive Plan.
10.43 1997 Stock Incentive Plan Form of Notice of Grant.
10.44+ 1997 Stock Incentive Plan Form of Stock Option Agreement.
10.45+ Lease dated January 10, 1997 between the Company and San Thomas
Investment Company.
10.46+ Series D Preferred Stock Purchase Agreement between the Company and
the investors listed on Schedule A thereto, dated March 7, 1997.
10.47+ Form of Master Purchase and Licensing Agreement.
10.48+ Form of Confidential Disclosure Agreement.
10.49+ Form of Indemnification Agreement between the Company and each of its
directors.
10.50+ Form of Indemnification Agreement between the Company and each of its
officers.
10.51+ Form of Written Consent of Holders of Series A, Series B, Series C and
Series D Preferred Stock to conversion.
10.52+ Form of Waiver of Registration Rights.
11.1 Statement of Computation of Pro Forma Per Share Amounts.
23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion
filed as Exhibit 5.1).
23.2 Consent and Report on Schedule of KPMG Peat Marwick LLP, Independent
Accountants.
24.1+ Power of Attorney (See Page II-7).
27.1 Financial Data Schedule.
</TABLE>
- --------

* Certain confidential portions of this Exhibit were omitted by means of
redacting a portion of the text (the "Mark"). This Exhibit has been filed
separately with the Secretary of the Commission without the Mark pursuant to
the Company's Application Requesting Confidential Treatment under Rule 406
under the Securities Act.

+ Previously filed with the Commission.

II-5
<PAGE>

(b) FINANCIAL STATEMENT SCHEDULES INCLUDED SEPARATELY IN THE REGISTRATION
STATEMENT.

All other schedules are omitted because they are not required, are not
applicable or the information is included in the Financial Statements or Notes
thereto.

ITEM 17. UNDERTAKINGS.

The undersigned hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the provisions described in Item 14, or otherwise, the Company has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Company of expenses incurred or paid by a Director, officer or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such Director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-6
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE COMPANY HAS
DULY CAUSED AMENDMENT NO. 1 TO THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF PALO
ALTO, COUNTY OF SANTA CLARA, STATE OF CALIFORNIA, ON THE 7TH DAY OF JULY,
1997.

Corsair Communications, Inc.

By: /s/ Mary Ann Byrnes
---------------------------------
MARY ANN BYRNES
PRESIDENT AND CHIEF EXECUTIVE
OFFICER

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AMENDMENT NO. 1
TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.

SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

/s/ Mary Ann Byrnes President, Chief July 7, 1997
_____________________________________ Executive Officer
(MARY ANN BYRNES) and Director
(Principal
Executive Officer)

Chief Financial July 7, 1997
* Officer and
_____________________________________ Secretary
(MARTIN J. SILVER) (Principal
Financial and
Accounting Officer)

Chairman of the July 7, 1997
* Board and Director
_____________________________________
(KEVIN R. COMPTON)

* Director July 7, 1997
_____________________________________
(PETER L.S. CURRIE)

* Director July 7, 1997
_____________________________________
(DAVID H. RING)

* Director July 7, 1997
_____________________________________
(ROLAND L. ROBERTSON)

* Director July 7, 1997
_____________________________________
(STEVE DOW)

By: /s/ Mary Ann Byrnes
----------------------------------
MARY ANN BYRNES, ATTORNEY-IN-FACT

</TABLE>

II-7
<PAGE>

SCHEDULE II

CORSAIR COMMUNICATIONS, INC.
Valuation and Qualifying Accounts
(In thousands)

<TABLE>
<CAPTION>
BALANCE AT THE CHARGED TO BALANCE AT THE
BEGINNING OF COSTS AND END OF THE
DESCRIPTION THE PERIOD EXPENSES DEDUCTIONS PERIOD
----------- -------------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
Reserve for bad debt and
allowances:
Period from inception
(December 5, 1994) to
December 31, 1994........ $ -- $ -- $-- $ --
Year ended December 31,
1995..................... $ -- $ 404 $-- $ 404
Year ended December 31,
1996..................... $ 404 $ -- $-- $ 404
Inventory reserves:
Period from inception
(December 5, 1994) to
December 31, 1994........ $ -- $ -- $-- $ --
Year ended December 31,
1995..................... $ -- $1,237 $-- $1,237
Year ended December 31,
1996..................... $1,237 $ 372 $333 $1,276
</TABLE>
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1+ Amended and Restated Certificate of Incorporation of the Company, as
amended.
3.2+ Form of Amended and Restated Certificate of Incorporation of the
Company to become effective immediately prior to this Offering.
3.3+ Bylaws of the Company, as amended.
3.4+ Form of Restated Bylaws of the Company to be effective upon
completion of this Offering.
4.1 Form of Certificate for Common Stock.
5.1 Opinion of Brobeck, Phleger & Harrison LLP with respect to the Common
Stock being registered.
10.1+ Series A Preferred Stock Purchase Agreement between the Company and
the purchasers listed on Schedule A thereto, dated December 10, 1994
10.2+ Asset Purchase Agreement between the Company and ESL Incorporated,
dated December 14, 1994.
10.3+ Series A Preferred Stock Purchase Agreement between the Company and
ESL Incorporated, dated December 14, 1994.
10.4*+ License and Technical Assistance Agreement between the Company, TRW
Inc. and ESL Incorporated, dated December 14, 1994.
10.5*+ AirTouch Assignment Agreement between the Company and ESL
Incorporated, dated December 14, 1994.
10.6*+ Development and License Agreement between ESL Incorporated and PacTel
Corporation, dated October 4, 1993.
10.7*+ First Amendment to the Development and License Agreement between ESL
Incorporated and PacTel Corporation, dated October 23, 1994.
10.8*+ Second Amendment to and Consent of Assignment of the Development and
License Agreement between the Company and AirTouch, dated December
14, 1994.
10.9*+ Third Amendment to the Development and License Agreement between the
Company and AirTouch, dated August 18, 1995.
10.10+ 1995 Stock Option/Stock Issuance Plan.
10.11+ 1995 Stock Option/Stock Issuance Plan Form of Notice of Grant.
10.12+ 1995 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.
10.13+ 1995 Stock Option/Stock Issuance Plan Form of Stock Purchase
Agreement.
10.14*+ Patent License Agreement.
10.15+ Master Lease Agreement, as amended, and Schedules VL-1 and VL-2
between the Company and Comdisco, Inc., dated August 31, 1995.
10.16+ Loan and Security Agreement between the Company and Comdisco, Inc.,
dated August 31, 1995.
10.17+ Secured Promissory Note from the Company to Comdisco, Inc., dated
August 31, 1995.
10.18+ Warrant granted to Comdisco, Inc. to purchase Series B Preferred
Stock, dated August 31, 1995.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.19+ Series B Preferred Stock Purchase Agreement between the Company and
the investors listed on Schedule A thereto, dated October 31, 1995.
10.20+ 1996 Stock Option/Stock Issuance Plan, as amended.
10.21+ 1996 Stock Option/Stock Issuance Plan Form of Notice of Grant, as
amended.
10.22+ 1996 Stock Option/Stock Issuance Plan Form of Stock Option Agreement.
10.23+ 1996 Stock Option/Stock Issuance Plan Form of Stock Purchase
Agreement, as amended.
10.24+ Promissory Note from Martin Silver to the Company, dated April 10,
1996.
10.25+ Promissory Note from Martin Silver to the Company, dated April 10,
1996.
10.26+ Loan and Security Agreement between the Company and Comdisco, Inc.,
dated July 31, 1996.
10.27+ Warrant granted to Comdisco, Inc. to purchase Series B Preferred
Stock, dated July 31, 1996.
10.28+ Secured Promissory Note from the Company to Comdisco, Inc., dated July
31, 1996.
10.29+ Loan and Security Agreement between the Company and MMC/GATX
Partnership No. 1, dated July 31, 1996.
10.30+ Warrant granted to MMC/GATX Partnership No. 1 to purchase Series B
Preferred Stock, dated July 31, 1996.
10.31+ Secured Promissory Note from the Company to MMC/GATX Partnership No.
1, dated July 31, 1996.
10.32+ Warrant granted to Comdisco, Inc. to purchase Series B Preferred
Stock, dated August 5, 1996.
10.33+ Loan and Security Agreement between the Company and Silicon Valley
Bank, dated August 30, 1996.
10.34+ Series C Preferred Stock Purchase Agreement between the Company and
the investors listed on Schedule A thereto, dated October 30, 1996.
10.35+ Amended and Restated Investors' Rights Agreement between the Company
and various stockholders, dated October 30, 1996.
10.36+ Amendment No. 1 to the Amended and Restated Investors' Rights
Agreement between the Company and various stockholders, dated March 7,
1997.
10.37+ Directed Share Agreement between the Company and the investors listed
on Exhibit A thereto, dated October 30, 1996.
10.38+ Promissory Note from Mary Ann Byrnes to the Company, dated November
14, 1996, as amended.
10.39+ 1997 Officer Stock Option Plan.
10.40 1997 Officer Stock Option Plan Form of Stock Option Agreement, as
amended.
10.41+ 1997 Employee Stock Purchase Plan.
10.42+ 1997 Stock Incentive Plan.
10.43 1997 Stock Incentive Plan Form of Notice of Grant.
10.44+ 1997 Stock Incentive Plan Form of Stock Option Agreement.
10.45+ Lease dated January 10, 1997 between the Company and San Thomas
Investment Company.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.46+ Series D Preferred Stock Purchase Agreement between the Company and
the investors listed on Schedule A thereto, dated March 7, 1997.
10.47+ Form of Master Purchase and Licensing Agreement.
10.48+ Form of Confidential Disclosure Agreement.
10.49+ Form of Indemnification Agreement between the Company and each of its
directors.
10.50+ Form of Indemnification Agreement between the Company and each of its
officers.
10.51+ Form of Written Consent of Holders of Series A, Series B, Series C and
Series D Preferred Stock to conversion.
10.52+ Form of Waiver of Registration Rights.
11.1 Statement of Computation of Pro Forma Per Share Amounts.
23.1 Consent of Brobeck, Phleger & Harrison LLP (contained in their opinion
filed as Exhibit 5.1).
23.2 Consent and Report on Schedule of KPMG Peat Marwick LLP, Independent
Accountants.
24.1+ Power of Attorney (See Page II-7).
27.1 Financial Data Schedule.
</TABLE>
- -------

+ Previously filed with the Commission.

<PAGE>

EXHIBIT 1.1

CORSAIR COMMUNICATIONS, INC.
----------------------------

2,250,000 SHARES

PLUS AN OPTION TO PURCHASE FROM CORSAIR COMMUNICATIONS, INC.

UP TO 337,500 ADDITIONAL SHARES TO COVER OVER-ALLOTMENTS

COMMON STOCK
------------

UNDERWRITING AGREEMENT
----------------------

_____________, 1997

DEUTSCHE MORGAN GRENFELL INC.

HAMBRECHT & QUIST LLC
WESSELS, ARNOLD & HENDERSON, L.L.C.
As Representatives of the several Underwriters

c/o Deutsche Morgan Grenfell Inc.
31 West 52nd Street
New York, New York 10019

Dear Sirs:

Corsair Communications, Inc., a Delaware corporation (the "Company"),
hereby confirms its agreement with the several underwriters named in Schedule 1
hereto (the "Underwriters"), for whom you have been duly authorized to act as
representatives (in such capacity, the "Representatives"), as set forth below.
If you are the only Underwriters, all references herein to the Representatives
shall be deemed to be references to the Underwriters.

Section 1. Underwriting. Subject to the terms and conditions contained herein:
------------

(a) The Company proposes to issue and sell 2,250,000 shares of common
stock, par value $0.001 per share (the "Common Stock"), of the Company (the
"Firm Shares") to the several Underwriters. The Company also proposes to issue
and sell to the several Underwriters not more than 337,500 additional shares of
Common Stock (the "Option Shares" and, together with the Firm Shares, the
"Shares") if requested by the Representatives as provided in Section 2(b)
hereof.

(b) Upon your authorization of the release of the Firm Shares, the
Underwriters propose to make a public offering (the "Offering") of the Firm
Shares upon the terms set forth in the Prospectus (as defined below) as soon
after the Registration Statement (as defined below) and this Agreement have
become effective as in the Representatives' sole
<PAGE>

judgment is advisable. As used in this Agreement, the term "Original
Registration Statement" means the registration statement (File No. 333-28519)
initially filed with the Securities and Exchange Commission (the "Commission")
relating to the Shares, as amended at the time when it was or is declared
effective, including all financial schedules and exhibits thereto and including
any information omitted therefrom pursuant to Rule 430A under the Securities Act
of 1933, as amended (the "Securities Act"), and included in the Prospectus; the
term "Rule 462(b) Registration Statement" means any registration statement filed
with the Commission pursuant to Rule 462(b) under the Securities Act (including
the Registration Statement and any Preliminary Prospectus (as defined below) or
Prospectus incorporated therein at the time such Registration Statement becomes
effective); the term "Registration Statement" includes both the Original
Registration Statement and any Rule 462(b) Registration Statement; the term
"Preliminary Prospectus" means each prospectus subject to completion filed with
the Original Registration Statement or any amendment thereto (including the
prospectus subject to completion, if any, included in the Original Registration
Statement or any amendment thereto at the time it was or is declared effective);
the term "Prospectus" means:

(i) if the Company relies on Rule 434 under the Securities Act,
the Term Sheet (as defined below) relating to the Shares that is
first filed pursuant to Rule 424(b)(7) under the Securities Act,
together with the Preliminary Prospectus identified therein that
such Term Sheet supplements;

(ii) if the Company does not rely on Rule 434 under the
Securities Act, the prospectus first filed with the Commission
pursuant to Rule 424(b) under the Securities Act;

(iii) if the Company does not rely on Rule 434 under the
Securities Act and if no prospectus is required to be filed
pursuant to Rule 424(b) under the Securities Act, the prospectus
included in the Registration Statement; or

(iv) for purposes of the representations and warranties in
Section 5 hereof, if the Prospectus is not in existence, the most
recent Preliminary Prospectus;

and the term "Term Sheet" means any term sheet that satisfies the
requirements of Rule 434 under the Securities Act. Any reference herein to
the "date" of a Prospectus that includes a Term Sheet shall mean the date
of such Term Sheet.

Section 2. Purchase and Closing.
--------------------

(a) On the basis of the representations, warranties, agreements and
covenants herein contained and subject to the terms and conditions herein set
forth, the Company agrees to issue and sell to each of the Underwriters, and
each of the Underwriters, severally and not jointly, agrees to purchase from the
Company, at a purchase price of $___ per Share (the "Purchase

-2-
<PAGE>

Price"), the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule 1 hereto. Firm Shares shall be registered by Bank of
Boston, N.A. in the name of the nominee of the Depository Trust Company ("DTC"),
Cede & Co. ("Cede & Co."), and credited to the accounts of such of its
participants as the Representatives shall request, upon notice to the Company at
least 48 hours prior to the First Closing Date (as defined below), with any
transfer taxes payable in connection with the transfer of the Firm Shares to the
Underwriters duly paid, against payment by or on behalf of the Underwriters to
the account of the Company of the aggregate Purchase Price therefor by wire
transfer in immediately available funds. The Company will make the certificate
or certificates for the Firm Shares available for checking and packaging by the
Representatives at the offices in New York, New York of the Company's transfer
agent or registrar or of the Representatives at least 24 hours prior to the
First Closing Date. Delivery or registry of and payment for the Firm Shares
shall be made at the offices of Brobeck Phleger & Harrison LLP, 2200 Geng Road,
Palo Alto, California 94303 at 9:30 A.M., New York City time, on the fourth full
business day following the date of this Agreement, or at such other place, time
or date as the Representatives and the Company may agree upon. Such time and
date of delivery against payment are herein referred to as the "First Closing
Date," and the implementation of all the actions described in this Section 2(a)
is herein referred to as the "First Closing."

(b) For the purpose of covering any overallotments in connection with
the distribution and sale of the Firm Shares as contemplated by the Prospectus,
the Company hereby grants to the several Underwriters an option to purchase,
severally and not jointly, the Option Shares. The purchase price to be paid for
any Option Shares shall be the same as the Purchase Price for the Firm Shares
set forth above in Section 2(a). The option granted hereby may be exercised as
to all or any part of the Option Shares from time to time within thirty days
after the date of the Prospectus (or, if such 30th day shall be a Saturday or
Sunday or a holiday, on the next business day thereafter when the New York Stock
Exchange and the Nasdaq Stock Market's National Market (the "Nasdaq National
Market") are open for trading). The Underwriters shall not be under any
obligation to purchase any of the Option Shares prior to the exercise of such
option. The Representatives may from time to time exercise the option granted
hereby by giving notice in writing or by telephone (confirmed in writing) to the
Company setting forth the aggregate number of Option Shares as to which the
several Underwriters are then exercising the option and the date and time for
delivery or registry of and payment for such Option Shares. Any such date of
delivery or registry shall be determined by the Representatives but shall not be
earlier than two business days or later than five business days after such
exercise of the option and, in any event, shall not be earlier than the First
Closing Date. The time and date set forth in such notice, or such other time or
date as the Representatives and the Company may agree upon or as the
Representatives may determine pursuant to Section 2(a) hereof, is herein called
an "Option Closing Date" with respect to such Option Shares, and the
implementation of all the actions described in this Section 2(b) is herein
referred to as the "Option Closing." As used in this Agreement, the term
"Closing Date" means either the First Closing Date or any Option Closing Date,
as applicable, and the term "Closing" means either the First Closing or any
Option Closing, as applicable. If the option is exercised as to all or any
portion of the Option Shares, then either one or more certificates in definitive
form for such Option Shares shall be delivered

-3-
<PAGE>

or, if such Option Shares are to be held through DTC, such Option Shares shall
be registered and credited, on the related Option Closing Date in the same
manner, and upon the same terms and conditions, set forth above in Section 2(a),
except that reference therein to the Firm Shares and the First Closing Date
shall be deemed, for purposes of this Section 2(b), to refer to such Option
Shares and Option Closing Date, respectively. Upon exercise of the option as
provided herein, the Company shall become obligated to sell to each of the
several Underwriters, and, on the basis of the representations, warranties,
agreements and covenants herein contained and subject to the terms and
conditions herein set forth, each of the Underwriters (severally and not
jointly) shall become obligated to purchase from the Company, the same
percentage of the total number of the Option Shares as to which the several
Underwriters are then exercising the option as such Underwriter is obligated to
purchase of the aggregate number of Firm Shares, as adjusted by the
Representatives in such manner as they deem advisable to avoid fractional
shares.

(c) The Company hereby acknowledges that the payment of monies
pursuant to Section 2(a) or Section 2(b) hereof (a "Payment") by or on behalf of
the Underwriters of the aggregate Purchase Price for any Shares does not
constitute closing of a purchase and sale of the Shares. Only execution and
delivery, by facsimile or otherwise, of a receipt for Shares by Deutsche Morgan
Grenfell Inc., on behalf of the Underwriters, indicates completion of the
closing of a purchase of the Shares from the Company. Furthermore, in the event
that the Underwriters make a Payment to the Company prior to the completion of
the closing of a purchase of Shares, the Company hereby acknowledges that until
Deutsche Morgan Grenfell Inc., on behalf of the Underwriters, executes and
delivers such receipt for the Shares the Company will not be entitled to the
Payment and shall return the Payment to the Underwriters as soon as practicable
(by wire transfer of same-day funds) upon demand. In the event that the closing
of a purchase of Shares is not completed and the Payment is not returned by the
Company to the Underwriters on the same day the Payment was received by the
Company, the Company agrees to pay to the Underwriters in respect of each day
the Payment is not returned by it, in same-day funds, interest on the amount of
such Payment in an amount representing the Underwriters' cost of financing as
reasonably determined by the Representatives. The failure of Deutsche Morgan
Grenfell Inc. to execute and deliver a receipt for the Shares shall in no way
affect the obligations of the Underwriters to the Company hereunder except as
specifically set forth herein.

(d) It is understood that any of you, individually and not as one of
the Representatives, may (but shall not be obligated to) make Payment on behalf
of any Underwriter or Underwriters for any of the Shares to be purchased by such
Underwriter or Underwriters. No such Payment shall relieve such Underwriter or
Underwriters from any of its or their obligations hereunder.

Section 3. Covenants of the Company. The Company covenants and agrees with the
------------------------
several Underwriters that:

(a) The Company will:

-4-
<PAGE>

(i) use its best efforts to cause the Registration Statement, if
not effective at the time of execution of this Agreement, and any
amendments thereto to become effective as promptly as possible.
If required, the Company will file the Prospectus or any Term
Sheet that constitutes a part thereof and any amendment or
supplement thereto with the Commission in the manner and within
the time period required by Rules 434 and 424(b) under the
Securities Act. During any time when a prospectus relating to
the Shares is required to be delivered under the Securities Act,
the Company (x) will comply with all requirements imposed upon it
by the Securities Act and the rules and regulations of the
Commission thereunder to the extent necessary to permit the
continuance of sales of or dealings in the Shares in accordance
with the provisions hereof and of the Prospectus, as then amended
or supplemented, and (y) will not file with the Commission the
Prospectus, Term Sheet, any amendment or supplement to such
Prospectus or Term Sheet, any amendment to the Registration
Statement (including the amendment referred to in the second
sentence of Section 5(a)(i)) or any Rule 462(b) Registration
Statement unless the Representatives previously have been advised
of, and furnished with a copy within a reasonable period of time
prior to, the proposed filing and the Representatives shall not
have reasonably objected in writing to such filing. The Company
will prepare and file with the Commission, in accordance with the
rules and regulations of the Commission, promptly upon request by
the Representatives or counsel for the Underwriters, any
amendments to the Registration Statement or amendments or
supplements to the Prospectus that may be necessary in the
opinion of counsel to the Underwriters in connection with the
distribution of the Shares by the several Underwriters. The
Company will advise the Representatives, promptly after receiving
notice thereof, of the time when the Registration Statement or
any amendment thereto has been filed or declared effective or the
Prospectus or Term Sheet or any amendment or supplement thereto
has been filed and will provide evidence satisfactory to the
Representatives of each such filing or effectiveness.

(ii) without charge, provide (x) to each of the Representatives
and to counsel for the Underwriters, an executed and a conformed
copy of the Original Registration Statement and each amendment
thereto or any Rule 462(b) Registration Statement (in each case
including exhibits thereto), (y) to each other Underwriter, a
conformed copy of the Original Registration Statement and each
amendment thereto or any Rule 462(b) Registration Statement (in
each case without exhibits thereto), and (z) so long as a
prospectus relating to the Shares is required to be delivered
under the Securities Act, as many copies of each Preliminary
Prospectus or the Prospectus or any amendment or supplement
thereto as the Representatives may reasonably request. Without
limiting the application

-5-
<PAGE>

of clause (z) of the preceding sentence, the Company, not later
than (I) 9:00 A.M., New York City time, on the business day
following the date of determination of the public offering price,
if such determination occurred at or prior to 12:00 noon, New
York City time, on such date or (II) 9:00 A.M., New York City
time, on the second business day following the date of
determination of the public offering price, if such determination
occurred after 12:00 noon, New York City time, on such date, will
deliver to the Underwriters, without charge, as many copies of
the Prospectus and any amendment or supplement thereto as the
Representatives may reasonably request for purposes of confirming
orders that are expected to settle on the First Closing Date. The
Company will provide or cause to be provided to each of the
Representatives, and to each Underwriter that so requests in
writing, a copy of each report on Form SR filed by the Company as
required by Rule 463 under the Securities Act.

(iii) advise the Representatives, promptly after receiving
notice or obtaining knowledge thereof, of (w) the issuance by the
Commission of any stop order suspending the effectiveness of the
Original Registration Statement or any amendment thereto or any
Rule 462(b) Registration Statement or any order preventing or
suspending the use of any Preliminary Prospectus or the
Prospectus or any amendment or supplement thereto, (x) the
suspension of the qualification of the Shares for offering or
sale in any jurisdiction, (y) the institution, threatening or
contemplation of any proceeding for any such purpose, or (z) any
request made by the Commission for amending the Original
Registration Statement or any Rule 462(b) Registration Statement,
for amending or supplementing the Prospectus or for additional
information. The Company will use all reasonable efforts to
prevent the issuance of any such stop order and, if any such stop
order is issued, to obtain the withdrawal thereof as promptly as
possible.

(b) The Company will arrange for the qualification of the Shares for
offering and sale in each jurisdiction as the Representatives shall reasonably
designate including, but not limited to, pursuant to applicable state securities
("Blue Sky") laws of certain states of the United States of America or other
U.S. jurisdictions, and the Company shall maintain such qualifications in effect
for so long as may be necessary in order to complete the placement of the
Shares; provided, however, that the Company shall not be obliged to file any
-----------------
general consent to service of process or to qualify as a foreign corporation or
as a securities dealer in any jurisdiction or to subject itself to taxation in
respect of doing business in any jurisdiction in which it is not otherwise so
subject.

(c) If, at any time prior to the final date when a prospectus relating
to the Shares is required to be delivered under the Securities Act, any event
occurs as a result of which the Prospectus, as then amended or supplemented,
would include any untrue statement of a

-6-
<PAGE>

material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, or if for any other reason it shall be necessary at any
time to amend or supplement the Registration Statement or the Prospectus to
comply with the Securities Act or the rules or regulations of the Commission
thereunder or applicable law, the Company will promptly notify the
Representatives thereof and will promptly, at its own expense, but subject to
the second full sentence of Section 3(a)(i) hereof: (x) prepare and file with
the Commission an amendment or supplement to the Registration Statement or
Prospectus which will correct such statement or omission or effect such
compliance; and (y) supply any amended or supplemented Prospectus to the
Underwriters in such quantities as the Underwriters may reasonably request.

(d) The Company will make generally available to the Company's
securityholders and to the Representatives as soon as practicable an earnings
statement that satisfies the provisions of Section 11(a) of the Securities Act,
including Rule 158 thereunder.

(e) The Company will apply the net proceeds from the sale of the
Shares as set forth under "Use of Proceeds" in the Prospectus.

(f) The Company will not, and will not allow any subsidiary to,
publicly announce any intention to, and will not itself, and will not allow any
subsidiary to, without the prior written consent of Deutsche Morgan Grenfell
Inc., on behalf of the Underwriters, (i) offer, pledge, sell, offer to sell,
contract to sell, sell any option or contract to purchase, purchase any option
to sell, grant any option, right or warrant to purchase, or otherwise transfer
or dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into, or exercisable or exchangeable for, Common Stock,
or (ii) enter into any swap or other agreement that transfers, in whole or in
part, any of the economic consequences of ownership of the shares of Common
Stock or securities convertible into, or exercisable or exchangeable for, shares
of Common Stock (whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of shares of Common Stock or such other
securities, in cash or otherwise), for a period beginning from the date hereof
and continuing to and including the date 180 days after the date hereof, except
pursuant to this Agreement and other than with respect to (x) shares of Common
Stock to be issued upon the exercise of warrants to purchase shares of Common
Stock, or upon conversion or exchange of securities convertible or exchangeable
into shares of Common Stock, in each case, which are outstanding on the date
hereof and disclosed in the Prospectus, and (y) shares of Common Stock (or any
securities convertible into, exercisable for or exchangeable for shares of
Common Stock) issued or issuable pursuant to any employee benefit plans,
qualified stock option plans or other employee compensation plans which are
disclosed in the Prospectus.

(g) For a period beginning from the date hereof and continuing to and
including the date 180 days after the date hereof, neither the Company nor any
of its affiliates, nor any person acting on behalf of any of them will, directly
or indirectly, (i) take any action designed to cause or to result in, or that
has constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company to

-7-
<PAGE>

facilitate the sale or resale of the Shares or (ii) (x) sell, bid for, purchase,
or pay anyone any compensation for soliciting purchases of, the Shares or (y)
pay or agree to pay to any person any compensation for soliciting another to
purchase any other securities of the Company.

(h) The Company will obtain the agreements described in Section 7(f)
hereof prior to the First Closing Date.

(i) If at any time during the 25-day period after the Registration
Statement becomes effective or during the period prior to any Closing Date, any
rumor, publication or event relating to or affecting the Company shall occur as
a result of which in the Representatives' sole judgment the market price of the
Shares has been or is likely to be materially affected (regardless of whether
such rumor, publication or event necessitates a supplement to or amendment of
the Prospectus), the Company will, after notice from the Representatives
advising the Company to the effect set forth above, forthwith prepare, consult
with the Representatives concerning the substance of, and disseminate a press
release or other public statement reasonably satisfactory to the Representatives
responding to or commenting on such rumor, publication or event.

(j) If the Company elects to rely on Rule 462(b), the Company shall
both file the Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) and pay the applicable fees in accordance with Rule
111 promulgated under the Securities Act by the earlier of (i) 10:00 P.M. New
York City time on the date of this Agreement and (ii) the time confirmations are
sent or given, as specified by Rule 462(b)(2) under the Securities Act.

(k) The Company will cause the Shares to be duly included for
quotation on the Nasdaq National Market prior to the First Closing Date. The
Company will use all reasonable efforts to ensure that the Shares remain
included for quotation on the Nasdaq National Market following the First Closing
Date.

Section 4. Expenses. The Company shall bear and pay all costs and expenses
--------
incurred incident to the performance of its obligations under this Agreement,
whether or not the transactions contemplated herein are consummated or this
Agreement is terminated pursuant to Section 9 hereof, including: (i) fees and
expenses of preparation, issuance and delivery of this Agreement to the
Underwriters; (ii) the fees and expenses of its counsel, accountants and any
other experts or advisors retained by the Company; (iii) fees and expenses
incurred in connection with the registration of the Shares under the Securities
Act and the preparation and filing of the Registration Statement, the Prospectus
and all amendments and supplements thereto; (iv) the printing and distribution
of the Prospectus and any Preliminary Prospectus and the printing and production
of all other documents connected with the Offering (including this Agreement and
any other related agreements); (v) expenses related to the qualification of the
Shares under the state securities or Blue Sky laws, including filing fees and
the reasonable fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of any Blue Sky
memoranda; (vi) the filing fees and expenses, if any, incurred with respect to
any filing with the National Association of Securities Dealers, Inc., including
the reasonable fees and disbursements of counsel for the Underwriters in
connection therewith; (vii) all expenses arising from the quoting of the Shares
on the Nasdaq National Market; (viii) all arrangements relating to

-8-
<PAGE>

the preparation, issuance and delivery to the Underwriters of any certificates
evidencing the Shares, including transfers agent's and registrar's fees; (ix)
the costs and expenses of the "roadshow" and any other meetings with prospective
investors in the Shares (other than as shall have been specifically approved by
the Representatives to be paid for by the Underwriters); and (x) the costs and
expenses of advertising relating to the Offering (other than as shall have been
specifically approved by the Representatives to be paid for by the
Underwriters).

Section 5. Representations And Warranties.
------------------------------

(a) As a condition of the obligation of the Underwriters to underwrite
and purchase the Shares, the Company represents and warrants to, and agrees
with, each of the several Underwriters as follows:

Registration Statement and Prospectus
-------------------------------------

(i) The Original Registration Statement, including the
Preliminary Prospectus, has been filed by the Company with the
Commission under the Securities Act, and one or more amendments to
such Registration Statement may have been so filed. After the
execution of this Agreement, the Company will file with the Commission
either (x) if such Registration Statement, as it may have been
amended, has been declared by the Commission to be effective under the
Securities Act, either (I) if the Company relies on Rule 434 under the
Securities Act, a Term Sheet relating to the Shares that shall
identify the Preliminary Prospectus that it supplements containing
such information as is required or permitted by Rules 434, 430A and
424(b) under the Securities Act or (II) if the Company does not rely
on Rule 434 under the Securities Act, a prospectus in the form most
recently included in an amendment to such Registration Statement (or,
if no such amendment shall have been filed, in such Registration
Statement), with such changes or insertions as are required by Rule
430A under the Securities Act or permitted by Rule 424(b) under the
Securities Act, and in the case of either clause (I) or (II) of this
sentence, as have been provided to and not objected to by the
Representatives prior to the execution of this Agreement, or (y) if
such Registration Statement, as it may have been amended, has not been
declared by the Commission to be effective under the Securities Act,
an amendment to such Registration Statement, including a form of
prospectus, a copy of which amendment has been furnished to and
approved by the Representatives prior to the execution of this
Agreement. The Company may also file a Rule 462(b) Registration
Statement with the Commission for the purpose of registering certain
additional Shares, which registration shall be effective upon filing
with the Commission.

(ii) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus. When any
Preliminary Prospectus was filed with the Commission, it (x) contained
all statements required to be stated therein in accordance with, and
complied in all material respects with

-9-
<PAGE>

the requirements of, the Securities Act and the rules and regulations
of the Commission thereunder and (y) with regard to the Registration
Statement, did not include any untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not misleading; and,
with regard to the Prospectus, did not include any untrue statement of
a material fact or omit to state any material fact necessary in order
to make the statements, in the light of the circumstances under which
they were made, not misleading. When the Registration Statement or any
amendment thereto was or is declared effective, it (I) contained or
will contain all statements required to be stated therein in
accordance with, and complied or will comply in all material respects
with the requirements of, the Securities Act and the rules and
regulations of the Commission thereunder and (II) did not or will not
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading. When the Prospectus or any Term
Sheet that is a part thereof or any amendment or supplement to the
Prospectus is filed with the Commission pursuant to Rule 424(b) (or,
if the Prospectus or such amendment or supplement is not required to
be so filed, when the Registration Statement or the amendment thereto
containing the Prospectus or such amendment or supplement to the
Prospectus was or is declared effective) and on the Closing Date, the
Prospectus, as amended or supplemented at any such time, (A) contained
or will contain all statements required to be stated therein in
accordance with, and complied or will comply in all material respects
with the requirements of, the Securities Act and the rules and
regulations of the Commission thereunder and (B) did not or will not
include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. The foregoing provisions of this paragraph (ii) do not
apply to (x) statements or omissions made in any Preliminary
Prospectus, the Registration Statement or any amendment thereto or the
Prospectus or any amendment or supplement thereto in reliance upon and
in conformity with written information furnished to the Company by any
Underwriter through the Representatives specifically for use therein
and (y) statements or omissions made in any Preliminary Prospectus,
the Registration Statement or any amendment thereto that is corrected
in the Prospectus (or any amendment or supplement thereto) where
delivery of the Prospectus (as amended or supplemented) was required
by the Securities Act.

(iii) If the Company has elected to rely on Rule 462(b) and the
Rule 462(b) Registration Statement is not effective, (x) the Company
will file a Rule 462(b) Registration Statement in compliance with, and
that is effective upon filing pursuant to, Rule 462(b) and (y) the
Company has given irrevocable instructions for transmission of the
applicable filing fee in connection with the filing of the Rule 462(b)
Registration Statement, in compliance with Rule 111 under the
Securities Act, or the Commission has received payment of such filing
fee.

-10-
<PAGE>

(iv) If the Company has elected to rely on Rule 434 under the
Securities Act, the Prospectus is not "materially different", as such
term is used in Rule 434, from the prospectus included in the
Registration Statement at the time of its effectiveness or an
effective post-effective amendment thereto (including such information
that is permitted to be omitted pursuant to Rule 430A under the
Securities Act);

(v) The Company has not distributed and, prior to the later of
(x) any Closing Date and (y) the completion of the distribution of the
Shares, will not distribute any offering material in connection with
the Offering other than the Registration Statement or any amendment
thereto, any Preliminary Prospectus or the Prospectus or any amendment
or supplement thereto.

(vi) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus (x) the
Company has not incurred any material liability or obligation, direct
or contingent, nor entered into any material transaction not in the
ordinary course of business; (y) the Company has not purchased any of
its outstanding capital stock (other than the repurchase of Common
Stock approved by Deutsche Morgan Grenfell Inc. pursuant to repurchase
rights contained in certain Restricted Stock Purchase Agreements to
which the Company is a party), nor declared, paid or otherwise made
any dividend or distribution of any kind on its capital stock; and (z)
there has not been any material change in the capital stock, short-
term or long-term debt of the Company, except in each case as
described in or contemplated by the Prospectus.

The Shares
----------

(vii) The Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus. All of the issued
shares of capital stock of the Company have been duly authorized and
validly issued and are fully paid and nonassessable, have been issued
in compliance with all applicable federal and state securities laws
and were not issued in violation of or subject to any preemptive
rights or other rights (which have not been waived) to subscribe for
or purchase such securities. The Shares have been duly authorized by
all necessary corporate action of the Company and, after payment
therefor in accordance herewith, will be validly issued, fully paid
and nonassessable at the Closing Date. The Common Stock of the
Company conforms in all material respects to the description thereof
in the Registration Statement and the Prospectus. The issuance of the
Shares is not subject to any preemptive rights or similar contractual
rights (which have not been waived) to purchase securities in
connection with any issuance thereof by the Company. No holder of
securities of the Company has any right which has not been fully
exercised or waived to require the Company to register the offer or
sale of any securities owned by such holder under the Securities Act
in the Offering contemplated by this Agreement.

-11-
<PAGE>

(viii) Except as disclosed in the Prospectus, there are no
outstanding (x) securities or obligations of the Company convertible
into or exchangeable for any capital stock of the Company, (y)
warrants, rights or options to subscribe for or purchase from the
Company any such capital stock or any such convertible or exchangeable
securities or obligations, or (z) obligations of the Company to issue
any shares of capital stock, any such convertible or exchangeable
securities or obligations, or any such warrants, rights or options.

(ix) The Company does not own any shares of stock or any other
equity securities of any corporation or have any equity interest in
any firm, partnership, association or other entity, except for all of
the outstanding capital stock of Corsair Communications Mexico, S.A.
DE C.V. (the "Subsidiary").

Listing
-------

(x) All of the Shares have been duly authorized and accepted for
quotation on the Nasdaq National Market, subject to official notice of
issuance.

Market manipulation
-------------------

(xi) Neither the Company nor any of its affiliates, nor any
person acting on behalf of any of them has, directly or indirectly,
(x) taken any action designed to cause or to result in, or that has
constituted or which might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares, or (y) since
the filing of the Original Registration Statement (I) sold, bid for,
purchased, or paid anyone any compensation for soliciting purchases
of, the Shares or (II) paid or agreed to pay to any person any
compensation for soliciting another to purchase any other securities
of the Company.

Corporate power and authority
-----------------------------

(xii) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the law of its
jurisdiction of incorporation with full power and authority to own,
lease and operate its properties and assets and conduct its business
as described in the Prospectus, is duly qualified to transact business
and is in good standing in each jurisdiction in which its ownership,
leasing or operation of its properties or assets or the conduct of its
business requires such qualification, except where the failure to be
so qualified does not amount to a material liability or disability to
the Company and has full power and authority to execute and perform
its obligations under this Agreement;.

(xiii) The execution and delivery of this Agreement and the
issuance and sale of the Shares have been duly authorized by all
necessary corporate action of the Company, and this Agreement has been
duly executed and delivered by

-12-
<PAGE>

the Company and is the valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.

(xiv) The Company is not in violation of its charter documents
or by-laws. The issuance, offering and sale of the Shares to the
Underwriters by the Company pursuant to this Agreement, the compliance
by the Company with the other provisions of this Agreement and the
consummation of the other transactions herein contemplated do not (x)
require the consent, approval, authorization, registration or
qualification of or with any governmental authority, except such as
have been obtained or made or such as may be required by the state
securities or Blue Sky laws of the various states of the United States
of America or other U.S. jurisdictions in connection with the offer
and sale of the Shares by the Underwriters, or (y) conflict with or
result in a breach or violation of any of the material terms and
provisions of, or constitute a default under, any material indenture,
mortgage, deed of trust, lease or other agreement or instrument to
which the Company is a party or by which the Company or any of its
properties are bound, or the charter documents or by-laws of the
Company, or any statute or any judgment, decree, order, rule or
regulation of any court or other governmental authority or any
arbitrator applicable to the Company.

(xv) The Company is not, and will conduct its operations in a
manner so that it continues not to be, an "investment company" and,
after giving effect to the Offering and the application of the
proceeds therefrom, will not be an "investment company", as such term
is defined in the Investment Company Act of 1940, as amended (the
"1940 Act").

Title, licenses and consents
----------------------------

(xvi) The Company has good and marketable title in fee simple to
all items of real property and marketable title to all personal
property owned by it, in each case free and clear of any security
interests, liens, encumbrances, equities, claims and other defects,
except such as do not materially and adversely affect the value of
such property and do not interfere with the use made or proposed to be
made of such property by the Company and any real property and
buildings held under lease by the Company are held under valid,
subsisting and enforceable leases, with such exceptions as are not
material and do not interfere with the use made or proposed to be made
of such property and buildings by the Company, in each case except as
described in or contemplated by the Prospectus; and no claim has been
asserted by anyone adverse to the Company's rights as lessee under any
of such leases, or affecting or questioning the Company's right to the
continued possession of the leased premises.

(xvii) The Company owns or possesses sufficient rights in, or
can acquire on reasonable terms, all material patents, patent
applications, trademarks, service marks, trade names, licenses, know-
how, copyrights, trade secrets and

-13-
<PAGE>

proprietary or other confidential information necessary to operate the
business now operated by it, and the Company has not received any
notice of, and has no knowledge of, any infringement of or conflict
with rights of any third party with respect to any of the foregoing
which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a materially adverse effect on
or constitute a materially adverse change in, or constitute a
development involving a prospective materially adverse effect on or
change in, the condition (financial or otherwise), earnings,
properties, business affairs or business prospects, stockholders'
equity, net worth or results of operations of the Company, except as
described in or contemplated by the Prospectus.

(xviii) The Company possesses all consents, licenses,
certificates, authorizations and permits issued by the appropriate
federal, state or foreign regulatory authorities necessary to conduct
its business as now conducted and as proposed to be conducted in the
Prospectus, and the Company has not received any notice of proceedings
relating to the revocation or modification of any such certificate,
authorization or permit which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a
materially adverse effect on or constitute a materially adverse change
in, or constitute a development involving a prospective materially
adverse effect on or change in, the condition (financial or
otherwise), earnings, properties, business affairs or business
prospects, net worth or results of operations of the Company, except
as described in or contemplated by the Prospectus.

Financial statements
--------------------

(xix) KPMG Peat Marwick LLP who have certified certain financial
statements of the Company and delivered their report with respect to
the audited financial statements and schedules included in the
Registration Statement and the Prospectus, are independent public
accountants as required by the Securities Act and the applicable rules
and regulations thereunder.

(xx) The financial statements and schedules of the Company
included in the Registration Statement and the Prospectus were
prepared in accordance with generally accepted accounting principles
("GAAP") consistently applied throughout the periods involved (except
as otherwise noted therein) and they present fairly the financial
condition of the Company as of the dates at which they were prepared
and the results of operations of the Company in respect of the periods
for which they were prepared.

Internal Accounting Controls
----------------------------

(xxi) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that (w)
transactions are executed in accordance with management's general or
specific authorizations; (x) transactions

-14-
<PAGE>

are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset
accountability; (y) access to assets is permitted only in accordance
with management's general or specific authorization; and (z) the
recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with
respect to any differences.

Litigation; Disclosure
----------------------

(xxii) No legal or governmental proceedings are pending or
threatened to which the Company is a party or to which the property of
the Company is subject that are required to be described in the
Registration Statement or the Prospectus and are not described
therein; and there are no statutes, regulations, contracts or other
documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described therein or filed as
required.

Dividends and Distributions
---------------------------

(xxiii) The Company is not currently prohibited, directly or
indirectly, from paying any dividends, making any other distribution
on its capital stock, in each case except as described in or
contemplated by the Prospectus.

Taxes
-----

(xxiv) The Company has filed all foreign, federal, state and
local tax returns that are required to be filed or has requested
extensions of the time for filing thereof (except in any case in which
the failure so to file would not have a materially adverse effect on
the Company) and has paid all taxes required to be paid by it and any
other assessment, fine or penalty levied against it, to the extent
that any of the foregoing is due and payable, except for any such
assessment, fine or penalty that is currently being contested in good
faith or as described in or contemplated by the Prospectus.

Insurance
---------

(xxv) The Company is insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which it is engaged;
the Company has not been refused any insurance coverage sought or
applied for; and the Company has no reason to believe that it will not
be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not
materially and adversely affect the condition (financial or
otherwise), earnings, properties, business affairs or business
prospects, net worth or results of

-15-
<PAGE>

operations of the Company, except as described in or contemplated by
the Prospectus.

Pension and Labor
-----------------

(xxvi) The Company is in compliance in all material respects
with all presently applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended, including the regulations and
published interpretations thereunder ("ERISA"); no "reportable event"
(as defined in ERISA) has occurred with respect to any "pension plan"
(as defined in ERISA) for which the Company would have any liability;
the Company has not incurred and does not expect to incur liability
under (i) Title IV of ERISA with respect to termination of, or
withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of
the Internal Revenue Code of 1986, as amended, including the
regulations and published interpretations thereunder (the "Code"); and
each "pension plan" for which the Company would have any liability
that is intended to be qualified under Section 401(a) of the Code is
so qualified in all material respects and nothing has occurred,
whether by action or by failure to act, which would cause the loss of
such qualification.

(xxvii) No labor dispute with the employees of the Company
exists or is threatened or imminent that could have a materially
adverse effect on or constitute a materially adverse change in, or
constitute a development involving a prospective materially adverse
effect on or change in, the condition (financial or otherwise),
properties, management, earnings, business affairs or business
prospects, net worth or results of operations of the Company, except
as described in or contemplated by the Prospectus.

Environmental
-------------

(xxviii) The Company is not in violation of any federal or state
law or regulation relating to occupational safety and health or to the
storage, handling or transportation of hazardous or toxic materials
and the Company has received all permits, licenses or other approvals
required of it under applicable federal and state occupational safety
and health and environmental laws and regulations to conduct its
business, and the Company is in compliance with all terms and
conditions of any such permit, license or approval, except any such
violation of law or regulation, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals which would not,
singly or in the aggregate, have a materially adverse effect on or
constitute a materially adverse change in, or constitute a development
involving a prospective materially adverse effect on or change in, the
condition (financial or otherwise), earnings, properties, business
affairs or business prospects, net worth or results of operations of
the Company, except as described in or contemplated by the Prospectus.

-16-
<PAGE>

Other Agreements
----------------

(xxix) No default by the Company exists, and no event has
occurred which, with notice or lapse of time or both, would constitute
a default by the Company in the due performance and observance of any
material term, covenant or condition of any material indenture,
mortgage, deed of trust, lease or other agreement or instrument to
which the Company is a party or by which the Company or any of its
properties is bound.

Absence of Materially Adverse Change
------------------------------------

(xxx) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus: (A) the
Company has not incurred any material liabilities or obligations,
direct or contingent, not in the ordinary course of business, nor has
it entered into any material transaction not in the ordinary course of
business; (B) no legal or governmental proceeding affecting the
Company has been instituted or threatened which is materially adverse
to the condition (financial or otherwise), management, earnings,
property, business affairs or business prospects, stockholders'
equity, net worth or results of operations of the Company; (C) the
Company has not sustained any material loss or interference with its
business or properties from fire, flood, hurricane, accident or other
calamity, whether or not covered by insurance, or from any labor
dispute or any legal or governmental proceeding; and (D) there has
been no materially adverse change (including, without limitation, a
change in management or control), or development involving a
prospective materially adverse change, in the condition (financial or
otherwise), management, earnings, property, business affairs or
business prospects, stockholders' equity, net worth or results of
operations of the Company, other than as described in or contemplated
by the Prospectus (exclusive of any amendments or supplements
thereto).

(xxxi) No receiver or liquidator (or similar person) has been
appointed in respect of the Company or in respect of any part of the
assets of the Company; no resolution, order of any court, regulatory
body, governmental body or otherwise, or petition or application for
an order, has been passed, made or presented for the winding up of the
Company or for the protection of the Company from its creditors; and
the Company has not stopped or suspended payments of its debts, become
unable to pay its debts or otherwise become insolvent. The Company
has complied with all provisions of Section 517.075, Florida statutes
relating to doing business with the Government of Cuba or with any
person or affiliate located in Cuba.

The Subsidiary
--------------

(xxxii) All of the issued shares of capital stock of the
Subsidiary have been duly authorized and validly issued and are fully
paid and nonassessable,

-17-
<PAGE>

have been issued in compliance with all applicable securities laws and
were not issued in violation of or subject to any preemptive rights or
other rights to subscribe for or purchase such securities. There are
no outstanding (x) securities or obligations of the Subsidiary
convertible into or exchangeable for any capital stock of the
Subsidiary, (y) warrants, rights or options to subscribe for or
purchase from the Subsidiary any such capital stock or any such
convertible or exchangeable securities or obligations, or (z)
obligations of the Subsidiary to issue any shares of capital stock,
any such convertible or exchangeable securities or obligations, or any
such warrants, rights or options. The Subsidiary does not conduct any
business, own, lease or operate any properties or assets, which in the
aggregate are material with respect to the Company.

(b) The above representations and warranties shall be deemed to be
repeated at each Closing, and all references therein to the Shares and the
Closing Date shall be deemed to refer to the Firm Shares or the Option Shares
and the First Closing Date or the applicable Option Closing Date, each as
applicable.

Section 6. Indemnity.
---------

(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning of
Section 15 of the Securities Act or Section 20 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), against any and all losses, claims,
damages or liabilities, joint or several, to which such Underwriter or such
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon:

(i) any untrue statement or alleged untrue statement made by the
Company in Section 5 hereof,

(ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any
amendment thereto, any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or

(iii) the omission or alleged omission to state in the
Registration Statement or any amendment thereto a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or the omission or alleged omission to
state in any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto a material fact required to be
stated therein or necessary to make the statements therein, in
the light of the circumstances in which they were made, not
misleading,

and will reimburse, as incurred, each Underwriter and each such controlling
person for any legal or other costs or expenses reasonably incurred by such
Underwriter or such controlling person in

-18-
<PAGE>

connection with investigating, defending against or appearing as a third-party
witness in connection with any such loss, claim, damage, liability or action;
provided, however, that the Company will not be liable in any such case to the
- -----------------
extent that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or alleged untrue statement or omission or alleged
omission made in the Registration Statement or any amendment thereto, any
Preliminary Prospectus, the Prospectus or any amendment or supplement thereto in
reliance upon and in conformity with written information furnished to the
Company by such Underwriter through the Representatives specifically for use
therein; and provided further, that the Company will not be liable to any
----------------
Underwriter or any person controlling such Underwriter with respect to any such
untrue statement or alleged untrue statement, or omission or alleged omission
made in any Preliminary Prospectus that is corrected in the Prospectus (or any
amendment or supplement thereto) if the person asserting any such loss, claim,
damage or liability purchased Shares from such Underwriter but was not sent or
given a copy of the Prospectus (as amended or supplemented) in any case where
such delivery of the Prospectus (as amended or supplemented) was required by the
Securities Act, unless such failure to deliver the Prospectus (as amended or
supplemented) was a result of noncompliance by the Company with Section 3
hereof. The indemnity provided for in this Section 6 shall be in addition to any
liability which the Company may otherwise have. The Company will not, without
the prior written consent of the Representatives, settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be sought hereunder
(whether or not any such Representatives or any person who controls any such
Representatives is a party to such claim, action, suit or proceeding), unless
such settlement, compromise or consent includes an unconditional release of all
of the Underwriters and such controlling persons from all liability arising out
of such claim, action, suit or proceeding.

(b) Each Underwriter, severally and not jointly, will indemnify and
hold harmless the Company, each of its directors, each of its officers who
signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act against any losses, claims, damages or liabilities to which the
Company or any such director, officer or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
(i) any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto
or (ii) the omission or the alleged omission to state therein a material fact
required to be stated in the Registration Statement or any amendment thereto,
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company by such
Underwriter through the Representatives specifically for use therein, and,
subject to the limitation set forth immediately preceding this clause, will
reimburse, as incurred, any legal or other expenses reasonably incurred by the
Company or any such director, officer or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or

-19-
<PAGE>

any action in respect thereof. The remedies provided for in this Section 6 are
not exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.

(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to paragraph (a) or (b) of this Section 6, such person (for
purposes of this paragraph (c), the "indemnified party") shall, promptly after
receipt by such party of notice of the commencement of such action, notify the
person against whom such indemnity may be sought (for purposes of this paragraph
(c), the "indemnifying party"), but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 6 (or, to the extent of
prejudice, under this Section 6). In case any such action is brought against
any indemnified party, and it notifies the indemnifying party of the
commencement thereof, the indemnifying party will be entitled to participate
therein and, to the extent that it may wish, jointly with any other indemnifying
party similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party; provided, however, that if the
-----------------
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be one or more legal defenses available to it and/or other
indemnified parties which are different from or additional to those available to
the indemnifying party, the indemnifying party shall not have the right to
direct the defense of such action on behalf of such indemnified party or parties
and such indemnified party or parties shall have the right to select separate
counsel to defend such action on behalf of such indemnified party or parties.
After notice from the indemnifying party to such indemnified party of its
election so to assume the defense of any such action and approval (subject to
the reasonableness standard) by such indemnified party of counsel appointed to
defend such action, the indemnifying party will not be liable to such
indemnified party under this Section 6 for any legal or other expenses, other
than reasonable costs of investigation, subsequently incurred by such
indemnified party in connection with the defense thereof, unless (i) the
indemnified party shall have employed separate counsel in accordance with the
proviso to the next preceding sentence (it being understood, however, that in
connection with such action the indemnifying party shall not be liable for the
expenses of more than one separate counsel (in addition to local counsel) in any
one action or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or circumstances,
designated in writing by the Representatives in the case of paragraph (a) of
this Section 6, representing the indemnified parties under such paragraph (a)
who are parties to such action or actions), or (ii) the indemnifying party does
not promptly retain counsel satisfactory to the indemnified party, or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party. All fees and expenses
reimbursed pursuant to this paragraph (c) shall be reimbursed as they are
incurred. After such notice from the indemnifying party to such indemnified
party, the indemnifying party will not be liable for the costs and expenses of
any settlement of such action effected by such indemnified party without the
consent of the indemnifying party.

-20-
<PAGE>

(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 6 is unavailable or insufficient, for
any reason, to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the Offering or (ii) if the allocation
provided by the foregoing clause (i) is not permitted by applicable law, not
only such relative benefits but also the relative fault of the indemnifying
party or parties on the one hand and the indemnified party on the other in
connection with the acts, statements or omissions or alleged acts, statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and the Underwriters on the other shall be deemed to be in the same proportion
as the total proceeds from the Offering (before deducting expenses) received by
the Company bear to the total underwriting discounts and commissions received by
the Underwriters. The relative fault of the parties shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or the Underwriters, the parties'
relative intents, knowledge, access to information and opportunity to correct or
prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances. The Company and the Underwriters agree that
it would not be equitable if the amount of such contribution were determined by
pro rata or per capita allocation (even if the Underwriters were treated as one
- -------- ----------
entity for such purpose) or by any other method of allocation that does not take
into account the equitable considerations referred to above in this paragraph
(d). Notwithstanding any other provision of this paragraph (d), no Underwriter
shall be obligated to make contributions hereunder that in the aggregate exceed
the total public offering price of the Shares purchased by such Underwriter
under this Agreement, less the aggregate amount of any damages that such
Underwriter has otherwise been required to pay in respect of the same or any
substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
hereunder are several in proportion to their respective underwriting obligations
and not joint, and contributions among Underwriters shall be governed by the
provisions of the Deutsche Morgan Grenfell Inc. Master Agreement Among
Underwriters. For purposes of this paragraph (d), each person, if any, who
controls an Underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act shall have the same rights to contribution as
such Underwriter, and each director of the Company, each officer of the Company
who signed the Registration Statement and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, shall have the same rights to contribution as the Company.

Section 7. Conditions Precedent. The obligations of the several Underwriters
--------------------
to purchase and pay for the Shares shall be subject, in the sole discretion of
the Representatives (exercising

-21-
<PAGE>

such discretion and acting on behalf of all the Underwriters), to the accuracy
of the representations and warranties of the Company contained herein as of the
date hereof and as of each Closing Date, as if made on and as of each Closing
Date, to the performance by the Company of its covenants and agreements
hereunder and to the following additional conditions:

(a) (i) If the Original Registration Statement or any amendment
thereto filed prior to the First Closing Date has not been declared effective as
of the time of execution hereof, the Original Registration Statement or such
amendment shall have been declared effective not later than 6:00 P.M. New York
City time on the date of determination of the public offering price, if such
determination occurred at or prior to 4:30 P.M. New York City time on such date,
or 12:00 Noon New York City time on the business day following the day on which
the public offering price was determined, if such determination occurred after
4:30 P.M. New York City time on such date, and (ii) if the Company has elected
to rely upon Rule 462(b), the Rule 462(b) Registration Statement shall have been
declared effective not later than the time confirmations are sent or given as
specified by Rule 462(b)(2), or such later time and date as shall have been
consented to by the Representatives; if required, the Prospectus or any Term
Sheet that constitutes a part thereof and any amendment or supplement thereto
shall have been filed with the Commission in the manner and within the time
period required by Rules 434 and 424(b) under the Securities Act; no stop order
suspending the effectiveness of the Registration Statement or any amendment
thereto shall have been issued, and no proceedings for that purpose shall have
been instituted or threatened or, to the knowledge of the Company or the
Representatives, shall be contemplated by the Commission; and the Company shall
have complied with any request of the Commission for additional information (to
be included in the Registration Statement or the Prospectus or otherwise).

(b) The Representatives shall have received a legal opinion from
Brobeck Phleger & Harrison LLP, counsel for the Company, dated the Closing Date,
to the effect that:

(i) the Registration Statement is effective under the Securities
Act; any required filing of the Prospectus, or any Term Sheet
that constitutes a part thereof, pursuant to Rules 434 and 424(b)
has been made in the manner and within the time period required
by Rules 434 and 424(b); and no stop order suspending the
effectiveness of the Registration Statement or any amendment
thereto has been issued and, to the best knowledge of such
counsel, no proceedings for that purpose are pending or
threatened by the Commission;

(ii) the Original Registration Statement and each amendment
thereto, any Rule 462(b) Registration Statement and the
Prospectus (in each case, other than the financial statements and
other financial information contained therein, as to which such
counsel need express no opinion) comply as to form in all
material respects with the applicable requirements of the
Securities Act and the rules and regulations of the Commission
thereunder;

-22-
<PAGE>

(iii) nothing has come to the attention of such counsel which
has caused it to conclude that (in each case, other than the
financial statements and other financial information contained
therein, as to which such counsel need express no belief) (x) the
Registration Statement, as of its effective date, contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make
the statements therein not misleading or (y) the Prospectus, as
of its date or the date of such opinion, included or includes any
untrue statement of a material fact or omitted or omits to state
any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading.

(iv) if the Company elects to rely on Rule 434 under the
Securities Act, the Prospectus is not "materially different", as
such term is used in Rule 434, from the prospectus included in
the Registration Statement at the time of its effectiveness or an
effective post-effective amendment thereto (including such
information that is permitted to be omitted pursuant to Rule 430A
under the Securities Act);

(v) the Company has an authorized, issued and outstanding
capitalization as set forth in the Prospectus; all of the issued
shares of capital stock of the Company have been duly authorized
and validly issued and are to our knowledge fully paid and
nonassessable, have been issued in compliance with all applicable
federal and state securities laws and were not issued in
violation of or subject to any preemptive rights or to our
knowledge other rights (which have not been waived) to subscribe
for or purchase securities; the Shares have been duly authorized
by all necessary corporate action of the Company and, when issued
and delivered to and paid for by the Underwriters pursuant to
this Agreement, will be validly issued, fully paid and
nonassessable; the Common Stock of the Company conforms in all
material respects to the description thereof in the Registration
Statement and the Prospectus; the issuance of the Shares is not
subject to any preemptive rights or similar contractual rights to
purchase securities in connection with any issuance thereof by
the Company; and no holder of securities of the Company to our
knowledge has any right which has not been fully exercised or
waived to require the Company to register the offer or sale of
any securities owned by such holder under the Securities Act in
the Offering contemplated by this Agreement;

(vi) the Company owns all of the outstanding shares of capital
stock of Subsidiary and to counsel's knowledge, the Company does
not own any equity or capital interests in any corporation,
partnership, joint venture, association or other entity.

-23-
<PAGE>

(vii) all of the Shares have been duly authorized and accepted
for quotation on the Nasdaq National Market, subject to official
notice of issuance;

(viii) the Company has been duly organized and is validly
existing as a corporation in good standing under the laws of
Delaware and is duly qualified to transact business as a foreign
corporation and is in good standing under the laws of all other
jurisdictions where the ownership, leasing or operation of its
properties or assets or the conduct of its business requires such
qualification, except where the failure to be so qualified does
not amount to a material liability or disability to the Company;
the Company has full power and authority to own, lease and
operate its properties and assets and conduct its business as
described in the Prospectus, and the Company has corporate power
to enter into this Agreement and to carry out all the terms and
provisions hereof to be carried out by it;

(ix) the statements set forth under the headings "Description of
Capital Stock" and "Management - Benefit Plans" in the
Prospectus, insofar as such statements purport to summarize
certain provisions of the capital stock and employee benefit
plans of the Company, provide an accurate and fair summary of
such provisions; and the statements set forth under the headings
"Business - Legal Proceedings," "Shares Eligible for Future Sale"
and "Certain Transactions" in the Prospectus, insofar as such
statements constitute a summary of the legal matters, documents
or proceedings referred to therein, have been reviewed by such
counsel and accurately and fairly present the information called
for with respect to such legal matters, documents and proceedings
in all material respects as required by the Securities Act and
the rules and regulations thereunder;

(x) the execution and delivery of this Agreement and the issuance
and sale of the Shares have been duly authorized by all necessary
corporate action of the Company, and this Agreement has been
duly executed and delivered by the Company and is the valid and
binding agreement of the Company, enforceable against the Company
in accordance with its terms;

(xi) the Company is not in violation of its charter documents or
by-laws; the issuance, offering and sale of the Shares to the
Underwriters by the Company pursuant to this Agreement, the
compliance by the Company with the other provisions of this
Agreement and the consummation by the Company of the other
transactions herein contemplated do not (x) require the consent,
approval, authorization, registration or qualification of or with
any governmental authority, except such as have been obtained or
such as may be required by the securities or Blue Sky laws of the
various states of

-24-
<PAGE>

the United States of America and other U.S. jurisdictions in
connection with the offer and sale of the Shares by the
Underwriters, or (y) conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, lease or
other agreement or instrument, known to such counsel and filed as
an exhibit to the Registration Statement, to which the Company is
a party or by which the Company or any of its properties is
bound, or the charter documents or by-laws of the Company, or any
Federal, California or Delaware statute or any judgment, decree,
order, rule or regulation of any court or other governmental
authority or any arbitrator known to such counsel and applicable
to the Company;

(xii) the Company is not an "investment company" and, after
giving effect to the Offering and the application of the proceeds
therefrom, will not be an "investment company", as such term is
defined in the 1940 Act; and

(xiii) such counsel does not know of any legal or governmental
proceedings pending or threatened to which the Company is a party
or to which the property of the Company is subject that are
required to be described in the Registration Statement or the
Prospectus and are not described therein or any statutes,
regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement that are not
described therein or filed as required.

In rendering any such opinion, such counsel may rely, as to matters of
fact, to the extent such counsel deems proper, on certificates of responsible
officers of the Company and public officials and, as to matters involving the
application of laws of any jurisdiction other than the States of California and
Delaware or the United States, on the opinion of other counsel.

References to the Registration Statement and the Prospectus in this
paragraph (b) shall include any amendment or supplement thereto at the date of
such opinion. The opinions of Company counsel described herein shall be
rendered to the Underwriters at the request of the Company and shall so state
therein.

(c) The Representatives shall have received a legal opinion from
Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel for the
Underwriters, dated the Closing Date, covering the issuance and sale of the
Shares, the Registration Statement and the Prospectus, and such other related
matters as the Representatives may reasonably require, and the Company shall
have furnished to such counsel such documents as they may reasonably request for
the purpose of enabling them to pass upon such matters.

-25-
<PAGE>

(d) The Representatives shall have received from KPMG Peat Marwick LLP
a letter or letters dated, respectively, the date hereof and the Closing Date,
in form and substance satisfactory to the Representatives, to the effect that

(i) they are independent accountants with respect to the Company
within the meaning of the Securities Act and the applicable rules
and regulations thereunder;

(ii) in their opinion, the audited financial statements and
schedules examined by them and included in the Registration
Statement and the Prospectus comply in form in all material
respects with the applicable accounting requirements of the
Securities Act and the related published rules and regulations
and Staff Accounting Bulletins with respect to registration
statements on Form S-1;

(iii) on the basis of a reading of the latest available interim
unaudited condensed financial statements of the Company and of
the unaudited financial statements of the Company, carrying out
certain specified procedures (which do not constitute an
examination made in accordance with generally accepted auditing
standards) that would not necessarily reveal matters of
significance with respect to the comments set forth in this
paragraph (iii), a reading of the minute books of the
stockholders, the board of directors and any committees thereof
of the Company, and inquiries of certain officials of the Company
who have responsibility for financial and accounting matters,
nothing came to their attention that caused them to believe that:

(x) the unaudited financial statements of the Company
included in the Registration Statement and the Prospectus do
not comply in form in all material respects with the
applicable accounting requirements of the Securities Act and
the related published rules and regulations thereunder or
are not in conformity with GAAP applied on a basis
substantially consistent with that of the audited financial
statements included in the Registration Statement and the
Prospectus;

(y) the unaudited amounts for revenues and total and per
share amounts of net loss included in the Registration
Statement and the Prospectus do not agree with the amounts
set forth in any unaudited financial statements for those
same periods or are not in conformity with GAAP accounting
principles applied; and

(z) at a specific date not more than five business days
prior to the date of such letter, there were any changes in
the capital stock or long-term debt of the Company or any
decreases in net current

-26-
<PAGE>

assets or stockholders' equity of the Company, in each case
compared with amounts shown on the June 30, 1997 unaudited
balance sheet included in the Registration Statement and the
Prospectus, or for the period from July 1, 1997 to July __,
1997, there were any decreases, as compared with April 1,
1997 to April __, 1997, in sales, revenues, net loss or
total or per share amounts of net loss of the Company,
except in all instances for changes, decreases or increases
set forth in such letter.

(iv) they have carried out certain specified procedures, not
constituting an audit, with respect to certain amounts,
percentages and financial information that are derived from the
general accounting records of the Company and are included in the
Registration Statement and the Prospectus and in Exhibit 11 to
the Registration Statement, and have compared such amounts,
percentages and financial information with such records of the
Company and with information derived from such records and have
found them to be in agreement, excluding any questions of legal
interpretation.

In the event that the letters referred to above set forth any such
changes, decreases or increases, it shall be a further condition to the
obligations of the Underwriters that (I) such letters shall be accompanied by a
written explanation of the Company as to the significance thereof, unless the
Representatives deem such explanation unnecessary, and (II) such changes,
decreases or increases do not, in the sole judgment of the Representatives, make
it impractical or inadvisable to proceed with the purchase and delivery of the
Shares as contemplated by the Registration Statement, as amended as of the date
hereof. References to the Registration Statement and the Prospectus in this
paragraph (d) with respect to either letter referred to above shall include any
amendment or supplement thereto at the date of such letter.

(e) The Company shall have furnished or caused to be furnished to the
Underwriters at the Closing a certificate of its Chairman of the Board, its
President or its Chief Executive Officer and its Chief Financial Officer
satisfactory to the Underwriters to the effect that:

(i) the representations and warranties of the Company in this
Agreement are true and correct as if made on and as of the
Closing Date; the Registration Statement, as amended as of the
Closing Date, does not include any untrue statement of a material
fact or omit to state any material fact necessary to make the
statements therein not misleading, and the Prospectus, as amended
or supplemented as of the Closing Date, does not include any
untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not
misleading; and the Company has performed all covenants and
agreements and satisfied all

-27-
<PAGE>

conditions on its part to be performed or satisfied at or prior
to the Closing Date;

(ii) no stop order suspending the effectiveness of the
Registration Statement or any amendment thereto has been issued,
and no proceedings for that purpose have been instituted or
threatened or, to the best of the Company's knowledge, are
contemplated by the Commission; and

(iii) subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus: (A)
the Company has not incurred any material liabilities or
obligations, direct or contingent, not in the ordinary course of
business, nor has it entered into any material transaction not in
the ordinary course of business; (B) no legal or governmental
proceeding affecting the Company has been instituted or
threatened which is materially adverse to the condition
(financial or otherwise), management, earnings, property,
business affairs or business prospects, stockholders' equity, net
worth or results of operations of the Company; (C) the Company
has not sustained any material loss or interference with its
business or properties from fire, flood, hurricane, accident or
other calamity, whether or not covered by insurance, or from any
labor dispute or any legal or governmental proceeding; and (D)
there has not been any materially adverse change (including,
without limitation, a change in management or control), or
development involving a prospective materially adverse change, in
the condition (financial or otherwise), management, earnings,
properties, business affairs or business prospects, stockholders'
equity, net worth or results of operations of the Company, except
in each case as described in or contemplated by the Prospectus
(exclusive of any amendment or supplement thereto).

(f) The Representatives shall have received from each person who is a
director or officer of the Company and holders of at least one percent of the
outstanding shares of Common Stock an agreement dated on or before the date of
this Agreement to the effect that such person will not publicly announce any
intention to and will not, without the prior written consent of Deutsche Morgan
Grenfell Inc. on behalf of the Underwriters, (i) offer, pledge, sell, offer to
sell, contract to sell, sell any option or contract to purchase, purchase any
option to sell, grant any option right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any of the shares of Common
Stock or any securities convertible into, or exercisable or exchangeable for,
Common Stock, or (ii) enter into any swap or other arrangement that transfers,
in whole or in part, any of the economic consequences of ownership of the shares
of Common Stock or any securities convertible into, or exercisable or
exchangeable for, shares of Common Stock (whether any such transaction described
in clause (i) or (ii) above is to be settled by delivery of (A) shares of Common
Stock, (B) securities convertible into, or exercisable or exchangeable for,
Common Stock, (C) in cash or (D) otherwise), in each case, beneficially owned
(within the meaning of Rule 13d-3 under the Exchange Act) or otherwise
controlled by

-28-
<PAGE>

such person on the date of the Prospectus or thereafter acquired, for a period
beginning from the date of the Prospectus and continuing to and including the
date 180 days after the date of the Prospectus; provided, however, that such
-----------------
person may, without the prior written consent of Deutsche Morgan Grenfell Inc.
on behalf of the Underwriters, transfer shares of Common Stock or such other
securities to members of such person's immediate family or to trusts for the
benefit of members of such person's immediate family or in connection with bona
----
fide gifts, provided that any transferee agrees to the transfer restrictions
- ---- --------
described above.

(g) Prior to the commencement of the Offering, the Company shall have
made an application for the quotation of the Shares on the Nasdaq National
Market and the Shares shall have been included for trading on the Nasdaq
National Market, subject to official notice of issuance.

(h) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential downgrading or of
any review for a possible change that does not indicate the direction of the
possible change, in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization", as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act.

(i) On or before the Closing Date, the Representatives and counsel for
the Underwriters shall have received such further certificates, documents or
other information as they may have reasonably requested from the Company.

All opinions, certificates, letters and documents delivered pursuant
to this Agreement will comply with the provisions hereof only if they are
satisfactory in all material respects to the Representatives and counsel for the
Underwriters. The Company shall furnish to the Representatives such conformed
copies of such opinions, certificates, letters and documents in such quantities
as the Representatives and counsel for the Underwriters shall reasonably
request.

The respective obligations of the several Underwriters to purchase and
pay for any Shares shall be subject, in their discretion, to each of the
foregoing conditions to purchase the Shares, except that all references therein
to the Shares and the Closing Date shall be deemed to refer to the Firm Shares
or the Option Shares and the First Closing Date or the related Option Closing
Date, each as applicable.

Section 8. Default of Underwriters. If, at any Closing, any one or more of the
-----------------------
Underwriters shall fail or refuse to purchase Shares that it has or they have
agreed to purchase hereunder on such date, and the aggregate number of Shares
which such defaulting Underwriter or Underwriters agreed but failed or refused
to purchase is ten percent or less of the aggregate number of the Shares to be
purchased on such date, the other Underwriters may make arrangements
satisfactory to the Representatives for the purchase of such Shares by other
persons (who may include one or more of the non-defaulting Underwriters,
including the Representatives), but if no such arrangements are made by the
First Closing Date or the related

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<PAGE>

Option Closing Date, as the case may be, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule 1 hereto bears to the aggregate
number of Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as the Representatives may specify,
to purchase the Shares which such defaulting Underwriter or Underwriters agreed
but failed or refused to purchase on such date. If, at the First Closing, any
Underwriter or Underwriters shall fail or refuse to purchase Firm Shares and the
aggregate number of Firm Shares with respect to which such default occurs is
more than ten per cent of the aggregate number of Firm Shares to be purchased,
and arrangements satisfactory to the Representatives and the Company for the
purchase of such Firm Shares are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of any non-
defaulting Underwriter or the Company. In any such case either the
Representatives or the Company shall have the right to postpone the Closing, but
in no event for longer than seven days, in order that the required changes, if
any, in the Registration Statement and in the Prospectus or in any other
documents or arrangements may be effected. If, at any Option Closing, any
Underwriter or Underwriters shall fail or refuse to purchase Option Shares, the
non-defaulting Underwriters shall have the option to (i) terminate their
obligation hereunder to purchase Option Shares or (ii) purchase not less than
the number of Option Shares that such non-defaulting Underwriters would have
been obligated to purchase in the absence of such default. As used in this
Agreement, the term "Underwriter" includes any person substituted for an
Underwriter under this Section 8. Any action taken under this Section 8 shall
not relieve any defaulting Underwriter from liability in respect of any default
of such Underwriter under this Agreement.

Section 9. Termination. This Agreement shall be subject to termination with
-----------
respect to the Shares to be purchased on a Closing Date in the sole discretion
of the Representatives by notice to the Company given prior to such Closing Date
in the event that the Company shall have failed, refused or been unable to
perform all obligations and satisfy all conditions on its part to be performed
or satisfied hereunder at or prior thereto or, if at or prior to any Closing
Date, (a) trading in securities generally on the New York Stock Exchange or the
Nasdaq National Market shall have been suspended or materially limited or
minimum or maximum prices (other than "circuit breakers") shall have been
established by or on, as the case may be, the Commission or the New York Stock
Exchange or the Nasdaq National Market; (b) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market; (c) a general moratorium on commercial banking activities shall have
been declared by either Federal or New York State authorities; (d) there shall
have occurred (i) an outbreak or escalation of hostilities between the United
States and any foreign power, (ii) an outbreak or escalation of any other
insurrection or armed conflict involving the United States, or (iii) any other
calamity or crisis or materially adverse change in general economic, political
or financial conditions having an effect on the U.S. financial markets that, in
the sole judgment of the Representatives, makes it impractical or inadvisable to
proceed with the public offering or the delivery of the Shares as contemplated
by the Registration Statement, as amended as of the date hereof; or (e) the
Company shall have, in the sole judgment of the Representatives, sustained any
material loss or interference with its business or properties from fire, flood,
hurricane, accident or other calamity, whether or not covered by insurance, or
from any labor dispute or any legal or governmental

-30-
<PAGE>

proceeding, or there shall have been any materially adverse change (including,
without limitation, a change in management or control), or constitute a
development involving a prospective materially adverse change, in the condition
(financial or otherwise), management, earnings, properties, business affairs or
business prospects, stockholders' equity, net worth or results of operations of
the Company, except in each case as described in or contemplated by the
Prospectus (exclusive of any amendment or supplement thereto). Termination of
this Agreement pursuant to this Section 9 shall be without liability of any
party to any other party except for the liability of the Company in relation to
expenses as provided in Sections 4 and 10 hereof, the indemnity provided in
Section 6 hereof and any liability arising before or in relation to such
termination.

Section 10. Reimbursement of Expenses. If the sale of the Shares provided for
-------------------------
herein is not consummated because any condition to the obligations of the
Underwriters set forth in Section 7 hereof is not satisfied or because of any
termination pursuant to Section 9 hereof (other than by reason of a default by
any of the Underwriters), the Company shall reimburse the Underwriters,
severally upon demand, for all out-of-pocket expenses (including reasonable fees
and disbursements of counsel) that shall have been incurred by them in
connection with the proposed purchase and sale of the Shares.

Section 11. Information Supplied by Underwriters. The statements set forth in
------------------------------------
the last paragraph on the front cover page and under the heading "Underwriting"
in any Preliminary Prospectus or the Prospectus (to the extent such statements
relate to the Underwriters) constitute the only information furnished by any
Underwriter through the Representatives to the Company for the purposes of
Section 5(a)(ii) and Section 6 hereof. The Underwriters confirm that such
statements (to such extent) are correct.

Section 12. Notices. In all dealings hereunder, you shall act on behalf of
-------
each of the Underwriters, and the parties hereto shall be entitled to act and
rely upon any statement, request, notice or agreement on behalf of any
Underwriter made or given by you jointly by the Representatives. Any notice or
notification in any form to be given under this Agreement may be delivered in
person or sent by telefacsimile or telephone (subject in the case of a
communication by telephone to confirmation by telefacsimile) addressed to:

in the case of the Company:
--------------------------

Corsair Communications, Inc.
3408 Hillview Avenue
Palo Alto, CA 94304

Telefacsimile: (415) 842-3300
Telephone: (415) 493-1426
Attention: Martin J. Silver

-31-
<PAGE>

in the case of the Underwriters, or any of them:
-----------------------------------------------

Deutsche Morgan Grenfell Inc.
31 West 52nd Street
New York, New York 10019
Telefacsimile: 415/614-5030
Telephone: 415/614-5006
Attention: William J. Brady

Any such notice shall take effect, in the case of delivery, at the time of
delivery and, in the case of telefacsimile, at the time of dispatch with
confirmed receipt.

Section 13. Miscellaneous.
- ----------- -------------

(a) Time shall be of the essence of this Agreement.

(b) The headings herein are inserted for convenience of reference only
and are not intended to be part of, or to affect, the meaning or interpretation
of this Agreement.

(c) For purposes of this Agreement, (a) "business day" means any day
on which the New York Stock Exchange is open for trading, and (b) "subsidiary"
has the meaning set forth in Rule 405 under the Securities Act.

(d) This Agreement may be executed in any number of counterparts, all
of which, taken together, shall constitute one and the same Agreement and any
party may enter into this Agreement by executing a counterpart.

(e) This Agreement shall inure to the benefit of and shall be binding
upon the several Underwriters, the Company and their respective successors and
legal representatives, and nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person any legal or equitable
right, remedy or claim under or in respect of this Agreement, or any provisions
herein contained, this Agreement and all conditions and provisions hereof being
intended to be and being for the sole and exclusive benefit of such persons and
for the benefit of no other person, except that (i) the indemnities of the
Company contained in Section 6 hereof shall also be for the benefit of any
person or persons who control any Underwriter within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act and (ii) the indemnities
of the Underwriters contained in Section 6 hereof shall also be for the benefit
of the directors of the Company, the officers of the Company who have signed the
Registration Statement and any person or persons who control the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act. No purchaser of Shares from any Underwriter shall be deemed a successor
because of such purchase.

(f) The respective representations, warranties, agreements, covenants,
indemnities and other statements of the Company, its officers and the several
Underwriters set

-32-
<PAGE>

forth in this Agreement or made by or on behalf of them, respectively, pursuant
to this Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Company, any of its officers or
directors, any Underwriter or any controlling person referred to in Section 6
hereof and (ii) delivery of and payment for the Shares. The respective
agreements, covenants, indemnities and other statements set forth in Sections 4,
6 and 10 hereof shall remain in full force and effect, regardless of any
termination or cancellation of this Agreement.

(g) This Agreement sets forth the entire understanding and supercedes
all prior and contemporaneous agreements and discussions between the parties
relating to the subject matter contained herein. This Agreement may not be
modified or amended except in a writing executed by duly authorized
representatives of Deutsche Morgan Grenfell Inc. and the Company.

Section 14. Severability. It is the desire and intent of the parties that the
------------
provisions of this Agreement be enforced to the fullest extent permissible under
the law and public policies applied in each jurisdiction in which enforcement is
sought. Accordingly, in the event that any provision of this Agreement would be
held in any jurisdiction to be invalid, prohibited or unenforceable for any
reason, such provision, as to such jurisdiction, shall be ineffective, without
invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.

Section 15. Governing Law. The validity and interpretation of this Agreement,
-------------
and the terms and conditions set forth herein, shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any provisions relating to conflicts of laws.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

-33-
<PAGE>

If the foregoing is in accordance with your understanding, please sign
and return to us six counterparts hereof, and upon the acceptance hereof by you,
on behalf of each of the Underwriters, this letter and such acceptance hereof
shall constitute a binding agreement among each of the Underwriters and the
Company. It is understood that your acceptance of this letter on behalf of each
of the Underwriters is pursuant to the authority set forth in the Deutsche
Morgan Grenfell Inc. Master Agreement Among Underwriters, the form of which
shall be submitted to the Company for examination upon request, but without
warranty on your part as to the authority of the signers thereof.

Very truly yours,

Corsair Communications, Inc.

By ______________________________

Name: Martin J. Silver
Title: Chief Financial Officer

The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.

DEUTSCHE MORGAN GRENFELL INC.
Hambrecht & Quist LLC
Wessels, Arnold & Henderson, L.L.C.

By: DEUTSCHE MORGAN GRENFELL INC.

By ___________________________

Name:
Title:

By ___________________________

Name:
Title:

[For itself and on behalf of the Representatives.]

-34-
<PAGE>

SCHEDULE 1
----------
The Underwriters

Underwriter Underwriting commitment
- ----------- -----------------------

[name]............................... [number of Firm Shares]
---- ---------------------

_____________________

Total................................ [aggregate number of Firm Shares]
-------------------------------

-35-

<PAGE>

Exhibit 4.1

CERTIFICATE FACE

CORSAIR COMMUNICATIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
NUMBERS
SHARES
COR
THIS CERTIFICATE IS TRANSFERABLE IN THE CITY OF BOSTON, MA.
OR THE CITY OF NEW YORK, N.Y.
CUSIP 220406 10 2
SEE REVERSE FOR CERTAIN DEFINITIONS
THIS CERTIFIES THAT
is the record holder of
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.001 PAR VALUE, OF
CORSAIR COMMUNICATIONS
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized Attorney upon surrender of this certificate properly
endorsed. This certificate is not valid until countersigned by the Transfer
Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
Chief Financial Officer and Secretary
President and Chief Executive Officer
COUNTERSIGNED AND REGISTERED:
BankBoston, N.A.
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE

CERTIFICATE BACK

CORSAIR COMMUNICATIONS
The Corporation will furnish without charge to each stockholder who so requests
the powers, designations, preferences and relative participating, optional or
other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
Any such request should be directed to the Corporation, attention of its
Secretary at the Corporation's principal executive offices.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint tenants with the right of survivorship and not as tenants in
common

<PAGE>

UNIF GIFT MIN ACT____________
(Cust)
Custodian____________________
(Minor)
under Uniform Gifts to Minors
Act _________________________
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received,
_____________________________________________ hereby sell(s), assign(s) and
transfer(s) unto
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE(S)
of the Shares of capital stock represented by the within Certificate and do(es)
hereby irrevocably constitute and appoint
______________________________________________________________________________
Attorney
to transfer the said Shares on the books of the within named Corporation with
full power
substitution in the premises.
Dated
NOTE: The signature to this assignment must correspond with the name as written
upon the face of the certificate in every particular, without alteration or
enlargement or any change whatever. Signature must be guaranteed.
Signature(s) Guaranteed
By
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad.15.

<PAGE>

EXHIBIT 5.1

July 7, 1997

Corsair Communications, Inc.
3408 Hillview Avenue
Palo Alto, California 94304

Re: 2,587,500 Shares of Common Stock of Corsair Communications, Inc.
----------------------------------------------------------------

Ladies and Gentlemen:

We have acted as counsel to Corsair Communications, Inc., a Delaware
corporation (the "Company"), in connection with the proposed issuance and sale
by the Company of up to 2,587,500 shares of the Company's Common Stock (the
"Shares"), pursuant to the Company's Registration Statement on Form S-1 filed on
June 4, 1997 (the "Registration Statement").

In connection with this opinion, we have examined the Registration
Statement and related Prospectus, the Company's current Amended and Restated
Certificate of Incorporation, as amended through the date hereof, the Amended
and Restated Certificate of Incorporation, which the Registration Statement
contemplates will become effective immediately prior to the issuance and sale of
the Shares, the Company's bylaws, as amended through the date hereof, the
restated bylaws which the Registration Statement contemplates will become
effective immediately prior to the issuance and sale of the Shares and the
originals, or copies certified to our satisfaction, of such records, documents,
certificates, memoranda and other instruments as in our judgment are necessary
or appropriate to enable us to render the opinion expressed below (the
"Documents"). We are relying (without any independent investigation thereof)
upon the truth and accuracy of the statements set forth in such Documents.

On the basis of the foregoing, and in reliance thereon, we are of the
opinion that the Shares have been duly authorized, and if, as and when issued in
accordance with the Registration Statement and Prospectus (as amended and
supplemented through the date of issuance) will be validly issued, fully paid
and nonassessable.
<PAGE>

Corsair Communications, Inc. July 7, 1997
Page 2

We consent to the use of this opinion as an exhibit to the
Registration Statement and further consent to all references to us in the
Registration Statement, the Prospectus and any further amendments thereto.

Very truly yours,

/s/ BROBECK, PHLEGER & HARRISON LLP

<PAGE>

EXHIBIT 10.40
CORSAIR COMMUNICATIONS
----------------------
STOCK OPTION AGREEMENT
----------------------
(Non-Qualified)

AGREEMENT made as of this ____ day of _______, 1997, by and between Corsair
Communications, a Delaware corporation (hereinafter called "Company"), and
_________________ (hereinafter called "Optionee").

WITNESSETH:
-----------

RECITALS
--------

A. The Board of Directors of the Company has determined it is in the best
interests of the Company to grant non-qualified options to Optionee pursuant to
the terms of the Company's 1997 Officer Stock Option Plan (the "Plan").

B. The granted option is intended to be a non-qualified stock option
which does not satisfy the requirements of Section 422 of the Internal Revenue
---
Code.

NOW, THEREFORE, it is hereby agreed as follows:

1. Grant of Option. Subject to and upon the terms and conditions set
---------------
forth in this Agreement, the Company hereby grants to Optionee, as of the date
of this Agreement (the "Grant Date"), a stock option to purchase up to
________________________________________ (_______) shares of Common Stock,
$0.001 par value per share, of the Company (the "Optioned Shares") from time to
time during the option term at the option price of $______ per share (the
"Option Price").

2. Option Term. This option shall expire at the close of business on
-----------
_________________ (the "Expiration Date").

3. Right of Exercise. Optionee may, any time prior to the Expiration
-----------------
Date, pursuant to the terms of this Agreement, elect to exercise this option to
purchase the Optioned Shares; provided, however, that the Optioned Shares shall
vest in accordance with the following vesting schedule:

No Optioned Shares shall vest unless and until the Optionee has
completed sixty (60) months of Service (as defined in the Plan) measured from
the date hereof; provided, however, that in the event that the price of the
Company's Common Stock as quoted on any national securities exchange or the
Nasdaq National Market exceeds $11.00 at any time during Optionee's Service with
the Company, the Optioned Shares shall vest as follows:
<PAGE>

(a) Upon the completion by Optionee of the first twelve (12) months of
Service (as defined in the Plan) following the date of this Agreement, 20% of
the Optioned Shares shall become vested.

(b) The Remaining Optioned Shares shall vest in a series of successive
equal monthly installments over each of the next thirty-six (36) months of
Service completed by the Optionee after the initial twelve (12) month service
period specified in subparagraph (a) above.

4. Manner of Exercising Option.
---------------------------

(a) In order to exercise this option with respect to all or any part
of the Optioned Shares for which this option is at the time exercisable,
Optionee (or in the case of exercise after Optionee's death, the Optionee's
executor, administrator, heir or legatee, as the case may be) must take the
following actions:

(i) Execute and deliver to the Secretary of the Company
written notice of exercise (the "Notice"). Any such Notice shall be
substantially in the same form as attached Exhibit "A";

(ii) Pay the aggregate option price for the purchased shares
(plus an amount equal to required federal and state tax withholding on the
taxable income recognized at the time of such exercise) in cash; and

(iii) Furnish to the Company appropriate documentation that
the person or persons exercising the option, if other than Optionee, have the
right to exercise this option.

(b) This option shall be deemed to have been exercised with respect
to the number of Optioned Shares specified in the Notice at such time as the
Notice has been delivered to the Company. Payment of the option price (and
withholding amount) shall immediately become due and shall accompany the Notice.
As soon thereafter as practical, the Company shall mail or deliver to Optionee
or to the other person or persons exercising this option a certificate or
certificates representing the shares so purchased and paid for.

5. Termination of Employment.
-------------------------

-2-
<PAGE>

employee status, remain exercisable during the sixty (60) day period following
the date of such cessation of employee status and at such point this option will
terminate entirely and cease to be exercisable; provided, however, in no event
will this option be exercisable at any time after the Expiration Date.

(b) Should Optionee become permanently disabled and cease by reason
thereof to be in Service (as defined in the Plan) to the Company, this option
will, solely to the extent that it is exercisable immediately prior to such
cessation of Optionee's Service, remain exercisable during the six (6) month
period following the date of such cessation of Service and at such point this
option will terminate entirely and cease to be exercisable; provided, however,
in no event will this option be exercisable at any time after the Expiration
Date. Optionee will be deemed to be permanently disabled if Optionee is, by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of not less than one year,
unable to engage in any substantial gainful employment.

(c) Should Optionee die while still in Service (as defined in the
Plan) to the Company (or during the sixty (60) day period referred to in
subparagraph (a) or during the six (6) month period referred to in subparagraph
(b)), the executors or administrators of Optionee's estate or Optionee's heirs
or legatees (as the case may be) will have the right to exercise this option for
a period of six (6) months, solely to the extent that it is exercisable
immediately prior to the Optionee's death; provided, however, in no event will
this option be exercisable at any time after the Expiration Date.

(d) Should Optionee's Service (as defined in the Plan) be terminated
for cause (including, but not limited to, any act of dishonesty, unethical
conduct, willful misconduct, insubordination, fraud or embezzlement, or any
unauthorized disclosure of confidential information or trade secrets), this
option will immediately terminate entirely and cease to be exercisable when
notice of termination of employment is given.

6. Adjustment in Optioned Shares.
-----------------------------

(a) In the event any change is made to the Common Stock issuable
pursuant to this Agreement by reason of any stock split, stock dividend,
combination of shares, or other change affecting the outstanding Common Stock as
a class without receipt of consideration, then appropriate adjustments will be
made to (i) the total number of Optioned Shares subject to this option and (ii)
the Option Price payable per share in order to reflect such change and thereby
preclude a diminution or enlargement of benefits thereunder.

-3-
<PAGE>

(b) If the Company is the acquired or non-surviving entity in any
merger or other business combination, then this option, if outstanding
immediately after such merger or other business combination, shall be
appropriately adjusted to apply and pertain to the number and class of
securities which would be issuable to the Optionee in the consummation of such
merger or business combination if the option were exercised immediately prior to
such merger or business combination, and appropriate adjustments shall also be
made to the Option Price payable per share, provided the aggregate Option Price
payable hereunder shall remain the same.

(c) This Agreement shall not in any way affect the right of the
Company to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.

7. Option Nontransferable; Exception. This option shall be neither
---------------------------------
transferable nor assignable by Optionee other than by will or the laws of
descent and distribution.

8. Privilege of Stock Ownership. The holder of this option shall not
----------------------------
have any of the rights of a shareholder with respect to the Optioned Shares
until such individual shall have exercised the option and paid the Option Price.

9. Compliance with Laws and Regulations.
------------------------------------

(a) The exercise of this option and the issuance of Optioned Shares
upon such exercise shall be subject to compliance by the Company and the
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange on which shares of the Company's
Common Stock may be listed at the time of such exercise and issuance.

(b) In connection with and as a condition to the exercise of this
option, Optionee shall execute and deliver to the Company such representations
in writing as may be requested by the Company in order for it to comply with the
applicable requirements of federal and state securities laws.

(c) Share certificates issued upon exercise of this option shall
contain appropriate restrictive legends in connection with federal and state
securities laws.

10. Successors and Assigns. The provisions of this Agreement shall inure
----------------------
to the benefit of, and be binding upon, the successors,

-4-
<PAGE>

administrators, heirs, legal representatives and assigns of Optionee and the
successors and assigns of the Company.

11. Notices. Any notice required to be given or delivered to the Company
-------
under the terms of this Agreement shall be in writing and addressed to the
Company in care of its Secretary at its corporate offices. Any notice required
to be given or delivered to Optionee shall be in writing and addressed to
Optionee at the address indicated below Optionee's signature line on this
Agreement. All notices shall be deemed to have been given or delivered upon
personal delivery or three business days after deposit in the U.S. mail, postage
prepaid and properly addressed to the party to be notified.

12. No Employment Contract. Nothing in this Agreement confers upon
----------------------
Optionee any right to continue in the employ of the Company or interferes with
or restricts in any way the rights of the Company, which are hereby expressly
reserved, to discharge Optionee at any time for any reason or no reason, with or
without cause (except as may be expressly otherwise stated in a formal written
employment agreement between the Company and Optionee). Except to the extent
the terms of any formal written employment agreement between the Company and
Optionee may expressly provide otherwise, the Company is not under any
obligation to continue the employment of Optionee for any period of specific
duration.

13. Construction. All decisions of the Board of Directors of the Company
------------
with respect to any question or issue arising under this Agreement shall be
conclusive and binding on all persons having an interest in this option.

14. Governing Law. The interpretation, performance, and enforcement of
-------------
this Agreement shall be governed by the laws of the State of California.

15. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

16. Amendments. No amendment, modification, or supplement of this
----------
Agreement shall be binding unless executed in writing and signed by all of the
parties hereto.

-5-
<PAGE>

written (all of which shall have no substantive significance or evidentiary
effect). Each party acknowledges, represents and warrants that it has not relied
on any representation, agreement, understanding, arrangements or commitment
which has not been expressly set forth in this Agreement. Each party
acknowledges, represents and warrants that this Agreement is fully integrated
and not in need of parol evidence in order to reflect the intentions of the
parties. The parties specifically intend that the literal words of this
Agreement shall, alone, conclusively determine all questions concerning the
parties' intent.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

-6-
<PAGE>

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
duplicate on its behalf by its duly authorized officer and Optionee has also
executed this Agreement in duplicate, all as of the day and year indicated
above.

COMPANY: CORSAIR COMMUNICATIONS,
a Delaware corporation

By: ________________________________________

Address: 3408 Hillview Avenue
Palo Alto, CA 94304

OPTIONEE:

By: ________________________________________
[Name of Optionee]

Address: ____________________________________________

____________________________________________

[SIGNATURE PAGE TO STOCK OPTION AGREEMENT]

-7-
<PAGE>

EXHIBIT "A"
-----------

EXERCISE NOTICE
---------------

____________, 19 ___

Corsair Communications
3408 Hillview Avenue
Palo Alto, CA 94304
Attn: Corporate Secretary

Gentlemen:

The undersigned hereby elects to exercise his right to purchase __________
shares of Common Stock (the "Shares") of Corsair Communications, a Delaware
corporation, pursuant to and in accordance with the Option dated
________________, subject to compliance with the terms and conditions of the
Option. The undersigned hereby represents that he is acquiring such shares for
his own account, for investment purposes only, and not with a view to any resale
or distribution thereof.

Very truly yours,

______________________________________
Signature

___________________________________
Print

A-1
<PAGE>

FIRST AMENDMENT TO
STOCK OPTION AGREEMENT
(NON-QUALIFIED)

THIS FIRST AMENDMENT TO STOCK OPTION AGREEMENT (the "First Amendment") is
made and entered into this __ day of __________, 1997, by and between CORSAIR
COMMUNICATIONS, INC. (the "Corporation") and ____________________ ("Optionee").

RECITALS
--------

WHEREAS, pursuant to the Corporation's 1997 Officer Stock Option Plan,
Optionee has an option to purchase shares of the Corporation in accordance with
a Stock Option Agreement dated ____________, _____ (the "Stock Option
Agreement");

WHEREAS, the Corporation and the Optionee desire to amend such option in
the manner hereinafter set forth;

AGREEMENT
---------

NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto agree as follows:

18. The Stock Option Agreement is hereby amended by adding the following
as a new Paragraph 18 thereof:

"18. Repurchase Right
----------------

18.1 Grant. The Corporation is hereby granted the right (the
-----
"Repurchase Right"), exercisable at any time during the sixty (60)-day
period following the date the Optionee ceases for any reason to remain in
Service or (if later) during the sixty (60)-day period following the
execution date of this Agreement, to repurchase at the Option Price all or
(at the discretion of the Corporation and with the consent of the Optionee)
any portion of the Optioned Shares in which the Optionee has not acquired a
vested interest in accordance with the vesting provisions of paragraph 3
(such shares to be hereinafter called the "Unvested Shares"). For purposes
of this Agreement, the Optionee shall be deemed to remain in Service for so
long as the Optionee continues to render periodic services to the
Corporation or any parent or subsidiary corporation, whether as an
employee, a non-employee member of the board of directors, or an
independent contractor or consultant.
<PAGE>

18.2 Exercise of the Repurchase Right. The Repurchase Right shall be
--------------------------------
exercisable by written notice delivered to the owner of the Unvested Shares
(the "Owner") prior to the expiration of the applicable sixty (60)-day
period specified in paragraph 18.1. The notice shall indicate the number
of Unvested Shares to be repurchased and the date on which the repurchase
is to be effected, such date to be not more than thirty (30) days after the
date of notice. Owner shall, prior to the close of business on the date
specified for the repurchase, deliver to the Secretary of the Corporation
the certificates representing the Unvested Shares to be repurchased, each
certificate to be properly endorsed for transfer. The Corporation shall,
concurrently with the receipt of such stock certificates, pay to Owner in
cash or cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Option Price previously paid for the
Unvested Shares which are to be repurchased.

18.3 Termination of the Repurchase Right. The Repurchase Right shall
-----------------------------------
terminate with respect to any Unvested Shares for which it is not timely
exercised under paragraph 18.2. In addition, the Repurchase Right shall
terminate, and cease to be exercisable, with respect to any and all
Optioned Shares in which the Optionee vests in accordance with the vesting
schedule specified in paragraph 3.

18.4 Fractional Shares. No fractional shares shall be repurchased by
-----------------
the Corporation. Accordingly, should the Repurchase Right extend to a
fractional share (in accordance with the vesting provisions of paragraph 3)
at the time the Optionee ceases Service, then such fractional share shall
be added to any fractional share in which the Optionee is at such time
vested in order to make one whole vested share no longer subject to the
Repurchase Right.

18.5 Additional Shares or Substituted Securities. In the event of
-------------------------------------------
any stock dividend, stock split, recapitalization or other change affecting
the Corporation's outstanding Common Stock as a class effected without
receipt of consideration, then any new, substituted or additional
securities or other property (including money paid other than as a regular
cash dividend) which is by reason of any such transaction distributed with
respect to the Optioned Shares shall be immediately subject to the
Repurchase Right, but only to the extent the Optioned Shares are at the
time covered by such right. Appropriate adjustments to reflect the
distribution of such securities or property shall be made to the number of
Optioned Shares and Total Purchasable Shares hereunder and to the price per
share to be paid upon the exercise of the Repurchase Right in order to
reflect the effect of any such transaction upon the Corporation's capital
structure; provided, however, that the aggregate purchase price shall
--------
remain the same.

18.6 Corporate Transaction.
---------------------

A. Immediately prior to the consummation of any of the following
shareholder-approved transactions (a "Corporate Transaction"):

2
<PAGE>

(i) a merger or consolidation in which the Corporation is not the
surviving entity,

(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets, or

(iii) any transaction (other than an issuance of shares by the
Corporation for cash) in or by means of which one or more persons acting in
concert acquire, in the aggregate, more than 50% of the outstanding shares
of the stock of the Corporation,

the Repurchase Right shall automatically lapse in its entirety except to
the extent the Repurchase Right is assigned by the Corporation to the
successor corporation (or its parent company) in connection with such
Corporate Transaction.

B. If the Repurchase Right remains in effect following a
Corporate Transaction, such right shall apply to the new capital stock or
other property (including cash) received in exchange for the Optioned
Shares in consummation of the Corporate Transaction, but only to the extent
the Optioned Shares are at the time covered by such right. Appropriate
adjustments shall be made to the price per share payable upon exercise of
the Repurchase Right to reflect the effect of the Corporate Transaction
upon the Corporation's capital structure; provided, however, that the
--------
aggregate purchase price shall remain the same.

C. If the Repurchase Rights are assigned to a successor
corporation in connection with a Corporate Transaction, such Repurchase
Rights shall automatically cease to be exercisable with respect to one-half
of the then Unvested Shares immediately prior to Optionee's termination of
Service if Optionee's Service terminates by reason of an Involuntary
Termination within twelve (12) months following the effective date of such
Corporate Transaction. Involuntary Termination shall mean the termination
of the Service of any individual which occurs by reason of such
individual's involuntary dismissal or discharge by the Corporation or its
assignee for reasons other than Misconduct, or such individual's voluntary
resignation following a reduction in his or her level of compensation
(including base salary, fringe benefits) by more than fifteen percent (15%)
or a relocation of such individual's place of employment by more than fifty
(50) miles, provided and only if such change, reduction or relocation is
effected by the Corporation or its assign without the Optionee's consent.
Misconduct shall mean the commission of any act of fraud, embezzlement or
dishonesty by the Optionee, any unauthorized use or disclosure by such
person of confidential information or trade secrets of the Corporation (or
any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or
any Parent or Subsidiary) in a material manner. The foregoing definition
shall not be deemed to be inclusive of

3
<PAGE>

all the acts or omissions which the Corporation (or any Parent or
Subsidiary) may consider as grounds for the dismissal or discharge of any
Optionee or other person in the Service of the Corporation (or any Parent
or Subsidiary).

D. This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise make changes in
its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets."

19. Notwithstanding the provisions of Section 1 hereof, no acceleration of
vesting shall occur and no lapse of Repurchase Rights shall occur under Section
18 of the Stock Option Agreement with respect to any Corporate Transaction
occurring within six (6) months of the date of this First Amendment.

20. Except as expressly set forth herein, the option shall continue to be
governed by the terms of the original Stock Option Agreement.

[Remainder of this page left intentionally blank]

4
<PAGE>

IN WITNESS WHEREOF, the parties have executed the First Amendment on
the day and year first indicated above.

CORSAIR COMMUNICATIONS, INC.

By: ___________________________________
Martin Silver

Title: Chief Financial Officer

Address: 3408 Hillview Ave., Palo Alto, CA 94304

_______________________________________
Optionee

Address: _______________________________________

_______________________________________

The undersigned spouse of Optionee has read and hereby approves the
foregoing First Amendment to Stock Option Agreement. In consideration of the
Corporation's granting the Optionee the right to acquire the Optioned Shares in
accordance with the terms of such Agreement and Amendment, the undersigned
hereby agrees to be irrevocably bound by all the terms and provisions of such
Agreement and Amendment, including (specifically) the right of the Corporation
(or its assignees) to purchase any and all interest or right the undersigned may
otherwise have in such shares pursuant to community property laws or other
marital property rights.

______________________________________
Optionee's Spouse

Address: ______________________________________

______________________________________

<PAGE>

EXHIBIT 10.43

CORSAIR COMMUNICATIONS, INC.
NOTICE OF GRANT OF STOCK OPTION
-------------------------------

Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Corsair Communications, Inc. (the
"Corporation"):

Optionee:
-------- ------------------------------------------------------------
Grant Date:
---------- ----------------------------------------------------------
Vesting Commencement Date:
------------------------- -------------------------------------------
Exercise Price: $ per share
-------------- ---------------------------------------
Number of Option Shares: shares
----------------------- -------------------------------------
Expiration Date:
--------------- -----------------------------------------------------
Type of Option: Incentive Stock Option
-------------- -------
Non-Statutory Stock Option
-------

Exercise Schedule:
-----------------

Optionee understands and agrees that the Option is granted subject to and
in accordance with the terms of the Corsair Communications, Inc. 1997 Stock
Incentive Plan (the "Plan"). Optionee further agrees to be bound by the terms
of the Plan and the terms of the Option as set forth in the Stock Option
Agreement attached hereto as Exhibit A.

Optionee hereby acknowledges receipt of a copy of the official prospectus
for the Plan in the form attached hereto as Exhibit B. A copy of the Plan is
available upon request made to the Corporate Secretary at the Corporation's
principal offices.

No Employment or Service Contract. Nothing in this Notice or in the
---------------------------------
attached Stock Option Agreement or in the Plan shall confer upon Optionee any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining
<PAGE>

Optionee) or of Optionee, which rights are hereby expressly reserved by each, to
terminate Optionee's Service at any time for any reason, with or without cause.

Definitions. All capitalized terms in this Notice shall have the meaning
-----------
assigned to them in this Notice or in the attached Stock Option Agreement.

DATED: ____________________, 199 ___

CORSAIR COMMUNICATIONS, INC.

By: _________________________

Title: ______________________

_____________________________
OPTIONEE

Address: ____________________

_____________________________

ATTACHMENTS
- -----------
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - PLAN SUMMARY AND PROSPECTUS

2.
<PAGE>

EXHIBIT A
---------

STOCK OPTION AGREEMENT
----------------------
<PAGE>

CORSAIR COMMUNICATIONS
----------------------
STOCK OPTION AGREEMENT
----------------------
(Non-Qualified)

WITNESSETH:
-----------

RECITALS
--------

B. The granted option is intended to be a non-qualified stock option
which does not satisfy the requirements of Section 422 of the Internal Revenue
---
Code.

NOW, THEREFORE, it is hereby agreed as follows:

1. Grant of Option. Subject to and upon the terms and conditions set
---------------
forth in this Agreement, the Company hereby grants to Optionee, as of the date
of this Agreement (the "Grant Date"), a stock option to purchase up to
____________________ ______________________ (_______) shares of Common Stock,
$0.001 par value per share, of the Company (the "Optioned Shares") from time to
time during the option term at the option price of $______ per share (the
"Option Price").

2. Option Term. This option shall expire at the close of business on
-----------
_________________ (the "Expiration Date").

(a) Upon the completion by Optionee of the first twelve (12) months of
Service (as defined in the Plan) following the date of this Agreement, 20% of
the Optioned Shares shall become vested.

4. Manner of Exercising Option.
---------------------------

(i) Execute and deliver to the Secretary of the Company
written notice of exercise (the "Notice"). Any such Notice shall be
substantially in the same form as attached Exhibit "A";

(iii) Furnish to the Company appropriate documentation that the
person or persons exercising the option, if other than Optionee, have the right
to exercise this option.

5. Termination of Employment.
-------------------------

(a) Should Optionee cease to remain in Service (as defined in the
Plan) to the Company (other than by reason of death, permanent disability or
termination for cause), this option will, solely to the extent that it is
exercisable immediately prior to such cessation of employee status, remain
exercisable during the sixty (60) day period following the date of such
cessation of employee status and at such point this option will terminate

-2-
<PAGE>

entirely and cease to be exercisable; provided, however, in no event will this
option be exercisable at any time after the Expiration Date.

6. Adjustment in Optioned Shares.
-----------------------------

-3-
<PAGE>

securities which would be issuable to the Optionee in the consummation of such
merger or business combination if the option were exercised immediately prior to
such merger or business combination, and appropriate adjustments shall also be
made to the Option Price payable per share, provided the aggregate Option Price
payable hereunder shall remain the same.

9. Compliance with Laws and Regulations.
------------------------------------

(c) Share certificates issued upon exercise of this option shall
contain appropriate restrictive legends in connection with federal and state
securities laws.

10. Successors and Assigns. The provisions of this Agreement shall inure
----------------------
to the benefit of, and be binding upon, the successors, administrators, heirs,
legal representatives and assigns of Optionee and the successors and assigns of
the Company.

11. Notices. Any notice required to be given or delivered to the Company
-------
under the terms of this Agreement shall be in writing and addressed

-4-
<PAGE>

to the Company in care of its Secretary at its corporate offices. Any notice
required to be given or delivered to Optionee shall be in writing and addressed
to Optionee at the address indicated below Optionee's signature line on this
Agreement. All notices shall be deemed to have been given or delivered upon
personal delivery or three business days after deposit in the U.S. mail, postage
prepaid and properly addressed to the party to be notified.

14. Governing Law. The interpretation, performance, and enforcement of
-------------
this Agreement shall be governed by the laws of the State of California.

15. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

16. Amendments. No amendment, modification, or supplement of this
----------
Agreement shall be binding unless executed in writing and signed by all of the
parties hereto.

17. Entire Agreement. This Agreement, together with the Plan and all
----------------
exhibits hereto, constitutes the entire agreement among the parties pertaining
to the subject matter hereof and completely supersedes all prior or
contemporaneous agreements, understandings, arrangements, commitments,
negotiations and discussions of the parties, whether oral or written (all of
which shall have no substantive significance or evidentiary effect). Each party
acknowledges, represents and warrants that it has not relied on any
representation, agreement, understanding, arrangements or commitment which has
not been expressly set forth in this Agreement. Each party acknowledges,
represents and warrants that this Agreement is fully integrated and not in need
of parol evidence in order to reflect the intentions of the parties. The

-5-
<PAGE>

parties specifically intend that the literal words of this Agreement shall,
alone, conclusively determine all questions concerning the parties' intent.

[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

-6-
<PAGE>

COMPANY: CORSAIR COMMUNICATIONS,
a Delaware corporation

By: __________________________________

Address: 3408 Hillview Avenue
Palo Alto, CA 94304

OPTIONEE:

By: ___________________________________
[Name of Optionee]

Address: _______________________________________

_______________________________________

[SIGNATURE PAGE TO STOCK OPTION AGREEMENT]
<PAGE>

EXHIBIT "A"
-----------

EXERCISE NOTICE
---------------

____________, 19 ___

Corsair Communications
3408 Hillview Avenue
Palo Alto, CA 94304
Attn: Corporate Secretary

Gentlemen:

Very truly yours,

__________________________________
Signature

__________________________________
Print

A-1
<PAGE>

EXHIBIT B
---------

PLAN SUMMARY AND PROSPECTUS
---------------------------

A-2
<PAGE>

CORSAIR COMMUNICATIONS, INC.

_______________________________________

1997 STOCK INCENTIVE PLAN

PLAN SUMMARY AND PROSPECTUS

_______________________________________

The date of this Prospectus is ______________ 1997
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page

INFORMATION ON THE 1997 STOCK INCENTIVE PLAN............................................................................... 1

QUESTIONS AND ANSWERS ABOUT THE PLAN....................................................................................... 1

GENERAL PLAN PROVISIONS............................................................................................... 1
<C> <S> <C>

1. What is the basic structure of the Plan?................................................................... 1
2. When did the Plan become effective?........................................................................ 1
3. Who administers the Plan?.................................................................................. 2
4. Who is eligible to participate in the Plan?................................................................ 2
5. How many shares of Common Stock may be issued under the Plan? ............................................. 2
6. What happens if there is a change in the Corporation's capital structure?.................................. 3
7. Can the Plan be amended or terminated?..................................................................... 3

GRANT OF OPTIONS...................................................................................................... 4

8. How are options granted under the Discretionary Option Grant Program?...................................... 4
9. What type of options may be granted under the Discretionary Option Grant Program?.......................... 4
10. How is the exercise price determined?...................................................................... 4
11. How is the fair market value of the Common Stock determined?............................................... 4
12. Can the Corporation cancel my option and grant me a new option?............................................ 4
13. Can I assign or transfer my option?........................................................................ 4
14. When do I acquire the rights of a stockholder?............................................................. 5

EXERCISE OF OPTIONS................................................................................................... 5

15. When may I exercise my option?............................................................................. 5
16. When will my option terminate?............................................................................. 5
17. How do I exercise my option?............................................................................... 5
18. How do I pay the exercise price?........................................................................... 5
19. Does the Corporation have the right to repurchase the shares acquired upon exercise of my option?.......... 6
20. May I transfer shares subject to the Corporation's repurchase rights?...................................... 6
21. When will the Corporation's repurchase right lapse?........................................................ 6
22. Does the Plan include any special programs?................................................................ 6
23. What is the Stock Appreciation Right Program?.............................................................. 6
24. What is the Tax Withholding Program?....................................................................... 7

INCENTIVE OPTIONS..................................................................................................... 8

25. Who is eligible to receive an Incentive Option?............................................................ 8
26. Is there a limitation on the number of shares for which an Incentive Option may become exercisable
in any one calendar year?.................................................................................. 8
27. Can an Incentive Option lose its qualified status?......................................................... 8
28. What limitations apply to Incentive Options granted to a 10% stockholder?.................................. 9

EARLY TERMINATION OF OPTIONS.......................................................................................... 9

29. What happens to my options if my service terminates?....................................................... 9
30. What happens to my options if I am discharged from service for Misconduct?................................. 9
31. What happens to my options if I die or become disabled?.................................................... 9
32. What happens to my options if the Corporation is acquired or merged?....................................... 10
33. What happens to my options that are assumed upon a Corporate Transaction?.................................. 10
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
<C> <S> <C>
34. What happens to my options if there is a change in control of the Corporation?.................................... 11

DISPOSITION OF OPTION SHARES................................................................................................. 11

35. When can I sell my shares?........................................................................................ 11

STOCK ISSUANCE PROGRAM....................................................................................................... 12

36. How are shares of Common Stock issued under the Stock Issuance Program?........................................... 12
37. How is the purchase price determined?............................................................................. 12
38. What form of payment is required for shares issued under the Stock Issuance Program?.............................. 12
39. Are shares of Common Stock acquired under the Stock Issuance Program fully-vested?................................ 12
40. Does the Corporation have the right to reacquire the shares acquired under the Stock Issuance
Program?.......................................................................................................... 12
41. Can I transfer shares subject to the Corporation's reacquisition rights?.......................................... 13
42. What happens to unvested shares if the Corporation is acquired or merged?......................................... 13
43. What happens to the reacquisition rights that are assigned upon a Corporate Transaction?.......................... 13
44. What happens to unvested shares if there is a change in control of the Corporation?............................... 13
45. What other benefit is available under the Stock Issuance Program?................................................. 13
46. When can I sell my shares?........................................................................................ 14
47. Do I have any stockholder rights with respect to shares issued under the Stock Issuance Program?.................. 14

MISCELLANEOUS................................................................................................................ 14

48. Is financing available under the Plan?............................................................................ 14
49. Do I have the right to remain employed until my options under the Discretionary Option Grant
Program or my shares under the Stock Issuance Program vest?....................................................... 14
50. Are there any circumstances which would cause me to lose my rights with respect to an option or a
stock issuance?................................................................................................... 14
51. Does the Plan restrict the authority of the Corporation to grant or assume options outside of the
Plan?............................................................................................................. 15
52. Does the grant of an option or the issuance of shares under the Plan affect my eligibility to
participate in other plans of the Corporation?.................................................................... 15
53. What is a parent corporation?..................................................................................... 15
54. What is a subsidiary corporation?................................................................................. 15
55. Is the Plan subject to ERISA?..................................................................................... 15

RESTRICTIONS ON RESALE....................................................................................................... 15

56. What restrictions apply if I am a Section 16 Insider?............................................................. 15
57. What restrictions apply if I am an affiliate?..................................................................... 16

QUESTIONS AND ANSWERS ON FEDERAL TAX CONSEQUENCES............................................................................. 17

INCENTIVE OPTIONS............................................................................................................ 17

T1. Will the grant of an Incentive Option result in Federal income tax liability to me?............................... 17
T2. Will the exercise of an Incentive Option result in Federal income tax liability to me?............................ 17
</TABLE>
ii
<PAGE>
<TABLE>
<C> <S> <C>
T3. When will I be subject to Federal income tax on shares acquired under an Incentive Option?......................... 17
T4. What constitutes a disposition of Incentive Option shares?......................................................... 17
T5. How is my Federal income tax liability determined when I sell my shares?........................................... 17
T6. What if I make a qualifying disposition?........................................................................... 18
T7. What are the normal tax rules for a disqualifying disposition?..................................................... 18
T8. What if the shares purchased under an Incentive Option are subject to a substantial risk of
forfeiture, such as the Corporation's repurchase rights?........................................................... 19
T9. What if I am a Section 16 Insider at the time I exercise my Incentive Option?...................................... 19
T10. What are the Federal tax consequences to the Corporation?.......................................................... 19
T11. What are the consequences of paying the exercise price of an Incentive Option in the form of
shares of Common Stock acquired upon the exercise of an earlier-granted Incentive Option if the
delivery of the shares results in a disqualifying disposition?..................................................... 19
T12. What are the consequences of paying the exercise price of an Incentive Option in the form of
shares of Common Stock (i) acquired under an Incentive Option and held for the requisite holding
periods, (ii) acquired under a Non-Statutory Option or (iii) acquired through open-market
purchases?......................................................................................................... 20
T13. What are the consequences of a subsequent disposition of shares purchased under an Incentive
Option with shares of Common Stock?................................................................................ 20

NON-STATUTORY OPTIONS......................................................................................................... 20

T14. Will the grant of a Non-Statutory Option result in Federal income tax liability to me?............................. 20
T15. Will the exercise of a Non-Statutory Option result in Federal income tax liability to me?.......................... 20
T16. What if the shares purchased under a Non-Statutory Option are subject to a substantial risk of
forfeiture, such as the Corporation's repurchase rights?........................................................... 20
T17. What if I am a Section 16 Insider at the time I exercise my Non-Statutory Option?.................................. 21
T18. What is the effect of making a Section 83(b) election?............................................................. 21
T19. Will I recognize additional income when I sell shares acquired under a Non-Statutory Option?....................... 21
T20. What are the consequences of paying the exercise price of a Non-Statutory Option in the form of
shares of Common Stock previously acquired upon the exercise of employee options or through
open-market purchases?............................................................................................. 22
T21. What are the Federal tax consequences to the Corporation?.......................................................... 22

STOCK APPRECIATION RIGHTS..................................................................................................... 22

T22. Will the exercise of a stock appreciation right result in Federal income tax liability to me?...................... 22
T23. What are the Federal tax consequences to the Corporation?.......................................................... 22

STOCK ISSUANCES............................................................................................................... 23

T24. Will the issuance of vested shares result in Federal income tax liability to me?................................... 23
T25. Will the issuance of unvested shares result in Federal income tax liability to me?................................. 23
T26. What is the effect of making a Section 83(b) election?............................................................. 23
T27. Will I recognize additional income when I sell shares acquired under the Stock Issuance Program?................... 23
T28. What are the Federal tax consequences to the Corporation?.......................................................... 24
</TABLE>
iii
<PAGE>
<TABLE>
<C> <S> <C>
FEDERAL TAX RATES............................................................................................................. 24

T29. What are the applicable Federal tax rates?......................................................................... 24

ALTERNATIVE MINIMUM TAX....................................................................................................... 24

T30. What is the alternative minimum tax?............................................................................... 24
T31. How is the alternative minimum taxable income calculated?.......................................................... 25
T32. What is the allowable exemption amount?............................................................................ 25
T33. When is the spread on shares acquired under an Incentive Option that are subject to a substantial
risk of forfeiture includible in alternative minimum taxable income?............................................... 25
T34. Are there any special implications if I am a Section 16 Insider at the time of exercise?........................... 25
T35. How will the payment of alternative minimum taxes in one year affect the calculation of my tax
liability in a later year?......................................................................................... 25

REGISTRANT INFORMATION AND ANNUAL PLAN INFORMATION............................................................................. 26
</TABLE>
iv
<PAGE>

THIS DOCUMENT CONSTITUTES PART OF THE OFFICIAL PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.

INFORMATION ON THE
1997 STOCK INCENTIVE PLAN

Corsair Communications, Inc., a Delaware corporation (the
"Corporation"), is offering shares of its common stock (the "Common Stock") to
eligible individuals in the Corporation's service pursuant to option grants and
direct stock issuances under the Corporation's 1997 Stock Incentive Plan (the
"Plan"). The purpose of the Plan is to offer the Corporation's employees, the
non-employee members of the Board of Directors (the "Board"), and consultants
and other independent advisors who provide services to the Corporation the
opportunity to acquire an ownership interest in the Corporation as an incentive
for such persons to continue in the Corporation's service. Unless the context
indicates otherwise, all references to the Corporation in this Plan Summary and
Prospectus include Corsair Communications, Inc. and its parent and subsidiary
corporations, whether now existing or subsequently established.

QUESTIONS AND ANSWERS ABOUT THE PLAN

This Plan Summary and Prospectus sets forth in question and answer
format the principal terms of the option grants and direct stock issuances which
may be made from time to time under the Plan to individuals, including officers
or directors of the Corporation subject to the short-swing profit restrictions
of Section 16(b) of the Securities Exchange Act of 1934 (the "1934 Act").

GENERAL PLAN PROVISIONS
-----------------------

1. WHAT IS THE BASIC STRUCTURE OF THE PLAN?

The Plan is divided into four separate equity programs: (i) the
Discretionary Option Grant Program under which options may be granted to
eligible persons which will provide them with the right to purchase shares of
Common Stock; (ii) the Salary Investment Option Grant Program under which
eligible employees may elect to have a portion of their base salary invested
each year in special option grants, (iii) the Stock Issuance Program under which
eligible persons may be issued shares of Common Stock directly, either through
the purchase of such shares or as a bonus for services rendered the Corporation;
and (iv) the Automatic Option Grant Program under which non-employee members of
the Board will receive automatic option grants at periodic intervals.

2. WHEN DID THE PLAN BECOME EFFECTIVE?

The Plan was adopted by the Board and approved by the shareholders in
May, 1997, as the successor to the Corporation's 1996 Stock Option/Stock
Issuance Plan and the 1997 Officer Stock Option Plan (the "Predecessor Plans").
The Plan became effective when adopted by the Board of the Corporation (the
"Effective Date").

All options and unvested stock issuances outstanding under the
Predecessor Plans on the Effective Date have been incorporated into the Plan,
and no further option grants or stock issuances will be made under the
Predecessor Plans. Each option and stock issuance so incorporated will continue
to be governed by the terms of the agreement evidencing that option or stock
issuance, and no provision of the Plan will adversely affect or otherwise modify
the rights of the holders of such incorporated options or stock issuances with
respect to their acquisition of shares of Common Stock thereunder.
<PAGE>

3. WHO ADMINISTERS THE PLAN?

The Plan will be administered by the Board or by one or more
committees designated by the Board, provided that the "Primary Committee" (a
committee of two (2) or more non-employee Board members appointed by the Board)
shall have sole and exclusive authority to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to Section 16 Insiders and shall
have sole and exclusive authority to administer the Salary Investment Option
Grant Program with respect to all eligible individuals. Secondary Committees
comprised of two (2) or more Board members may also be appointed by the Board.
Each member of the Primary or any Secondary Committee will serve for so long as
the Board deems appropriate and may be removed by the Board at any time. The
Board or any Committee, in its capacity as administrator of the Plan, will be
referred to in this document as the "Plan Administrator."

The Plan Administrator will have full authority to determine with
respect to the option grants made under the Discretionary Option Grant Program
the persons who are to be granted options, the time or times when such option
grants are to be made, the number of shares to be subject to each such grant,
the time or times at which each option is to become exercisable, the vesting
schedule applicable to the option shares and the maximum period for which the
option is to remain outstanding. Under the Salary Investment Option Grant
Program the Plan Administrator will have full authority to determine the persons
who are to be granted options, the amount of the related salary reduction, the
time or times when such option grants are to be made, the option price, the
number of shares to be subject to each such grant, the time or times at which
each option is to become exercisable, the vesting schedule applicable to the
option shares and the maximum period for which the option is to remain
outstanding. Under the Stock Issuance Program, the Plan Administrator will have
full authority to determine the persons who are to be issued shares, the time or
times when such issuances are to be made, the number of shares subject to each
such issuance, the vesting schedules (if any) to be applicable to such shares
and the consideration to be paid for the shares. Decisions of the Plan
Administrator will be final and binding on all persons having an interest in the
Discretionary Option Grant, the Salary Investment Option Grant and Stock
Issuance Programs, and the outstanding option grants and stock issuances
thereunder.

The administration of the Automatic Option Grant Program will be self-
executing in accordance with the provisions of that program, and the Plan
Administrator will not perform any discretionary functions under that program.

4. WHO IS ELIGIBLE TO PARTICIPATE IN THE PLAN?

Employees, non-employee members of the Board, consultants and other
independent advisors (including employees, directors, consultants and
independent advisors of any Parent or Subsidiary) are eligible to participate in
the Discretionary Option Grant and Stock Issuance Programs. Only Employees who
are Section 16 Insiders and other highly compensated Employees shall be eligible
to participate in the Salary Investment Option Grant Program. The actual
persons to whom option grants or stock issuances are to be made under such
programs will be determined by the Plan Administrator in its sole discretion.
Only non-employee members of the Board are eligible to participate in the
Automatic Option Grant Program.

5. HOW MANY SHARES OF COMMON STOCK MAY BE ISSUED UNDER THE PLAN?

The maximum number of shares of Common Stock issuable over the term of
the Plan may not initially exceed 1,337,633 shares (subject to adjustment for
certain changes in the Corporation's capital structure as discussed below).
Such authorized share reserve includes (i) the number of shares which remained
available for issuance under the Predecessor Plans as of the Effective Date,
including the shares subject to outstanding options under the Predecessor Plans
incorporated into the Plan. The number of shares of Common Stock included in
the Plan will automatically be increased by an additional two percent of the
outstanding number of shares of capital stock of the Corporation per year. The
additional shares will also require registration with the SEC on a Form S-8
Registration Statement and may be used only for the grant of non-statutory stock
options.

-2-
<PAGE>

Should one or more outstanding options under the Plan expire or
terminate for any reason prior to exercise in full, the shares of Common Stock
subject to the portion of each such option not so exercised will be available
for subsequent issuance under the Plan. However, shares subject to options
which are surrendered pursuant to any stock appreciation rights issued under the
Plan and all share issuances under the Plan, whether or not the shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights,
will reduce on a share-for-share basis the number of shares of Common Stock
available for subsequent issuance under the Plan.

In no event may any one individual participating in the Plan receive
options, separately exercisable stock appreciation rights and direct share
issuances for more than 500,000 shares of Common Stock per calendar year.
Except for such restriction and certain restrictions in connection with
incentive stock option grants (see the Incentive Options section below), there
are no limitations on the number of shares of Common Stock for which an eligible
individual may be granted options or stock appreciation rights under the
Discretionary Option Grant Program or issued stock under the Stock Issuance
Program.

The Common Stock will be made available either from authorized but
unissued shares of Common Stock or from shares of Common Stock reacquired by the
Corporation, including shares repurchased on the open market.

6. WHAT HAPPENS IF THERE IS A CHANGE IN THE CORPORATION'S CAPITAL
STRUCTURE?

In the event of a Recapitalization, appropriate adjustments will
automatically be made to (i) the maximum number and/or class of securities
issuable under the Plan (on both an aggregate and per participant basis), (ii)
the number and/or class of securities for which the initial share reserve is to
increase each year and (iii) the number and/or class of securities and the
exercise price per share in effect under each outstanding option. The
adjustments to such outstanding options will preclude the dilution or
enlargement of the rights and benefits available under those options.

For purposes of the Plan, a RECAPITALIZATION is any stock dividend,
stock split, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration.

7. CAN THE PLAN BE AMENDED OR TERMINATED?

Yes. The Board has exclusive authority to amend or modify the Plan in
any and all respects. However, no amendment or modification may, without the
holder's consent, adversely affect such individual's rights and obligations
under his or her outstanding options, stock appreciation rights or direct stock
issuances under the Plan. In addition, certain amendments to the Plan may
require approval of the Corporation's stockholders.

The Plan will terminate upon the earliest of (i) the tenth anniversary
--------
of the Effective Date, (ii) the date on which all shares available for issuance
under the Plan have been issued or (iii) the termination of all outstanding
options in connection with a Corporate Transaction (see the Early Termination of
Options section below). Upon such Plan termination, all outstanding options and
stock issuances under the Plan will continue to have force and effect in
accordance with the provisions of the agreements evidencing those options or
issuances.

-3-
<PAGE>

GRANT OF OPTIONS
----------------

8. HOW ARE OPTIONS GRANTED UNDER THE DISCRETIONARY OPTION GRANT PROGRAM?

The Plan Administrator will have complete discretion to determine when
and to whom options will be granted and all the terms of each such option. Each
option grant will be evidenced by one or more documents (collectively, the
"Option Agreement") executed by the Corporation and the optionee.

9. WHAT TYPE OF OPTIONS MAY BE GRANTED UNDER THE DISCRETIONARY OPTION
GRANT PROGRAM?

The Plan Administrator may grant incentive stock options ("Incentive
Options") designed to meet the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or options which do not satisfy
such requirements ("Non-Statutory Options"). For a discussion of the difference
in tax treatment under the Code between Incentive Options and Non-Statutory
Options, see the "Questions and Answers on Federal Tax Consequences" section
below.

10. HOW IS THE EXERCISE PRICE DETERMINED?

The exercise price of an option granted under the Discretionary Option
Grant Program will be determined by the Plan Administrator, provided that the
exercise price of an Incentive Option cannot be less than one hundred percent
(100%) of the fair market value of the Common Stock on the grant date, and the
exercise price of a Non-Statutory Option cannot be less than eighty-five percent
(85%) of such fair market value. The exercise price of an option granted under
the Salary Reduction Option Grant Program will be the excess of the fair market
value of the Common Stock on the option grant date over the salary reduction
attributable to such option. The salary reduction attributable to any option
shall not be less than 33 1/3% nor more than 66 2/3% of such fair market value.

11. HOW IS THE FAIR MARKET VALUE OF THE COMMON STOCK DETERMINED?

The fair market value per share of Common Stock on any relevant date
under the Plan will be the closing selling price per share on that date as
reported on the Nasdaq National Market. If the Common Stock is not traded on
that day, the fair market value will be the closing selling price per share on
the last preceding date for which such quotation exists. Stock prices are
reported daily in most major newspapers.

12. CAN THE CORPORATION CANCEL MY OPTION AND GRANT ME A NEW OPTION?

Yes. The Plan Administrator has the authority to cancel outstanding
options and to issue new options in replacement, but your consent will be
required in connection with your participation in any such cancellation/regrant
program. The new options can cover the same or a different number of shares of
Common Stock and will have an exercise price per share based upon the fair
market value of the Common Stock on the new grant date. In addition, the new
options may have a vesting schedule based on the new grant date, without any
credit provided for the period the cancelled options were outstanding.

13. CAN I ASSIGN OR TRANSFER MY OPTION?

No. Your option generally cannot be assigned or transferred, except
by the provisions of your will or the laws of inheritance following your death.
However, a Non-Statutory Option may be assigned in whole or in part pursuant to
a court order issued in connection with marital dissolution or separation
proceedings.

-4-
<PAGE>

14. WHEN DO I ACQUIRE THE RIGHTS OF A STOCKHOLDER?

You will not have any stockholder rights with respect to the option
shares. You will not acquire stockholder rights until you exercise the option,
pay the exercise price and become a holder of record of the purchased shares.

EXERCISE OF OPTIONS
-------------------

15. WHEN MAY I EXERCISE MY OPTION?

Your option may be immediately exercisable for all of the option
shares or may become exercisable for such shares in a series of installments
over the period that you remain in the Corporation's service. The exercise
schedule applicable to your option will be determined by the Plan Administrator
at the time of grant and will be set forth in the Option Agreement. You may
exercise your option at any time for the shares for which your option is
exercisable, provided you do so before the option terminates. However, any
shares purchased under an option in which you are not vested upon your
termination of service will be subject to repurchase by the Corporation as
discussed below.

NOTE: OUTSTANDING OPTIONS UNDER THE PREDECESSOR PLANS WHICH HAVE BEEN
INCORPORATED INTO THE PLAN WILL BECOME EXERCISABLE IN ACCORDANCE WITH THE TERMS
OF THE ORIGINAL OPTION AGREEMENT.

16. WHEN WILL MY OPTION TERMINATE?

No option granted under the Plan may have a term in excess of ten (10)
years. The actual expiration date of your option will be set forth in the
Option Agreement. Your option may, however, terminate prior to its designated
expiration date in the event of your termination of service or upon the
occurrence of certain other events. See the "Early Termination of Options"
section below.

17. HOW DO I EXERCISE MY OPTION?

To exercise your option, you must provide the Corporation with written
notice of the exercise in which you indicate the number of shares to be
purchased under your option. The notice must be accompanied by payment of the
exercise price for the purchased shares, together with appropriate proof that
the person exercising the option (if other than yourself) has the right to
effect such exercise. You will be required to satisfy all applicable income and
employment tax withholding requirements at that time. For information about
such tax withholding, see the "Questions and Answers on Federal Tax
Consequences" section below.

18. HOW DO I PAY THE EXERCISE PRICE?

The exercise price may be paid in cash or check payable to the
Corporation or in shares of Common Stock. Any such shares will be valued at
fair market value on the exercise date and must have been held for the requisite
period necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes (generally a six (6)-month period).

Cashless exercises are also permitted to the extent your option is
exercised for vested shares of Common Stock. To use this procedure, you must
provide irrevocable written instructions to a Corporation-designated brokerage
firm to effect the immediate sale of the vested shares of Common Stock purchased
under your option and to pay over to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable withholding
taxes. Concurrently with such instructions, you must also direct the
Corporation to deliver the certificates for the purchased shares to the
brokerage firm in order to complete the sale.

-5-
<PAGE>

19. DOES THE CORPORATION HAVE THE RIGHT TO REPURCHASE THE SHARES ACQUIRED
UPON EXERCISE OF MY OPTION?

The answer will depend upon the exercise and vesting schedules in
effect for your option. If you are granted an option which becomes exercisable
in a series of installments over your period of service, then the shares of
Common Stock purchased under that option will be fully-vested when acquired and
will not be subject to the Corporation's repurchase rights. However, if you are
granted an option which is exercisable immediately, then the shares of Common
Stock purchased under such option will normally be subject to a vesting schedule
pursuant to which the Corporation may repurchase, at the original exercise
price, any unvested shares you hold at the time of your termination of service.
If you wait to exercise your option until you are fully vested in the option
shares, the Corporation will not have any right to repurchase the shares you
acquire.

The Corporation's repurchase rights will also cover any new,
substituted or additional securities or other property subsequently distributed
with respect to your unvested shares of Common Stock by reason of any
Recapitalization or Corporate Transaction. Appropriate adjustments to reflect
the distribution will be made to the number and/or class of securities subject
to the Corporation's repurchase rights and the price per share payable upon the
exercise of those rights.

The Plan Administrator will have full discretion to establish the
remaining terms upon which the Corporation's repurchase rights are to become
exercisable (including the procedure for effecting such repurchase), and such
terms will be included in the agreement evidencing the repurchase rights.

20. MAY I TRANSFER SHARES SUBJECT TO THE CORPORATION'S REPURCHASE RIGHTS?

You may not transfer, assign or encumber any unvested shares of Common
Stock which are subject to the Corporation's repurchase rights, except for
permissible gifts approved by the Plan Administrator or transfers by will or
inheritance following your death. The certificates representing such unvested
shares may, in the Plan Administrator's discretion, bear a legend indicating the
existence of such transfer restrictions, or the unvested shares (and any
securities or other property distributed with respect to such shares) may be
held in escrow by the Corporation (or any successor entity) until you vest in
those shares.

21. WHEN WILL THE CORPORATION'S REPURCHASE RIGHT LAPSE?

The Corporation's repurchase right will lapse, and you will vest in
your option shares, in one or more installments according to the vesting
schedule established by the Plan Administrator and set forth in the agreement
evidencing the repurchase right. In addition, the Corporation's repurchase
right may lapse, and shares subject to the terminated right may immediately
vest, in connection with certain Corporate Transactions and Changes in Control.

22. DOES THE PLAN INCLUDE ANY SPECIAL PROGRAMS?

The Plan includes the Stock Appreciation Right Program and the Special
Tax Withholding Program which are explained more fully below. The Plan
Administrator will have the discretion to extend the benefits of either of these
programs to one or more eligible individuals under the Plan. You will be
notified in writing should you be selected for participation in either program.

23. WHAT IS THE STOCK APPRECIATION RIGHT PROGRAM?

The Plan Administrator has the discretion to grant to selected
optionees tandem stock appreciation rights ("SARs") which provide the optionee
with the right to elect between the normal exercise of the option for shares of
Common Stock and the surrender of all or part of that option for a distribution
from the Corporation equal to the excess of (i) the fair market value of the
vested shares of Common Stock subject

-6-
<PAGE>

to the surrendered option (or surrendered portion thereof) at that time over
(ii) the exercise price payable for those shares. The distribution may, in the
Plan Administrator's discretion, be made in cash or in shares of Common Stock.
There are a number of limitations governing the exercise of an SAR:

- The exercise of the SAR must be approved by the Plan
Administrator.

- If the Plan Administrator disapproves the exercise of the SAR,
the optionee will retain whatever rights existed under the surrendered
option (or surrendered portion) and may exercise those rights at any time
before the later of (i) five (5) business days following notification of
-----
such disapproval or (ii) the last day on which the option is otherwise
exercisable in accordance with its terms.

- No SAR may be transferred or assigned.

The Plan Administrator may also grant special limited SARs to one or
more Section 16 Insiders. Upon the occurrence of a Hostile Take-Over, each
outstanding option with such a limited SAR in effect for at least six (6) months
may be surrendered by the Section 16 Insider to the Corporation, to the extent
the option is at the time exercisable for vested shares. Any such option
surrender must be effected within the thirty (30)-day period following the
Hostile Take-Over, and the Section 16 Insider will in return receive a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Take-Over Price of the shares of Common Stock in which the Section 16 Insider is
at the time vested under the surrendered option (or surrendered portion thereof)
over (ii) the aggregate exercise price payable for those shares. The cash
distribution will be made within five (5) days following the date the option is
surrendered to the Corporation, and neither the approval of the Plan
Administrator nor the consent of the Board will be required in connection with
such option surrender and cash distribution. The balance of the option (if any)
will continue to remain outstanding and exercisable in accordance with the
Option Agreement.

A HOSTILE TAKE-OVER will be deemed to occur in the event (i) any
person or related group of persons directly or indirectly acquires securities
possessing more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept and (ii) more than fifty percent (50%) of
---
the acquired securities are accepted from holders other than Section 16
Insiders.

For purposes of the option surrender right, the TAKE-OVER PRICE per
share will be deemed to be equal to the greater of (i) the fair market value per
-------
share of Common Stock on the option surrender date or (ii) the highest reported
price per share paid by the tender offeror in effecting the Hostile Take-Over.
However, if the surrendered option is an Incentive Option, the Take-Over Price
will not exceed the clause (i) price per share.

24. WHAT IS THE TAX WITHHOLDING PROGRAM?

Holders of Non-Statutory Options selected by the Plan Administrator
may participate in the Tax Withholding Program. Each selected optionee may
elect to have the Corporation withhold, from the shares of Common Stock
purchased under the optionee's Non-Statutory Options, a portion of those shares
with a fair market value equal to a designated percentage (not to exceed one
hundred percent (100%)) of the Federal, state and local tax withholding
liability incurred in connection with the exercise of those options. In lieu of
such direct withholding, the Plan Administrator may grant the optionee the right
to deliver previously acquired shares of Common Stock in satisfaction of the tax
liability. However, no shares of Common Stock will actually be withheld or
accepted in satisfaction of such tax liability except to the extent approved by
the Plan Administrator, and any such withheld or delivered shares will be valued
at fair market value on the date of the option exercise.

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<PAGE>

INCENTIVE OPTIONS
-----------------

This section applies only to Incentive Options. Non-Statutory Options
are not subject to these provisions.
---

25. WHO IS ELIGIBLE TO RECEIVE AN INCENTIVE OPTION?

Incentive Options may only be granted to individuals who are employees
of the Corporation.

26. IS THERE A LIMITATION ON THE NUMBER OF SHARES FOR WHICH AN INCENTIVE
OPTION MAY BECOME EXERCISABLE IN ANY ONE CALENDAR YEAR?

Yes. The aggregate fair market value of the shares of Common Stock
(determined at the date of grant) for which an option may for the first time
become exercisable in any calendar year as an Incentive Option under the Federal
tax laws may not exceed $100,000. To the extent you hold two (2) or more
Incentive Options which become exercisable for the first time in the same
calendar year, the $100,000 limitation will be applied on the basis of the order
in which those options were granted. Options which do not qualify for Incentive
Option treatment under the Federal tax laws by reason of this dollar limitation
may nevertheless be exercised as Non-Statutory Options in the calendar year in
which they become exercisable for the excess number of shares.

EXAMPLE: On December 3, 1997, Sam Smith is granted an Incentive
Option to purchase 4,000 shares of Common Stock at an exercise price of $15.00
per share, the fair market value of the Common Stock on that date. The option
first becomes exercisable for 100% of the shares on December 3, 1998, when the
fair market value of the Common Stock is assumed to be $25.00 per share. On
November 25, 1997, Sam is granted a second Incentive Option to purchase 7,000
shares of Common Stock at an exercise price of $20.00 per share, the fair market
value of the Common Stock on that date. This option becomes exercisable in 2
equal annual installments beginning on November 25, 1998, when the fair market
value of the Common Stock is assumed to be $25.00 per share.

The aggregate fair market value of the 4,000 shares of Common Stock on
the grant date under the first option is $60,000. The aggregate fair market
value of the 7,000 shares under the second option is $140,000 on the grant date.
Accordingly, in 1998, Common Stock valued at $60,000 for Incentive Option
purposes first becomes purchasable under the 1997 option (100% of the option
shares) and Common Stock valued at $70,000 first becomes purchasable under the
1997 option (50% of the option shares). 1,500 of the shares purchasable under
the 1997 option will not qualify for favorable tax treatment as Incentive
Options because the aggregate value (as measured as of the grant date) of the
shares of Common Stock for which the two options first become exercisable in the
1998 calendar year exceeds $100,000 ($60,000 + $70,000 = $130,000). The 1,500
shares which do not qualify for Incentive Option treatment under the 1997 option
may be exercised as Non-Statutory Options.

27. CAN AN INCENTIVE OPTION LOSE ITS QUALIFIED STATUS?

Yes. An option granted as an Incentive Option will generally be taxed
as a Non-Statutory Option if exercised more than three (3) months after you
terminate employee status. Certain amendments or modifications to an
outstanding option may also cause the loss of Incentive Option status, but no
such amendment or modification may be made without your consent.

-8-
<PAGE>

28. WHAT LIMITATIONS APPLY TO INCENTIVE OPTIONS GRANTED TO A 10%
STOCKHOLDER?

If an Incentive Option is granted to an individual who is at the time
the owner of stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation or any parent or
subsidiary corporation, then the exercise price per share cannot be less than
one hundred ten percent (110%) of the fair market value of the Common Stock on
the grant date, and the option term may not exceed five (5) years from the grant
date.

EARLY TERMINATION OF OPTIONS
----------------------------

29. WHAT HAPPENS TO MY OPTIONS IF MY SERVICE TERMINATES?

After your termination of service, you will have a limited period of
time in which to exercise your outstanding options for any shares of Common
Stock in which you are vested on the date your service terminates. The length
of this period will be set forth in your Option Agreement and will generally not
be in excess of three (3) months. However, you must in all events exercise your
option before the specified expiration of the option term. Each option will,
immediately upon your termination of service, terminate and cease to be
outstanding to the extent it is not at that time exercisable for vested shares.

Unless your Option Agreement specifically provides otherwise, you will
be deemed to continue in service for so long as you render services on a
periodic basis to the Corporation, whether as (i) an employee, subject to the
control and direction of the employer entity as to both the work to be performed
and the manner and method of performance, (ii) a non-employee member of the
Board or (iii) a consultant or independent advisor.

The Plan Administrator has the discretion to extend the period during
which you may exercise one or more of your options following your termination of
service and/or to permit such options to be exercised not only with respect to
the number of shares of Common Stock in which you are vested but also with
respect to one or more additional installments in which you would have vested
had you continued in service. You will be notified in writing in the event the
Plan Administrator decides to provide you with any of these additional benefits.

30. WHAT HAPPENS TO MY OPTIONS IF I AM DISCHARGED FROM SERVICE FOR
MISCONDUCT?

Should you be discharged from service for Misconduct, all of your
outstanding options will immediately terminate. For purposes of the Plan,
MISCONDUCT includes (i) any act of fraud, embezzlement or dishonesty, (ii) any
unauthorized use or disclosure of confidential information or trade secrets or
the Corporation or (iii) any other intentional misconduct adversely affecting
the business or affairs of the Corporation in a material manner. However, the
foregoing list is not inclusive of all the acts or omissions which may be
considered as grounds for dismissal or discharge of any individual in the
Corporation's service.

31. WHAT HAPPENS TO MY OPTIONS IF I DIE OR BECOME DISABLED?

If you die while any of your options are outstanding, the personal
representative of your estate or the person or persons to whom the options are
transferred by the provisions of your will or the laws of inheritance following
your death may exercise each of those options for any or all vested shares of
Common Stock for which the option was exercisable on the date your service with
the Corporation terminated, less any shares you may have subsequently purchased
prior to your death. The right to exercise each such option will lapse upon the

earlier of (i) the expiration of the option term or (ii) the first anniversary
- -------
of the date of your death.

-9-
<PAGE>

If you terminate your service with the Corporation because you become
permanently disabled, you will normally have a period of twelve (12) months from
such termination date during which to exercise your options for any or all of
the vested shares for which those options were exercisable at the time of such
termination. In no event, however, may you exercise any option after the
specified expiration of the option term. For purposes of the Plan, you will be
deemed to be permanently disabled if you are unable to perform any substantial
gainful activity by reason of any medically-determinable physical or mental
impairment expected to result in death or to be of continuous duration of twelve
(12) consecutive months or more.

32. WHAT HAPPENS TO MY OPTIONS IF THE CORPORATION IS ACQUIRED OR MERGED?

In the event of a Corporate Transaction, all options outstanding under
the Discretionary Option Grant Program will automatically accelerate so that
each such option will, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable for the total number of shares of Common
Stock at the time subject to that option and may be exercised for all or any
portion of such shares as fully vested shares. However, an outstanding option
will not so accelerate, if and to the extent: (i) the option is assumed by the
successor corporation (or its parent corporation) or replaced with a comparable
option to purchase shares of the successor corporation (or its parent
corporation), (ii) such option is replaced with a cash incentive program of the
successor corporation which preserves the option spread existing on the unvested
shares subject to the option at the time of the Corporate Transaction and
provides for subsequent payout in accordance with the same vesting schedule
applicable to such option or (iii) acceleration of the option is subject to
other limitations imposed by the Plan Administrator in the agreement evidencing
the option. In addition, all of the Corporation's outstanding repurchase rights
under the Discretionary Option Grant Program will automatically terminate in the
event of a Corporate Transaction except to the extent: (i) the repurchase right
is assigned to the successor corporation (or its parent corporation) or (ii)
termination of the repurchase right is subject to other limitations imposed by
the Plan Administrator in the agreement evidencing the right.

All outstanding options under the Plan will, to the extent not assumed
by the successor corporation (or its parent corporation), terminate and cease to
be outstanding immediately following the completion of the Corporate
Transaction.

Any Incentive Options accelerated upon the Corporate Transaction will
qualify as Incentive Options under the Federal tax laws only to the extent the
applicable $100,000 limitation is not exceeded. If such limitation is exceeded,
the option will be exercisable for the excess number of shares as a Non-
Statutory Option.

A CORPORATE TRANSACTION will be deemed to occur upon (i) a merger in
which securities possessing more than fifty percent (50%) of the total combined
voting power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such merger or (ii) a sale, transfer or other disposition
of all or substantially all the assets of the Corporation in liquidation or
dissolution of the Corporation.

NOTE: THE OUTSTANDING OPTIONS UNDER THE PREDECESSOR PLANS CONTAIN
SIMILAR ACCELERATION FEATURES.

33. WHAT HAPPENS TO MY OPTIONS THAT ARE ASSUMED UPON A CORPORATE
TRANSACTION?

Each option under the Discretionary Option Grant Program which is
assumed by the successor corporation (or its parent corporation) will,
immediately after the Corporate Transaction, be appropriately adjusted to apply
to the number and class of securities which would have been issued to the
optionee in consummation of the Corporate Transaction had the option been
exercised immediately prior to the Corporate Transaction. Appropriate
adjustments will also be made to the exercise price payable per share, provided
--------
the aggregate exercise price for the option shares will remain the same.

-10-
<PAGE>

The Plan Administrator may provide, at the time of the grant of any
option that, following any Corporate Transaction in which the option is assumed
or replaced, such option will thereafter automatically accelerate in the event
the optionee's service terminates through an Involuntary Termination occurring
within eighteen (18) months following the effective date of such Corporate
Transaction. Any option so accelerated will remain exercisable until the
earlier of (i) the expiration of the option term or (ii) the end of the one (1)-
year period measured from the date of the Involuntary Termination. In addition,
the Corporation's outstanding repurchase rights will automatically terminate
upon such an Involuntary Termination so that the shares held by the optionee at
that time will immediately vest.

34. WHAT HAPPENS TO MY OPTIONS IF THERE IS A CHANGE IN CONTROL OF THE
CORPORATION?

The Plan Administrator may provide for the automatic acceleration of
one or more outstanding options under the Discretionary Option Grant Program
upon the occurrence of a Change in Control, so that each such option will,
immediately prior to the occurrence of such transaction, become fully
exercisable with respect to the total number of shares of Common Stock at the
time subject to that option and may be exercised for all or any portion of those
shares as fully vested shares. Alternatively, the Plan Administrator may
condition any such option acceleration upon the subsequent termination of the
optionee's service through an Involuntary Termination within a designated period
following the effective date of such Change in Control. The Plan Administrator
may similarly provide for the immediate termination of one or more of the
outstanding repurchase rights upon the occurrence of a Change in Control or the
subsequent termination of the optionee's service through an Involuntary
Termination. You will be notified in writing should the Plan Administrator
provide for acceleration of your option in connection with a Change in Control
or your subsequent Involuntary Termination.

Any option so accelerated will remain exercisable until such option
expires or terminates. However, any Incentive Option accelerated upon the
Change in Control will remain exercisable as an Incentive Option under the
Federal tax laws only to the extent the applicable $100,000 dollar limitation is
not exceeded. If such limitation is exceeded, the option will be exercisable
for the excess number of shares as a Non-Statutory Option.

A CHANGE IN CONTROL will be deemed to occur in the event (i) any
person (or related group of persons) directly or indirectly acquires beneficial
ownership (within the meaning of Rule 13d-3 of the 1934 Act) of securities
possessing more than fifty percent (50%) of the total combined voting power of
the Corporation's outstanding securities pursuant to a tender or exchange offer
made directly to the Corporation's stockholders which the Board does not
recommend such stockholders to accept or (ii) there is a change in the
composition of the Board over a period of thirty-six (36) consecutive months or
less such that a majority of the Board ceases, by reason of one or more
contested elections for Board membership, to be comprised of individuals who
either (A) have been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as Board members
during such period by at least a majority of the Board members described in
clause (A) who were still in office at the time such election or nomination was
approved by the Board.

DISPOSITION OF OPTION SHARES
----------------------------

35. WHEN CAN I SELL MY SHARES?

You may sell your shares of Common Stock at any time without
restriction, provided you are not an affiliate of the Corporation at the time of
the sale. If you are an affiliate, you will be able to sell the shares
immediately only in compliance with Rule 144 of the Securities Act Rules. These
shares have been registered for trading with the Nasdaq National Market.

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<PAGE>

STOCK ISSUANCE PROGRAM
----------------------

36. HOW ARE SHARES OF COMMON STOCK ISSUED UNDER THE STOCK ISSUANCE
PROGRAM?

The Plan Administrator will have complete discretion to determine when
and to whom share issuances will be made and all the terms of each such
issuance. Each issuance will be evidenced by a stock issuance agreement (the
"Issuance Agreement") executed by the Corporation and the participant.

37. HOW IS THE PURCHASE PRICE DETERMINED?

The purchase price per share will be determined by the Plan
Administrator but cannot be less than eighty-five percent (85%) of the fair
market value of the Common Stock on the issuance date.

38. WHAT FORM OF PAYMENT IS REQUIRED FOR SHARES ISSUED UNDER THE STOCK
ISSUANCE PROGRAM?

The purchase price will be due immediately upon issuance of the Common
Stock and may be paid in cash or check payable to the Corporation. Shares of
Common Stock may also be issued as a stock bonus for past services rendered to
the Corporation, without any cash payment required of the participant.

39. ARE SHARES OF COMMON STOCK ACQUIRED UNDER THE STOCK ISSUANCE PROGRAM
FULLY-VESTED?

Shares of Common Stock issued under the Stock Issuance Program may, in
the discretion of the Plan Administrator, be fully vested upon issuance or may
vest over the participant's period of service or upon attainment of specified
performance objectives. The applicable vesting schedule will be incorporated
into the Issuance Agreement.

40. DOES THE CORPORATION HAVE THE RIGHT TO REACQUIRE THE SHARES ACQUIRED
UNDER THE STOCK ISSUANCE PROGRAM?

The answer will depend on the vesting schedule in effect for your
shares. If you are issued shares of Common Stock that are fully vested, then
the shares will not be subject to the Corporation's reacquisition rights.
However, if you are issued shares which are not fully vested at the time of
issuance, then the Corporation may reacquire those shares should you fail to
complete the applicable service requirement or should the specified performance
objectives not be attained. If you paid for the unvested shares in cash, then
the Corporation will refund the purchase price at the time those shares are
acquired. If you delivered a promissory note for such shares, the Corporation
will, in effecting the reacquisition, cancel the principal balance of the note
attributable to the reacquired shares. If the unvested shares were issued to
you as a bonus for past services, then any unvested shares held by you at the
time of your cessation of service or the non-attainment of the performance
objectives must be immediately surrendered to the Corporation for cancellation,
and you will cease to have any stockholder rights or other interests in the
cancelled shares.

The Corporation's reacquisition rights will also cover any new,
substituted or additional securities or other property subsequently distributed
with respect to your unvested shares by reason of any Recapitalization or
Corporate Transaction. Appropriate adjustments to reflect the distribution will
be made to the number and/or class of securities subject to the Corporation's
reacquisition rights and the price per share (if any) payable upon the exercise
of such rights.

The Plan Administrator may waive one or more of the Corporation's
outstanding reacquisition rights with respect to any unvested shares of Common
Stock you hold and thereby trigger the immediate vesting of those shares.

-12-
<PAGE>

The Plan Administrator will have full discretion to establish the
remaining terms upon which the Corporation's reacquisition rights are to become
exercisable (including the procedure for effecting such reacquisition). All the
terms of the reacquisition right will be included in the Issuance Agreement.

41. CAN I TRANSFER SHARES SUBJECT TO THE CORPORATION'S REACQUISITION
RIGHTS?

You may not transfer, assign or encumber any unvested shares of Common
Stock which are subject to the Corporation's reacquisition rights, except for
permissible gifts approved by the Plan Administrator, transfers by will or
inheritance following your death or transfers to the Corporation in pledge as
security for any promissory note delivered in payment for the shares. The
certificates representing the unvested shares of Common Stock may, in the Plan
Administrator's discretion, bear a legend indicating the existence of such
transfer restrictions, or the unvested shares (and any securities or other
property distributed with respect to such shares) may be held in escrow by the
Corporation (or any successor entity) until you vest in those shares.

42. WHAT HAPPENS TO UNVESTED SHARES IF THE CORPORATION IS ACQUIRED OR
MERGED?

In the event of a Corporate Transaction, all unvested shares of Common
Stock acquired under the Stock Issuance Program will immediately vest in full
except to the extent the Corporation's reacquisition rights with respect to
those shares are assigned to the successor corporation (or its parent
corporation) or such accelerated vesting is subject to other limitations imposed
by the Plan Administrator in the Issuance Agreement.

43. WHAT HAPPENS TO THE REACQUISITION RIGHTS THAT ARE ASSIGNED UPON A
CORPORATE TRANSACTION?

The Plan Administrator may provide, at the time of the issuance of the
shares that, following any Corporate Transaction in which the repurchase rights
are assigned, such rights will thereafter automatically accelerate in the event
the optionee's service terminates through an Involuntary Termination occurring
within eighteen (18) months following the effective date of such Corporate
Transaction.

44. WHAT HAPPENS TO UNVESTED SHARES IF THERE IS A CHANGE IN CONTROL OF THE
CORPORATION?

The Plan Administrator may provide for the immediate and automatic
vesting of one or more unvested shares of Common Stock outstanding under the
Stock Issuance Program upon the occurrence of a Change in Control.
Alternatively, the Plan Administrator may condition any such vesting upon an
Involuntary Termination of the participant's service effected within a
designated period following the effective date of such Change in Control. You
will be notified in writing should the Plan Administrator provide for such
automatic vesting in connection with a Change in Control or subsequent
Involuntary Termination.

45. WHAT OTHER BENEFIT IS AVAILABLE UNDER THE STOCK ISSUANCE PROGRAM?

The Plan Administrator will have the discretion to extend the Tax
Withholding Program to holders of unvested shares of Common Stock under the
Stock Issuance Program who elect to be taxed on such shares at the time of
vesting rather than at the time of issuance. Each selected participant may
accordingly elect to have the Corporation withhold, from the shares which
otherwise vest at the time, a portion of those shares with a fair market value
equal to a designated percentage (not to exceed one hundred percent (100%)) of
the Federal, state and local withholding tax liability incurred in connection
with the vesting of such shares. In lieu of such direct withholding, the
selected participants may also be granted the right to deliver existing shares
of Common Stock to the Corporation in satisfaction of such tax liability.
However, no shares will actually be withheld or accepted in satisfaction of such
tax liability except to the extent approved by the Plan Administrator, and any
such withheld or delivered shares will be valued at fair market value on the
vesting date. Any Section 16 Insiders who participate in the program will be
subject to certain restrictions on the timing of their withholding elections, as
discussed in the "Restrictions on Resale" section below.

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<PAGE>

You will be notified in writing should you be selected for
participation in the Tax Withholding Program.

46. WHEN CAN I SELL MY SHARES?

You may sell your vested shares of Common Stock at any time without
restriction, provided you are not an affiliate of the Corporation at the time of
the sale. If you are an affiliate, you will be able to sell the shares
immediately only in compliance with Rule 144 of the Securities Act Rules. These
shares have been registered for trading with the Nasdaq National Market.

47. DO I HAVE ANY STOCKHOLDER RIGHTS WITH RESPECT TO SHARES ISSUED UNDER
THE STOCK ISSUANCE PROGRAM?

You will have full stockholder rights with respect to the shares of
Common Stock issued to you under the Stock Issuance Program, including the right
to vote such shares and receive all regular cash dividends paid on such shares,
whether or not such shares are vested. However, unvested shares will be subject
to the transfer restrictions specified above.

MISCELLANEOUS
-------------

48. IS FINANCING AVAILABLE UNDER THE PLAN?

The Plan Administrator may assist you in the acquisition of shares of
Common Stock under the Discretionary Option Grant or Stock Issuance Program by
permitting you to pay the purchase price for the shares through a promissory
note payable in one or more installments. The terms of any such promissory
note, including the interest rate and terms of repayment, will be established in
the sole discretion of the Plan Administrator. Promissory notes may be made
without security or collateral; however, the maximum credit available to you may
not exceed the purchase price payable for the acquired shares (less the par
value of such shares), plus any withholding tax liability incurred by you in
connection with such acquisition. In addition, the Corporation will comply with
all applicable requirements of Regulation G of the Board of Governors of the
Federal Reserve System in connection with any financing extended under the Plan.

The Plan Administrator may, in its absolute discretion, determine that
one or more promissory notes under the financing program will be subject to
forgiveness by the Corporation in whole or in part upon such terms as the Plan
Administrator may deem appropriate.

49. DO I HAVE THE RIGHT TO REMAIN EMPLOYED UNTIL MY OPTIONS UNDER THE
DISCRETIONARY OPTION GRANT PROGRAM OR MY SHARES UNDER THE STOCK
ISSUANCE PROGRAM VEST?

No. Nothing in the Plan or in any option grant or stock issuance
under the Plan is intended to provide any person with the right to remain in the
Corporation's service for any specific period, and both you and the Corporation
will each have the right to terminate your service at any time and for any
reason, with or without cause.

50. ARE THERE ANY CIRCUMSTANCES WHICH WOULD CAUSE ME TO LOSE MY RIGHTS
WITH RESPECT TO AN OPTION OR A STOCK ISSUANCE?

Yes. The grant of options and the issuance of Common Stock under such
options or pursuant to the Stock Issuance Program are subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan and the securities issuable
thereunder. It is possible that the Corporation could be prevented from
granting options or from issuing shares of Common Stock under the Plan in the
event one or more required approvals or permits were not obtained.

-14-
<PAGE>

51. DOES THE PLAN RESTRICT THE AUTHORITY OF THE CORPORATION TO GRANT OR
ASSUME OPTIONS OUTSIDE OF THE PLAN?

No. The Plan does not limit the authority of the Corporation to grant
options outside of the Plan or to grant options to, or assume the options of,
any person in connection with the acquisition of the business and assets of any
firm, corporation or other business entity.

52. DOES THE GRANT OF AN OPTION OR THE ISSUANCE OF SHARES UNDER THE PLAN
AFFECT MY ELIGIBILITY TO PARTICIPATE IN OTHER PLANS OF THE
CORPORATION?

No. Option grants and stock issuances made under the Plan do not in
any way affect, limit or restrict your eligibility to participate in any other
stock plan or other compensation or benefit plan or program maintained by the
Corporation.

53. WHAT IS A PARENT CORPORATION?

A corporation is a parent corporation if such corporation owns,
directly or indirectly, stock possessing fifty percent (50%) or more of the
total combined voting power of the Corporation's outstanding securities.

54. WHAT IS A SUBSIDIARY CORPORATION?

A corporation is a subsidiary corporation if the Corporation owns,
directly or indirectly, stock possessing fifty percent (50%) or more of the
total combined voting power of the outstanding securities of that corporation.

55. IS THE PLAN SUBJECT TO ERISA?

The Plan is not subject to the provisions of the Employee Retirement
---
Income Security Act of 1974 (ERISA) or Section 401(a) of the Code.

RESTRICTIONS ON RESALE
----------------------

56. WHAT RESTRICTIONS APPLY IF I AM A SECTION 16 INSIDER?

Section 16(b) of the 1934 Act requires the Corporation to recover any
profit realized by a Section 16 Insider from any purchase and sale, or sale and
purchase, of such Common Stock made within a period of less than six (6) months.
The Securities and Exchange Commission (the "SEC") has recently issued a series
of rules under Section 16(b) of the 1934 Act which govern the short-swing
liability treatment of certain transactions effected by a Section 16 Insider
under employee stock plans such as the Plan which will exempt most transactions
occurring under the Plan from short-swing liability. The application of these
rules to various Plan transactions may be summarized as follows.

Option Grant. The receipt of an option grant under the Discretionary
------------
Option Grant Program will be an exempt transaction and will not be treated as a
"purchase" of the underlying option shares for short-swing liability purposes.

Option Exercise. The exercise of an option under the Discretionary
---------------
Option Grant Program will be an exempt transaction and will not be treated as a
"purchase" of the acquired shares for short-swing liability purposes unless the
market price of the Common Stock at the time the option is exercised is lower
than the exercise price paid for the shares.

-15-
<PAGE>

Delivery of Shares. The delivery of shares of Common Stock in payment
------------------
of the exercise price will be an exempt transaction for short-swing liability
purposes.

Stock Withholding. The withholding of a portion of the shares of
-----------------
Common Stock otherwise issuable to the Section 16 Insider by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of his or her outstanding options or the vesting of his or her stock issuances
will be an exempt transaction. The delivery of shares of Common Stock out of
the Section 16 Insider's existing investment portfolio in satisfaction of the
applicable tax withholding liability will be an exempt transaction for short-
swing liability purposes.

Direct Stock Issuances. The direct issuance of shares of Common Stock
----------------------
under the Stock Issuance Program, whether effected as a purchase or bonus, will
be an exempt transaction and will not be treated as a "purchase" of the issued
shares for short-swing liability purposes.

Vesting of Issued Shares. The vesting of shares issued under the
------------------------
Plan will not be a transaction taken into account for short-swing liability
purposes.

SAR Transactions. If an SAR is exercised for shares of Common Stock,
----------------
then the grant and exercise of such right will, for short-swing liability
purposes, be treated in the same manner as discussed above for the grant and
exercise of options.

Forfeiture of Unvested Shares. The surrender of unvested shares to
-----------------------------
the Corporation for cancellation without any cash payment or other consideration
to the participant will not be deemed a "sale" of those shares for short-swing
liability purposes. The repurchase of unvested shares by the Corporation for
consideration equal to the original purchase price paid for those shares will
normally not result in a "sale" transaction for short-swing liability purposes.

Sale of Shares. The sale of shares acquired under the Plan will be
--------------
treated as a "sale" for short-swing liability purposes and will be matched with
any non-exempt purchases of Common Stock (e.g. open-market purchases) made
within six (6) months before or after the date of such sale.

57. WHAT RESTRICTIONS APPLY IF I AM AN AFFILIATE?

In general, persons with power to manage and direct the policies of
the Corporation, relatives of these people and trusts, estates, corporations or
other entities controlled by any of these people or their relatives may be
deemed to be affiliates of the Corporation. Affiliates of the Corporation are
obligated to resell their shares of Common Stock in compliance with SEC Rule
144. This rule requires such sales to be effected in "broker's transactions,"
as defined in the rule, and a written notice of each sale must be filed with the
SEC at the time of such sale. The rule also limits the number of shares which
may be sold in any three (3)-month period to the greater of (i) one percent (1%)
of the outstanding shares of Common Stock or (ii) the average weekly reported
volume of trading in such shares on all securities exchanges during the four (4)
calendar weeks preceding the filing of the required notice of proposed sale.
However, the two (2)-year holding period requirement of Rule 144 will not be
applicable to any shares of Common Stock acquired under the Plan.

IF YOU ARE AN OFFICER OR DIRECTOR OF THE CORPORATION, YOU SHOULD
CONSULT WITH COUNSEL BEFORE OFFERING FOR SALE ANY SHARES OF COMMON STOCK
ACQUIRED UNDER THE PLAN IN ORDER TO ASSURE YOUR COMPLIANCE WITH RULE 144,
SECTION 16 AND ALL OTHER APPLICABLE PROVISIONS OF FEDERAL AND STATE SECURITIES
LAWS.

-16-
<PAGE>

QUESTIONS AND ANSWERS ON FEDERAL TAX CONSEQUENCES

The following is a general description of the Federal income tax
consequences of option grants and stock issuances under the Plan. State and
local tax treatment, which is not discussed below, may vary from such Federal
income tax treatment. You should consult with your own tax advisor as to the
tax consequences of your particular transactions under the Plan.

The tax consequences of Incentive Options and Non-Statutory Options
differ as described below.

INCENTIVE OPTIONS
-----------------

T1. WILL THE GRANT OF AN INCENTIVE OPTION RESULT IN FEDERAL INCOME TAX
LIABILITY TO ME?

No.

T2. WILL THE EXERCISE OF AN INCENTIVE OPTION RESULT IN FEDERAL INCOME TAX
LIABILITY TO ME?

No. You will not recognize taxable income at the time the Incentive
Option is exercised. However, the amount by which the fair market value (at the
time of exercise) of the purchased shares exceeds the exercise price paid for
those shares will constitute an adjustment to your income for purposes of the
alternative minimum tax (see the "Alternative Minimum Tax" section below). On
or before January 31 of the calendar year following the calendar year in which
you exercise your Incentive Option, you will receive an information statement
from the Corporation indicating, among other items, the number of shares of
Common Stock you purchased in connection with such exercise, the market price of
the Common Stock on the exercise date and the price you paid for the purchased
shares.

T3. WHEN WILL I BE SUBJECT TO FEDERAL INCOME TAX ON SHARES ACQUIRED UNDER
AN INCENTIVE OPTION?

Generally, you will recognize income in the year in which you make a
disposition of the shares purchased under your Incentive Option.

T4. WHAT CONSTITUTES A DISPOSITION OF INCENTIVE OPTION SHARES?

A disposition of shares purchased under an Incentive Option will occur
in the event you transfer legal title to those shares, whether by sale, exchange
or gift, or you deliver such shares in payment of the exercise price of any
other Incentive Option you hold. However, a disposition will not occur if you
engage in any of the following transactions: a transfer to your spouse, a
transfer into joint ownership with right of survivorship provided you remain one
of the joint owners, a pledge of the shares as collateral for a loan, a transfer
by bequest or inheritance upon your death or certain tax-free exchanges of the
shares permitted under the Code.

T5. HOW IS MY FEDERAL INCOME TAX LIABILITY DETERMINED WHEN I SELL MY
SHARES?

Your Federal income tax liability will depend upon whether you make a
qualifying or disqualifying disposition of the shares purchased under your
Incentive Option. A qualifying disposition will occur if the sale or other
----------
disposition of the shares takes place more than two (2) years after the date the
Incentive Option was granted and more than one (1) year after the date the
---
option was exercised for the particular shares involved in the disposition. A

disqualifying disposition is any sale or other disposition made before both of
- -------------
these minimum holding periods are satisfied.

-17-
<PAGE>

T6. WHAT IF I MAKE A QUALIFYING DISPOSITION?

You will recognize a long-term capital gain equal to the excess of (i)
the amount realized upon the SALE OR disposition over (ii) the exercise price
paid for the shares. You will recognize a long-term capital loss if the amount
realized is lower than the exercise price paid for the shares.

Example: On October 1, 1997, you are granted an Incentive Option for
-------
1,000 shares with an exercise price of $15.00 per share. On November 1, 1998,
you exercise this option when the market price is $25.00 per share. The
purchased shares are held until December 1, 1999, when you sell them for $30.00
per share.

Because the disposition of the shares is made more than two (2) years
after the grant date of the 1997 Incentive Option and more than one (1) year
after the option was exercised for the shares sold on December 1, 1999, the sale
represents a qualifying disposition of such shares, and for Federal income tax
purposes, you will recognize a long-term capital gain of $15.00 per share.

T7. WHAT ARE THE NORMAL TAX RULES FOR A DISQUALIFYING DISPOSITION?

Normally, when you make a disqualifying disposition of shares
purchased under an Incentive Option, you will recognize ordinary income at the
time of the disposition in an amount equal to the excess of (i) the fair market
value of the shares on the option exercise date over (ii) the exercise price
paid for those shares. If the disqualifying disposition is effected by means of
an arm's length sale or exchange with an unrelated party, the ordinary income
will be limited to the amount by which (i) the amount realized upon the
disposition of the shares or (ii) their fair market value on the exercise date,
whichever is less, exceeds the exercise price paid for the shares. The amount
of your disqualifying disposition income will be reported by the Corporation on
your W-2 wage statement for the year of disposition, and any applicable
withholding taxes which arise in connection with the disqualifying disposition
will be deducted from your wages or otherwise collected from you.

Any additional gain recognized upon the disqualifying disposition will
be capital gain, which will be long-term if the shares have been held for more
than one (1) year following the exercise date of the option.

Example: On October 1, 1997, you are granted an Incentive Option for
-------
1,000 shares with an exercise price of $15.00 per share. On November 1, 1998,
this option is exercised when the market price is $25.00 per share. The
purchased shares are held until March 1, 1999, when they are sold for $30.00 per
share.

Because the disposition of the shares is made less than one (1) year
after the exercise date of the 1997 Incentive Option, the sale represents a
disqualifying disposition of the shares, and for Federal income tax purposes,
the gain upon the sale will be divided into two (2) components:

Ordinary Income: You will recognize ordinary income in the
---------------
amount of $10.00 per share, the excess of the $25.00 per share market price
of the shares on the date the option was exercised over the $15.00 per
share exercise price.

Capital Gain: You will also recognize a short-term capital gain
------------
of $5.00 per share with respect to each share sold.

In the event the shares purchased under an Incentive Option are sold
in a disqualifying disposition for less than the exercise price paid for those
shares, you will not recognize any income but will recognize a capital loss
equal to the excess of (i) the exercise price paid for the shares over (ii) the
amount

-18-
<PAGE>

realized upon the disposition of those shares. For example, if the shares in the
above Example are sold for $13.00 per share in the disqualifying disposition,
you would simply recognize a short-term capital loss of $2.00 per share.

T8. WHAT IF THE SHARES PURCHASED UNDER AN INCENTIVE OPTION ARE SUBJECT TO
A SUBSTANTIAL RISK OF FORFEITURE, SUCH AS THE CORPORATION'S REPURCHASE
RIGHTS?

If the shares purchased under your Incentive Option are subject to a
substantial risk of forfeiture, such as the Corporation's right to repurchase
those shares at the original exercise price in the event your service terminates
prior to vesting in such shares, then the amount of ordinary income you would
recognize upon a disqualifying disposition of those shares will be based upon
-------------
their fair market value on the date the forfeiture period lapses (i.e., the
vesting date for the shares), rather than the date the Incentive Option is
exercised, and the holding period for determining whether any additional gain is
long-term or short-term capital gain will not commence until such lapse date.
In the absence of final Treasury Regulations relating to Incentive Options, it
is not certain whether this result can be avoided, and the normal disqualifying
disposition rules discussed above reinstated, by making a conditional election
pursuant to Code Section 83(b) to have the ordinary income measured at the time
the Incentive Option is exercised. (See question below concerning the effect of
Section 83(b) elections.) Because of the uncertainty as to the precise tax
consequences of such a conditional election, you should consult with your own
tax advisor before filing any such election.

T9. WHAT IF I AM A SECTION 16 INSIDER AT THE TIME I EXERCISE MY INCENTIVE
OPTION?

Vested shares which you acquire as a Section 16 Insider pursuant to
the exercise of an Incentive Option will not be treated as subject to a
substantial risk of forfeiture under the Federal tax laws.

T10. WHAT ARE THE FEDERAL TAX CONSEQUENCES TO THE CORPORATION?

If you make a qualifying disposition of shares acquired upon the
----------
exercise of an Incentive Option, then no income tax deduction may be taken by
the Corporation with respect to such shares. Should you make a disqualifying
-------------
disposition of such shares, then the Corporation will be entitled to an income
tax deduction equal to the amount of ordinary income you recognize in connection
with the disposition. The deduction will, in general, be allowed to the
Corporation in the taxable year in which the disposition occurs.

T11. WHAT ARE THE CONSEQUENCES OF PAYING THE EXERCISE PRICE OF AN INCENTIVE
OPTION IN THE FORM OF SHARES OF COMMON STOCK ACQUIRED UPON THE
EXERCISE OF AN EARLIER-GRANTED INCENTIVE OPTION IF THE DELIVERY OF THE
SHARES RESULTS IN A DISQUALIFYING DISPOSITION?

If the delivery of the shares acquired under an earlier granted
Incentive Option results in a disqualifying disposition, then you will be
subject to ordinary income taxation on the excess of (i) the fair market value
of the delivered shares at the time of their original purchase (or at the time
any forfeiture restriction applicable to those shares lapsed) over (ii) the
exercise price paid for the delivered shares.

The tax basis and capital gain holding periods for the shares of
Common Stock purchased upon exercise of the Incentive Option will be determined
as follows:

(i) To the extent the purchased shares equal in number the delivered
shares as to which there is a disqualifying disposition, the basis for the new
shares will be equal to the fair market value of the delivered shares at the
time they were originally purchased (or at the time any forfeiture restriction
applicable to those shares lapsed), and the capital gain holding period for
these shares will include the period for which the delivered

-19-
<PAGE>

shares were held (measured from the later of their original purchase date or
from the lapse date of any forfeiture restriction applicable to those shares).

(ii) To the extent the number of purchased shares exceeds the number
of delivered shares, the additional shares will have a zero basis and a capital
gain holding period measured (in general) from the exercise date.

T12. WHAT ARE THE CONSEQUENCES OF PAYING THE EXERCISE PRICE OF AN INCENTIVE
OPTION IN THE FORM OF SHARES OF COMMON STOCK (I) ACQUIRED UNDER AN
INCENTIVE OPTION AND HELD FOR THE REQUISITE HOLDING PERIODS, (II)
ACQUIRED UNDER A NON-STATUTORY OPTION OR (III) ACQUIRED THROUGH OPEN-
MARKET PURCHASES?

If the exercise price for the Incentive Option is paid with shares of
Common Stock (i) acquired under an Incentive Option and held for the requisite
minimum holding periods for a qualifying disposition, (ii) acquired under a Non-
Statutory Option or (iii) acquired through open-market purchases, you will not
recognize any taxable income (other than as described in the "Alternative
Minimum Tax" section below) with respect to the shares of Common Stock purchased
upon exercise of the Incentive Option. To the extent the purchased shares equal
in number the shares of Common Stock delivered in payment of the exercise price,
the new shares will have the same basis and holding period for capital gain
purposes as the delivered shares. To the extent the number of purchased shares
exceeds the number of delivered shares, the additional shares will have a zero
basis and a capital gain holding period measured (in general) from the exercise
date.

T13. WHAT ARE THE CONSEQUENCES OF A SUBSEQUENT DISPOSITION OF SHARES
PURCHASED UNDER AN INCENTIVE OPTION WITH SHARES OF COMMON STOCK?

If the Incentive Option is exercised with shares of Common Stock, then
those shares purchased under the Incentive Option which have a zero basis will
be treated as the first shares sold or otherwise transferred in a disqualifying
disposition. Accordingly, upon such a disqualifying disposition, you will
recognize ordinary income with respect to the zero basis shares in an amount
equal to their fair market value on the date the option was exercised for those
shares or, if such shares were subject to any forfeiture restrictions, on the
date those restrictions lapsed. Any additional gain will in most instances be
taxed as short-term capital gain.

NON-STATUTORY OPTIONS
---------------------

T14. WILL THE GRANT OF A NON-STATUTORY OPTION RESULT IN FEDERAL INCOME TAX
LIABILITY TO ME?

No.

T15. WILL THE EXERCISE OF A NON-STATUTORY OPTION RESULT IN FEDERAL INCOME
TAX LIABILITY TO ME?

Normally, you will recognize ordinary income in the year in which the
Non-Statutory Option is exercised in an amount equal to the excess of (i) the
fair market value of the purchased shares on the exercise date over (ii) the
exercise price paid for those shares. This income will be reported by the
Corporation on your W-2 wage statement for the year of exercise (or on a Form
1099 if you are not an employee), and you will be required to satisfy the tax
withholding requirements applicable to this income.

T16. WHAT IF THE SHARES PURCHASED UNDER A NON-STATUTORY OPTION ARE SUBJECT
TO A SUBSTANTIAL RISK OF FORFEITURE, SUCH AS THE CORPORATION'S
REPURCHASE RIGHTS?

If the shares you purchase under a Non-Statutory Option are subject to
a substantial risk of forfeiture, such as the Corporation's right to repurchase
those shares at the original exercise price upon your

-20-
<PAGE>

termination of service prior to vesting in such shares, then you will not
recognize any taxable income at the time of exercise but will have to report as
ordinary income, as and when the Corporation's repurchase rights lapse, an
amount equal to the excess of (i) the fair market value of the shares on the
date such shares vest over (ii) the exercise price paid for the shares.

If you purchase shares subject to such a substantial risk of
forfeiture, you may elect under Code Section 83(b) to recognize income at the
time of exercise (see the question below concerning the effect of making an
83(b) election). If such election is made, you will not recognize any
additional income with respect to your shares until such shares are sold or
otherwise transferred in a taxable transaction.

T17. WHAT IF I AM A SECTION 16 INSIDER AT THE TIME I EXERCISE MY NON-
STATUTORY OPTION?

Vested shares which you acquire as a Section 16 Insider upon the
exercise of a Non-Statutory Option will also be treated as subject to a
substantial risk of forfeiture if such exercise occurs within six (6) months
after the option grant date. In such event, the forfeiture period will not
lapse until the end of the six (6)-month period measured from the grant date,
and there will be no taxable income recognized at the time of exercise, unless
you make a Code Section 83(b) election to be taxed at that time. Without such a
Section 83(b) election, taxation will be deferred until the end of the six (6)-
month period measured from the option grant date, and you will accordingly
recognize ordinary income in an amount equal to the excess of (i) the fair
market value of the acquired shares of Common Stock at the end of that six (6)-
month period over (ii) the exercise price paid for such shares.

If the Non-Statutory Option remains outstanding for at least six (6)
months prior to exercise, then the acquisition of vested shares under that
option will be an exempt transaction for short-swing liability purposes, and
such shares will not be treated as subject to a substantial risk of forfeiture
for Federal income tax purposes. Accordingly, you will recognize ordinary
income upon such exercise in an amount equal to the excess of (i) the fair
market value of the vested shares on the exercise date over (ii) the exercise
price paid for such shares.

T18. WHAT IS THE EFFECT OF MAKING A SECTION 83(b) ELECTION?

If you purchase shares subject to the Corporation's repurchase right
or other substantial risk of forfeiture, you may elect under Code Section 83(b)
to include as ordinary income in the year of exercise an amount equal to the
excess of (i) the fair market value of the purchased shares on the exercise date
over (ii) the exercise price paid for the shares. The fair market value of the
purchased shares will be determined as if the shares were not subject to the
Corporation's repurchase right or other risk of forfeiture. If you make the
Section 83(b) election, you will not recognize any additional income when the
Corporation's repurchase right or other forfeiture risk subsequently lapses.

The Section 83(b) election must be filed with the Internal Revenue
Service within thirty (30) days following the date the option is exercised, and
any ordinary income resulting from such election will be subject to applicable
tax withholding requirements.

T19. WILL I RECOGNIZE ADDITIONAL INCOME WHEN I SELL SHARES ACQUIRED UNDER A
NON-STATUTORY OPTION?

Yes. You will recognize a capital gain to the extent the amount
realized upon the sale of such shares exceeds their fair market value at the
time you recognized the ordinary income with respect to their acquisition. A
capital loss will result to the extent the amount realized upon the sale is less
than such fair market value. The gain or loss will be long-term if the shares
are held for more than one (1) year prior to the disposition.

-21-
<PAGE>

The holding period normally starts at the time the Non-Statutory
Option is exercised. If you purchase shares subject to the Corporation's
repurchase right or other substantial risk of forfeiture, the capital gain
holding period will start either (i) at the time the shares may first be sold
free of such repurchase right or forfeiture risk, if no Section 83(b) election
is made at the time of exercise of the option, or (ii) at the time the option is
exercised if you file the Section 83(b) election within thirty (30) days after
the exercise date.

T20. WHAT ARE THE CONSEQUENCES OF PAYING THE EXERCISE PRICE OF A NON-
STATUTORY OPTION IN THE FORM OF SHARES OF COMMON STOCK PREVIOUSLY
ACQUIRED UPON THE EXERCISE OF EMPLOYEE OPTIONS OR THROUGH OPEN-MARKET
PURCHASES?

You will not recognize any taxable income to the extent the shares of
Common Stock received upon the exercise of the Non-Statutory Option equal in
number the shares of Common Stock delivered in payment of the exercise price.
For Federal income tax purposes, these newly-acquired shares will have the same
basis and capital gain holding period as the delivered shares. To the extent
the delivered shares were acquired under an Incentive Option, the new shares
received upon the exercise of the Non-Statutory Option will continue to be
subject to taxation as Incentive Option shares in accordance with the Incentive
Option principles discussed above.

The additional shares of Common Stock received upon the exercise of
the Non-Statutory Option will, in general, have to be reported as ordinary
income for the year of exercise in an amount equal to their fair market value on
the exercise date. These additional shares will have a tax basis equal to such
fair market value and a capital gain holding period measured (in general) from
the exercise date. However, if the shares purchased under the Non-Statutory
Option are subject to the Corporation's repurchase right or other substantial
risk of forfeiture, then the recognition and measurement of ordinary income and
the commencement of the capital gain holding period will be deferred until the
time the repurchase right or other forfeiture risk lapses, unless you make a
Section 83(b) election to be taxed at the time of exercise.

T21. WHAT ARE THE FEDERAL TAX CONSEQUENCES TO THE CORPORATION?

The Corporation will be entitled to an income tax deduction equal to
the amount of ordinary income you recognize in connection with the exercise of
the Non-Statutory Option. The deduction will, in general, be allowed for the
taxable year of the Corporation in which you recognize such ordinary income.
However, if the deduction is attributable to a Non-Statutory Option exercised
for shares subject to the Corporation's repurchase right or other substantial
risk of forfeiture, then in the absence of your Section 83(b) election, the
deduction will not be allowed until the taxable year of the Corporation which
includes the last day of the calendar year in which you recognize the ordinary
income with respect to the shares acquired under your Non-Statutory Option.

STOCK APPRECIATION RIGHTS
-------------------------

T22. WILL THE EXERCISE OF A STOCK APPRECIATION RIGHT RESULT IN FEDERAL
INCOME TAX LIABILITY TO ME?

Yes. Upon the exercise of a stock appreciation right for a
distribution from the Corporation, you will, in general, recognize ordinary
income in an amount equal to that distribution.

T23. WHAT ARE THE FEDERAL TAX CONSEQUENCES TO THE CORPORATION?

The Corporation will be entitled to an income tax deduction equal to
the amount of ordinary income you recognize in connection with the appreciation
distribution. The deduction will, in general, be allowed FOR the taxable year
of the Corporation in which you recognize such ordinary income is recognized by
the optionee.

-22-
<PAGE>

STOCK ISSUANCES
---------------

T24. WILL THE ISSUANCE OF VESTED SHARES RESULT IN FEDERAL INCOME TAX
LIABILITY TO ME?

Vested shares of Common Stock which you acquire as a Section 16
Insider under the Stock Issuance Program will be treated as subject to a
substantial risk of forfeiture for six (6) months after the date of the
acquisition and there will be no taxable income recognized at the time of the
acquisition unless you make a Section 83(b) election to be taxed at that time
(see the question below concerning the effect of making an 83(b) election).
Without such a Section 83(b) election, taxation will be deferred for six (6)
months from the issue date, and you will, at the end of such deferral period,
recognized ordinary income in an amount equal to the excess of (i) the then fair
market value of the issued shares over (ii) the purchase price (if any) paid for
such shares.

T25. WILL THE ISSUANCE OF UNVESTED SHARES RESULT IN FEDERAL INCOME TAX
LIABILITY TO ME?

If you are issued unvested shares of Common Stock subject to the
Corporation's reacquisition rights and do not make a Section 83(b) election at
the time of such issuance, you will not recognize any taxable income with
respect to those unvested shares at the time of acquisition. However, you will
subsequently recognize ordinary income as and when the Corporation's
reacquisition rights lapse with respect to the shares in an amount equal to the
excess of (i) the fair market value of the shares on the date the Corporation's
reacquisition rights lapse with respect to those shares over (ii) the purchase
price (if any) paid for the shares.

You may elect under Code Section 83(b) to recognize income at the time
the unvested shares are issued to you (see the question below concerning the
effect of making an 83(b) election). If such election is made, you will not
recognize any additional income with respect to your unvested shares until such
shares are sold or otherwise transferred in a taxable transaction.

T26. WHAT IS THE EFFECT OF MAKING A SECTION 83(B) ELECTION?

If you are issued shares subject to the Corporation's reacquisition
right or other substantial risk of forfeiture, you may elect under Code Section
83(b) to include as ordinary income in the year of issuance an amount equal to
the excess of (i) the fair market value of the issued shares on the issue date
over (ii) the purchase price (if any) paid for the shares. The fair market
value of the issued shares will be determined as if the shares were not subject
to the Corporation's reacquisition right or other forfeiture risk of forfeiture.
If you make the Section 83(b) election, you will not recognize any additional
income when the Corporation's reacquisition right or other forfeiture risk
subsequently lapses.

The Section 83(b) election must be filed with the Internal Revenue
Service within thirty (30) days following the date the shares are issued, and
any ordinary income resulting from such election will be subject to applicable
tax withholding requirements.

T27. WILL I RECOGNIZE ADDITIONAL INCOME WHEN I SELL SHARES ACQUIRED UNDER
THE STOCK ISSUANCE PROGRAM?

Yes. You will recognize a capital gain to the extent the amount
realized upon the sale of such shares exceeds their fair market value at the
time you recognized the ordinary income with respect to their issuance. A
capital loss will result to the extent the amount realized upon such sale is
less than such fair market value.

The gain or loss will be long-term if the shares are held for more
than one (1) year prior to the sale. For vested shares issued under the Stock
Issuance Program to you as a Section 16 Insider, the capital gain holding period
will generally start six (6) months after the date of issuance, unless you file
a Section 83(b)

-23-
<PAGE>

election to be taxed on the shares at the time of issuance. The capital gain
holding period for unvested shares issued under the Stock Issuance Program will
start either (i) at the time the Corporation's reacquisition rights with respect
to the shares lapse, if no Section 83(b) election is filed at the time of
issuance, or (ii) at the time of issuance, if you file the Section 83(b)
election within thirty (30) days after the issue date.

T28. WHAT ARE THE FEDERAL TAX CONSEQUENCES TO THE CORPORATION?

The Corporation will be entitled to an income tax deduction equal to
the amount of ordinary income you recognize in connection with the acquisition
of Common Stock under the Stock Issuance Program. The deduction will normally
be allowed for the taxable year in which such issuance occurs. However, in the
absence of your Section 83(b) election, the deduction for share issuances
subject to the Corporation's reacquisition rights or other substantial risk of
forfeiture will not be allowed until the taxable year of the Corporation which
includes the last day of the calendar year in which you recognize ordinary
income with respect to the issued shares.

FEDERAL TAX RATES
-----------------

T29. WHAT ARE THE APPLICABLE FEDERAL TAX RATES?

Ordinary income is subject to a maximum Federal tax rate of 39.6%,
while long-term capital gains are subject to a maximum Federal tax rate of 28%.
However, the marginal tax rate on ordinary income may be effectively in excess
of 39.6% because of the limitations placed on itemized deductions and the phase-
out of personal exemptions which occur at certain levels of income.

Limitation on Itemized Deductions. Itemized deductions are reduced by
----------------------------------
3% of the amount by which the taxpayer's adjusted gross income for the year
exceeds certain threshold amounts. The threshold amount for joint returns in
1996 was $117,950 ($58,975 for a married taxpayer filing a separate return) and
is adjusted annually for inflation. The reduction, however, will not exceed 80%
of the total itemized deductions (excluding medical expenses, casualty and theft
losses, and certain investment interest expense) claimed by the taxpayer.

Phase-Out of Personal Exemptions. The deduction for personal
---------------------------------
exemptions claimed by the taxpayer is reduced by 2% for each $2,500 ($1,250 for
a married taxpayer filing a separate return) or fraction thereof by which the
taxpayer's adjusted gross income for the year exceeds a specified threshold
amount. In 1996, the applicable thresholds were $176,950 for married taxpayers
filing joint returns, $117,950 for single taxpayers and $86,025 for married
taxpayers filing separate returns. Accordingly, the deduction is completely
eliminated for any taxpayer whose adjusted gross income for the year exceeds the
applicable threshold amount by more than $122,500. The threshold amounts are
subject to cost-of-living adjustments for all taxable years beginning after
December 31, 1991.

Legislation is currently pending which, if enacted, would further
reduce the maximum rate of tax imposed on long-term capital gains.

ALTERNATIVE MINIMUM TAX
-----------------------

T30. WHAT IS THE ALTERNATIVE MINIMUM TAX?

The alternative minimum tax is an alternative method of calculating
the income tax you must pay each year in order to assure that a minimum amount
of tax is paid for the year. The first $175,000 ($87,500 for a married taxpayer
filing a separate return) of your alternative minimum taxable income for the
year over

-24-
<PAGE>

the allowable exemption amount is subject to alternative minimum taxation at the
rate of 26%. The balance of your alternative minimum taxable income is subject
to alternative minimum taxation at the rate of 28%. The alternative minimum tax
will, however, be payable only to the extent that it exceeds your regular
Federal income tax for the year (computed without regard to certain credits and
special taxes).

T31. HOW IS THE ALTERNATIVE MINIMUM TAXABLE INCOME CALCULATED?

Your alternative minimum taxable income is based upon your regular
taxable income for the year, adjusted to (i) include certain additional items of
income and tax preference and (ii) disallow or limit certain deductions
otherwise allowable for regular tax purposes. The spread on an Incentive Option
(the excess of the fair market value of the purchased shares at the time of
exercise over the exercise price paid for those shares) included in your
alternative minimum taxable income at the time of exercise, whether or not the
shares are subsequently made the subject of a disqualifying disposition.

T32. WHAT IS THE ALLOWABLE EXEMPTION AMOUNT?

The maximum allowable exemption amount is $45,000 for a married
taxpayer filing a joint return, $33,750 for an unmarried taxpayer, and $22,500
for a married taxpayer filing a separate return. The allowable exemption amount
is, however, to be reduced by 25 cents for each $1.00 by which the individual's
alternative minimum taxable income for the year exceeds $150,000 for a married
taxpayer filing a joint return, $112,500 for an unmarried taxpayer, and $75,000
for a married taxpayer filing a separate return.

T33. WHEN IS THE SPREAD ON SHARES ACQUIRED UNDER AN INCENTIVE OPTION THAT
ARE SUBJECT TO A SUBSTANTIAL RISK OF FORFEITURE INCLUDIBLE IN
ALTERNATIVE MINIMUM TAXABLE INCOME?

Should the shares purchased under an Incentive Option be subject to a
substantial risk of forfeiture (such as the Corporation's repurchase rights
applicable to unvested shares), then the optionee's alternative minimum taxable
income attributable to the exercised Incentive Option will be measured at the
time the risk of forfeiture lapses and will be equal to the excess of the fair
market value of the shares at that time over the exercise price paid for the
shares. Alternatively, the optionee may file a Section 83(b) election within 30
days after the exercise of the Incentive Option in an effort to limit the amount
of such alternative minimum taxable income to the spread between the fair market
value of the purchased shares at the time of exercise and the exercise price
paid for such shares.

T34. ARE THERE ANY SPECIAL IMPLICATIONS IF I AM A SECTION 16 INSIDER AT THE
TIME OF EXERCISE?

Under recent amendments to the applicable SEC rules, Section 16
Insider upon the exercise of an Incentive Option will not have any special
implications under the alterative minimum tax at the time of exercise.

T35. HOW WILL THE PAYMENT OF ALTERNATIVE MINIMUM TAXES IN ONE YEAR AFFECT
THE CALCULATION OF MY TAX LIABILITY IN A LATER YEAR?

If alternative minimum taxes are paid for one or more taxable years, a
portion of those taxes (subject to certain adjustments and reductions) will be
applied as a partial credit against your regular tax liability (but not
alternative minimum tax liability) for subsequent taxable years.

Upon the sale or other disposition of the purchased shares, whether in
the year of exercise or in any subsequent taxable year, your basis for computing
the gain for purposes of alternative minimum taxable income (but not regular
taxable income) will include the amount of the option spread previously included
in your alternative minimum taxable income.

-25-
<PAGE>

REGISTRANT INFORMATION AND ANNUAL PLAN INFORMATION

Corsair Communications, Inc. is a Delaware corporation which maintains
its principal executive offices at 3408 Hillview Avenue, Palo Alto, California
94304. The telephone number at the executive offices is (415) 842-3300. You
may contact the Corporation at this address or telephone number for further
information concerning the Plan and its administration.

A copy of the Corporation's Annual Report to Stockholders for the most
recent fiscal year will be furnished to each participant in the Plan, and
additional copies will be furnished without charge to each participant upon
written or oral request to the Corporate Secretary of the Corporation at its
principal executive offices or upon telephoning the Corporation at its
principal executive offices. In addition, any person receiving a copy of this
Prospectus may obtain without charge, upon written or oral request to the
Corporate Secretary, a copy of any of the documents listed below, which are
hereby incorporated by reference into this Prospectus, other than certain
exhibits to such documents:

The Corporation's Prospectus, filed with the Corporation's S-1
Registration Statement No. 333-28519, under the Securities Act of 1933, in
which there is set forth the Corporation's audited and unaudited financial
statements for the period from inception (December 5, 1994) through June
30, 1997; and

The Corporation's Form 8-A filed pursuant to Section 12 of the
Securities and Exchange Act of 1934, in which there is described the terms,
rights and provisions applicable to the Corporation's outstanding Common
Stock.

The Corporation will also deliver to each participant in the Plan who
does not otherwise receive such materials a copy of all reports, proxy
statements and other communications distributed to the Corporation's
stockholders.

-26-

<PAGE>

EXHIBIT 11.1

CORSAIR COMMUNICATIONS, INC.

STATEMENT OF COMPUTATION OF PRO FORMA PER SHARE AMOUNTS
(In thousands, except per share amounts)

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED JUNE 30 ,
DECEMBER 31, ----------------
1996 1996 1997
------------ ------- -------
<S> <C> <C> <C>
Net loss........................................ $(12,761) $(5,875) $(4,436)
======== ======= =======
Weighted Average number of common stock
outstanding.................................... 105 53 909
Preferred Stock (as if converted basis)......... 6,741 6,741 6,741
Preferred stock and common stock issued and
stock options granted in accordance with Staff
Accounting Bulletin No. 83..................... 2,024 1,705 3,312
-------- ------- -------
Shares used in pro forma per share
calculation.................................. 8,870 8,499 10,962
======== ======= =======
Pro forma net loss per share.................... $ (1.44) $ (0.69) $ (0.40)
======== ======= =======
</TABLE>

<PAGE>

EXHIBIT 23.2

INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE

The Board of Directors
Corsair Communications, Inc.:

The audits referred to in our report dated March 7, 1997, except as to Note
9 which is as of June 13 , 1997, included the related financial statement
schedule as of December 31, 1995 and 1996, and for the period from December 5,
1994 (inception) to December 31, 1994 and for each of the years in the two-
year period ended December 31, 1996, included in the registration statement.
The financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on the financial
statement schedule based on our audits. In our opinion, such financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

We consent to the use of our reports included herein and to the reference to
our firm under the headings "Selected Financial Data" and "Experts" in the
prospectus.

KPMG PEAT MARWICK LLP

San Francisco, California

July 7, 1997

<PAGE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> 12-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 JUN-30-1997
<CASH> 17,052 10,500
<SECURITIES> 2,452 9,786
<RECEIVABLES> 3,260 2,964
<ALLOWANCES> 404 451
<INVENTORY> 9,298 11,318
<CURRENT-ASSETS> 32,188 35,414
<PP&E> 2,424 2,815
<DEPRECIATION> 1,454 2,166
<TOTAL-ASSETS> 34,911 38,594
<CURRENT-LIABILITIES> 12,506 17,895
<BONDS> 0 0
0 0
9 9
<COMMON> 1 2
<OTHER-SE> 18,001 17,199
<TOTAL-LIABILITY-AND-EQUITY> 34,911 38,594
<SALES> 18,178 18,302
<TOTAL-REVENUES> 19,606 20,320
<CGS> 17,235 14,967
<TOTAL-COSTS> 19,197 16,503
<OTHER-EXPENSES> 12,948 8,293
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 220 (43)
<INCOME-PRETAX> (12,759) (4,433)
<INCOME-TAX> 2 3
<INCOME-CONTINUING> (12,761) (4,436)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (12,761) (4,436)
<EPS-PRIMARY> (1.44) (.40)
<EPS-DILUTED> 0.00 0.00

</TABLE>